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Other Finance News

Why A Flat In Folkestone Valued At £161,000 Is Still Unsold at Just £59,000

As the first buyer of a new McCarthy & Stone retirement development in Folkestone, you would expect to be offered a great deal. A forward-thinking retiree was offered an ‘early bird’ discount of £3,000 for a one bedroom flat. This took the total asking price of the flat to £161,950 which by market standards in 2007 was relatively affordable.

Since inheriting the flat in 2015 the buyer’s son has been unable to sell and is now becoming so desperate that he is considering an offer of just £15,000 from a specialist quick home buying company.

How could a high-quality apartment built as recently as 2007 have plummeted in value so aggressively, particularly when considering the average apartment price in Folkestone increased by approximately £25,000 during the same period?  What happened to this McCarthy & Stone flat?

Poor Resale Value Accusations

With more than 1,200 developments across the UK, McCarthy & Stone is a market-leading developer of retirement flats. Nevertheless, the company has been accused on several occasions of building and selling flats with very low resale values.

The retirement flat in Folkestone was put on the market in 2015 for £143,000.  After which, it was reduced in price exponentially over the years, eventually falling to just £59,000. Even at this low price, nobody has expressed any genuine interest in buying.

Far from an issue with the quality of the apartment, the main problem appears to be with excessive monthly service charges payable on the flat. A charge which its current owner claims has reached a whopping £562 per month, the equivalent of paying almost £6,750 per year. This could theoretically swallow up the entire state pension of the occupant, simply to cover ground rent and general services.

In the meantime, the flat’s current owner has been forced to cover these charges on behalf of his late father. He has so far handed over approximately £18,000 in monthly charges and has spoken of his genuine fears of bankruptcy. Incredibly, one of the UK’s leading quick home buying services has now offered just £15,000 for the apartment, more than 90% less than its original purchase price.

“In total it’s costing me £900 a month to keep. I’ve got my own home to pay for and you can’t run two houses on a normal wage. It’s been one huge money pit. One of the buy-it-now companies has offered me as little as £15,000 for it. The stress has been so much and to be honest it’s made me so stroppy and moody, it’s cost me my relationship too,” he told reporters.

No Isolated Incident

It’s of no consolation to this particular individual but the issue regarding terrible resale values on McCarthy & Stone properties is far from isolated. In the exact same development, a flat that was purchased in April 2010 for £150,000 sold in 2018 for just £75,000. Another with an initial value of £151,000 fetched just £105,000. 

One of the two bedroom McCarthy & Stone properties on the same development is up for sale right now at £45,000, billed as the cheapest property in the whole of Folkestone.

One of the issues causing the enormous depreciation of such properties is comparatively low demand. The flats are exclusively available for couples over the age of 55 or individuals over 60, who may also struggle to qualify for mortgages against such properties. They are beautiful flats at giveaway prices, though are made inaccessible by the excessive monthly service charges and ground rent. 

Shortly after building the development, known as Laurel Court, McCarthy & Stone sold the freehold to a company based in the British Virgin Islands. Having initially charged around £350 per month in charges, FirstPort gradually increased it to more than £500 over the following years.

FirstPort provided the following statement when contacted by the press:

“Laurel Court is an assisted living development with enhanced communal facilities such as a restaurant, dining room, function room, restaurant kitchen, staff room, sleepover room, and two lifts. This does mean that it requires a more comprehensive level of servicing and the service charge is higher than it would be on a non-assisted living development.”

“We clearly explain our charges to customers and share budgets with them before the final bill is agreed so that we are completely transparent and there are no surprise costs.”

“We know our customers have the peace of mind that day-to-day home maintenance tasks are taken care of, like mowing the lawn, as well as the bigger jobs, like refurbishing the lifts. Having an estates manager and other on-site staff available 24/7 in an assisted living development offers safety and security that is really valued by our residents and their families. Our customers tell us that the quality of life and the sense of community and companionship that comes from living in a communal, managed development has enhanced their lives greatly.”

Likewise, McCarthy & Stone stopped short of accepting any wrongdoing or even offering an apology to those affected:

“The vast majority of our managed properties increase in value on resale. To help improve this further, we launched a new in-house resales operation in 2017 to support our customers and their families when they come to sell their property. We urge anyone seeking to resell their property to use our in-house service.”

