Email Usthumb
Categories
Mortgages

Equity Release Market Tipped for Major Growth in 2021

Independent brokers and financial advisers across the country are projecting a successful year ahead for the equity release market. With interest among customers having remained surprisingly high throughout 2020, even in the face of major economic uncertainty, three quarters of experts anticipate significant market growth over the next 12 months.

Specifically, new data published by Canada Life suggests that many financial advisers anticipate the value of the equity release market to exceed £6 billion in 2021 for the first time.

Modest Yet Reassuring Gains

The figures from Canada Life suggest that around 42% of financial advisers experienced growth in their equity release activities during 2020. While this is not particularly impressive growth, it is nonetheless reassuring given the financial impact and uncertainty of the COVID-19 pandemic.

Many had expected the market to grind to a complete halt, when in reality it remained ‘business as usual’ for a surprising proportion of lenders.

As a result, 62% of advisors now believe that the equity release market will be operating at pre-lockdown levels by the end of the second quarter next year. It’s also widely predicted that the market’s performance will continue to accelerate indefinitely, as more people than ever before express an interest in equity release.

Changing Priorities and Purchase Intent

Meanwhile, Canada Life’s figures indicate a series of interesting shifts in how those planning to release equity in their homes intend to allocate the funds raised. Evidence also suggests that the average equity release customer age in the UK will also reduce – 50% of advisors predicting a spike in popularity among younger homeowners next year.

45% of experts also see more equity release customers applying for bigger loans, releasing much larger proportions of the equity tied up in their homes.

As for allocation of the funds, 70% of advisors predict that their customers will give portions of the proceeds to their children or grandchildren next year. 65% see equity release funds being used to pay off debts, marking a slight reduction from the 71% recorded in 2020.

The primary motivations among equity release customers for leveraging the money tied up in their homes are expected to remain the same next year. These include paying off the debt during retirement, concerns regarding insufficient pension savings and the ongoing volatility of the stock market. Get help working out the costs of paying a mortgage using our UK mortgage calculator

In addition, the impact of COVID-19 on people’s finances, income and long-term financial stability are also likely to influence decisions regarding equity release.

“There is no doubt 2020 has been challenging for many reasons, but it is great to see so much positivity looking forward to next year,” commented Alice Watson, Head of Marketing at Canada Life.

“Advisers are clearly anticipating a growth in demand driven by both improved awareness of equity release and families reassessing their finances in light of the pandemic. Predictions around a shift in customer age and increase in loan size, point to a move in how homeowners view their home as a financial asset much like pensions or ISAs,”

“The world is changing around us, but closer to home we need to consider how best to use our overall wealth to provide the secure financial futures we seek. Advisers are best placed to show clients how to plan for that future.”

Categories
Mortgages

Bankruptcy Mortgages Explained

Contrary to popular belief, bankruptcy will not necessarily count you out of the running for a mortgage. A history of bankruptcy on your file can create additional challenges, but does not make qualifying for a mortgage impossible.

It is simply a case of carefully considering the options, in order to pair your requirements with an appropriate lender you can count on.

How Soon After Bankruptcy Can You Get A Mortgage?

In the immediate aftermath of declaring bankruptcy, qualifying for any kind of credit can be extremely difficult. Particularly when major banks and lenders are concerned, those who have recently been declared bankrupt are excluded from almost all lines of credit across the board.

Any history of bankruptcy in your financial history will appear on your credit file for a period of six years. During which, you can expect to be scrutinised by the vast majority of mainstream lenders when applying for lines of credit. The more recent the bankruptcy, the lower the likelihood of qualifying for a loan.

If you are considering applying for a mortgage during this period, you will need to take your business to a specialist lender. Away from the UK High Street, there is an extensive network of flexible and accommodating specialists who welcome applicants with flawed credit histories. Even those with recent bankruptcies are not necessarily ruled out of contention. You can even use our UK mortgage calculator to work out the cost.

You may have recently been declared bankrupt, but you may also be in an extremely strong financial position with a provable source of income.  Likewise, you may already own one or more properties, against which you may be able to secure a loan to access the funds you need.

Bankruptcy need not prevent you from qualifying for a mortgage but it is essential to seek independent advice before applying. Consult with an independent broker to discuss the available options and choose an appropriate way forwards.

What Size Deposit Do You Need?

With all types of ‘substandard’ finance, bigger deposits make it easier to qualify for a competitive loan. During the first couple of years following bankruptcy, you may be required to provide as much as 40% as a minimum down payment.  Over the subsequent two to three years, this could fall to as little as 25% or even 15%.

If you declared bankruptcy six or more years ago, there is a good chance you will qualify for a mortgage with a deposit as low as 10% or even 5%. Though it is worth bearing in mind that the larger the deposit you provide, the more likely you are to be offered a competitive rate of interest and reduced overall borrowing costs.

Larger deposits often hold the key to not only qualifying for a poor-credit mortgage but also ensuring you access a competitive deal. If possible, it is therefore worth considering offering a down payment that exceeds the lender’s minimum requirement.

Which Lenders Offer Bankruptcy Mortgages?

On the UK High Street, the list of lenders that specialise in bankruptcy mortgages is relatively short. In fact, any evidence of bankruptcy whatsoever is likely to count you out of the running with the vast majority of mainstream lenders.

This is why it is important to set your sights beyond the usual High Street names, if looking to get a good deal with a history of bankruptcy. With the help of an established independent broker, your requirements and financial position can be paired with an innovative and accommodating lender who specialises in post-bankruptcy mortgages.

By working with an independent specialist, you are far more likely to both qualify and be offered a competitive deal you can afford.  Particularly if you are otherwise in a strong and consistent financial position, your history of bankruptcy may not be held against you.

Speak to an independent broker to arrange a whole-market mortgage comparison, including the specialist lenders you won’t find on any UK High Street.

Categories
Mortgages

Let-to-Buy: How to Assess Affordability

Let-to-buy can be a fantastic option where selling your home the conventional way is impossible or not preferable. For an overview of borrowing costs and typical let-to-buy rates, use our helpful let-to-buy calculator.

How Does Let-to-Buy Work?

Let-to-buy bears many similarities to a classic buy-to-let investment opportunity. Though with let-to-buy, the whole process works in reverse.

Many homeowners, upon finding their dream property encounter difficulties selling their current home. In other instances, those who have spent years or decades investing heavily in their current home would rather hang onto it than sell it.

In both instances, let-to-buy could be the ideal option. This is where you retain ownership of your current property, let it out to tenants and use the rental payments to cover your current mortgage. You are then free to take a new mortgage on the property you intend to buy, leaving you with just one mortgage to pay from your own income.

Your tenants effectively pay your previous mortgage and you ultimately end up with the two homes under your ownership.

Switching Mortgages

Let-to-buy can be flexible and affordable, though is not without its complexities. Letting out a property under the terms of a standard mortgage usually goes against most lenders’ terms and conditions.

It is therefore necessary to switch the mortgage on your current home to a specialist buy-to-let mortgage, as you will subsequently be letting the property out to tenants, rather than living in it. This may also mean a higher APR than the prior conventional mortgage, along with additional borrowing costs applicable to buy-to-let mortgages.

This is one of many reasons why comparing the market in its entirety for a competitive deal is essential. After gaining a basic overview of what is on offer with our let-to-buy calculator, call to arrange an obligation-free consultation.

Establishing Affordability

All applicable costs of let-to-buy need to be carefully considered before applying for a new mortgage or buying a second home.

For example, owning a second property may increase stamp duty liability. Rental income tax is also payable on the money earned by letting out a property.

In addition, becoming a landlord means taking responsibility for the upkeep and