“The value of retirement housing is not just financial. Retirement communities help to reduce the burden of maintenance, increase safety and security for the elderly and reduce loneliness. Nine out of 10 of our customers say moving to one of our properties improves their quality of life.”The seller in this instance contacted McCarthy & Stone to request their “in-house service” though was rejected and refused any further assistance.  

Bridging Loans

Regulated Bridging Loan Helps Couple Create Their Dream Home

UK Property Finance recently aided a newly married couple purchase and refurbish the property of their dreams. The couple had found their perfect home in a desirable area of Suffolk where they had previously lived and which was being marketed at a price within their budget due to the updating work required.

When the couple approached UK Property Finance, they had already received three estimates for both the timescale and the costs involved for the refurbishments. They also had savings to cover the renovations in full.

To prevent missing out on the property, the clients had to provide proof of funds to the estate agent and as such needed an agreement in principle for a loan of £500,000 as quickly as possible.  We provided a quotation for a bridging loan within a matter of hours and to obtain a market leading rate this loan was to be secured as a first charge on both the new property and on a Buy to Let property they had inherited several years earlier. Their exit strategy was clearly defined as the loan would be repaid in full by the sale of their current home which after deductions would have sufficient equity remaining to clear the bridging loan in full.  The bridging loan was arranged with a term of 12 months however interest would only be generated whilst the loan remained unpaid and as the current residential property sold within 3 months and 3 days of the loan being funded only 3 months and 3 days of interest was generated, not the interest for the full 12 months of the agreed term.  This made the recommended bridging loan a highly cost-effective way of funding the clients short term requirements.   

The loan transaction completed quickly and without problems and the couple were able to purchase their dream property and commence the renovations needed prior to moving in. All renovations were completed by the time that the sale of the current residential property completed enabling the clients to seamlessly move from old to new.

Bridging Loans

Bridging Loan Helps Business Partners Get New Venture Underway

At UK Property Finance we are always proud to be part of a small business success story. In this instance we were approached by two lifelong friends who had decided to go into business together. Both experienced tradesmen and in their mid-30s, they believed that the time had come to invest in property and in particular purchasing properties in need of renovation.  This would enable them to utilize their skills in order to create maximum profit when they sell.

One of the partners owned a commercial property inherited from a deceased relative several years prior. The other partner had considerable savings, although even the combination of equity and savings was not enough to purchase a property outright and pay for the renovation work needed. The partners approached UK Property Finance for advice and based on their scenario we advised that a short-term bridging loan would be the most appropriate product for them.

The loan was secured against the first partners commercial property while the second partners savings were used for the 10% deposit required for an auction purchase and the balance to minimize the loan required and Loan to Value (LTV) so that UK Property Finance could recommend the best interest rates available in the market and also raise the money needed to complete the renovation work. The loan was finalized from start to finish within 2 weeks and the funds were transferred allowing the new business partners to take formal ownership of their first investment property well before the 28 days allowed by the auction house and as such they commenced the refurbishments earlier than expected.

We have kept in regular contact with this new fledgling business who are well on with their first development and already on the lookout for number two. 

Bridging Loans Mortgages Secured Loans

Secured 2nd Charge Mortgage Loan Assists Self-Employed Client’s Purchase of First Buy to Let Property Investment

The UK’s Buy to Let market continues to prove a goldmine for those making the right moves at the right time. UK Property Finance recently helped a client from London collect the keys to his first Buy to Let investment property purchase.

The client had significant equity tied up in his residential home which could be released.  He also had a large amount of free funds which when the two were combined created a sizeable deposit allowing our client the opportunity to use products with the best possible interest rates. To access the equity tied up in his own home, we suggested a 2nd charge mortgage loan secured against the clients home.

We chose a 2nd charge mortgage loan instead of a full remortgage as UK Property Finance have access to second charge mortgage lenders who will allow loan sizes of 6 or 7 times an applicants income to be raised at highly competitive rates of interest. 

This meant that our client could raise a larger deposit via a second charge mortgage loan than if he had fully remortgaged.  Additionally, despite being self-employed our client was able to verify his income using 1 years SA302 tax returns.  With our contacts, this made it quick and easy to arrange the loan needed to purchase the investment property and the application for £280,000 was approved and the underwriting process completed in less than five working days. 

During the process the client admitted that he been rejected by three lenders beforehand, simply due to his self-employed status. He was delighted with the result we achieved and left the team at UK Property Finance a glowing Trustpilot review for giving him the opportunity to access the Buy to Let property ladder for the 1st time. Work out the costs of a mortgage using our UK mortgage calculator

Secured Loans

All Debts Consolidated Within 5 days For Young Couple From Cambridge

We were approached by a young couple from Cambridge who for various reasons were struggling with financial debt.  Between them they had accumulated seven credit cards all with maxed out balances, multiple fully utilized overdrafts and a handful of personal loans, all on varying higher rates of interest and all requiring payments each month. The clients were only able to meet the minimum monthly requirements so the balances were remaining virtually unchanged.

Urgent action was needed but their own bank and several others had rejected their applications for debt consolidation as they failed to pass the tick box underwriting decision making preferred by those lenders.  UK Property Finance suggested a debt consolidation loan with one of our chosen lender panel and accessing the preferential underwriting we had managed to negotiate. We carefully presented the clients case to the lender and successfully proved the benefits of repaying the clients multiple debts with one single payment, competitively priced loan which ensured the subsequent repayments would be well within the clients means.

Ultimately, we managed to shrink the clients monthly outgoings by approximately 45% by reducing the overall interest charged. This provided our clients with significantly more disposable income and helped them to revert back to enjoying life again.

As their consolidation loan was offered in the form of a second charge mortgage loan secured against their property, we were able to negotiate an unbeatable rate of interest via the preferential rates negotiated from our panel of carefully chosen market leading lenders.


How Does Right to Buy Affect Mortgage Eligibility?

The government’s Right to Buy scheme provides qualified council property tenants the opportunity to purchase their homes at a discounted price. Depending on the property type, location and period of residency, discounts as high as £82,800 (increasing to £110,500) are available.

In order to qualify under the Right to Buy scheme there are conditions the applicant must adhere to:

  • The property they wish to purchase is their primary or only residence
  • It is a self-contained property used for a single purpose
  • The applicant has a legal and valid contract with the landlord
  • The tenant has lived in a council property for at least three years
  • It is owned and let by a recognised public sector landlord
  • The property is located in England (there are separate schemes for Wales and NI)

If all of these conditions are met the tenant has the right to purchase the property at a discounted rate. If the landlord makes a suitable offer and the sale is agreed it falls with the tenant to make the necessary mortgage arrangements.

Are there different types of secured loans specifically for Right to Buy or are Right to Buy mortgage applications processed as normal?

Right to Buy Mortgages Explained

It’s a common misconception that a separate type of ‘ Right to Buy mortgage’ is available for those who qualify under the scheme. In reality, there’s technically no such thing. Nor does Right to Buy in any way adversely affect mortgage eligibility.

Qualifying under the Right to Buy scheme could increase your likelihood of qualifying for a mortgage.

Homebuyers in the United Kingdom are now expected to hand over initial deposits of averaging around £50,000. This is a sum significantly higher than most everyday earners can afford. With Right to Buy, the discount afforded under the scheme is accepted by most lenders in place of this deposit.

If you qualify for a discount under the Right to Buy program there is a good chance you won’t need to come up with any deposit. At the very least you will have a significantly reduced deposit if you qualify for a smaller discount. This opportunity can broaden the options available for Right to Buy mortgage applicants who may otherwise have struggled to qualify for a good deal.

What Else Impacts Eligibility for Council House Mortgages?

Eligibility for a council house mortgage is similar to traditional mortgage eligibility. There are several factors that may stand in your way of qualifying for a competitive mortgage, including but not limited to the following:

  • A poor credit history: Credit checks are carried out where mortgages are issued, impacting not only eligibility but also interest rates and wider borrowing costs.
  • Applications during retirement: Some lenders restrict secured loans for home purchases to applicants under the age of 75 or even 70.
  • Self-employment: It may be advisable to work with a specialist lender if you are self-employed.
  • Non-standard construction: if the council property you live in features any non-standard construction elements it could affect your eligibility.

 In Summary…

Right to Buy does not have any direct bearing on mortgage eligibility. In order to qualify for a competitive mortgage you will still be expected to meet the same basic criteria as any other borrower. Work out the costs of a mortgage using our Mortgage calculator UK

If you have any questions or concerns regarding your eligibility under Right to Buy or would like to discuss mortgage options in more detail, we’re standing by to take your call. Contact a member of the team at UK Property Finance for an honest, obligation-free consultation.


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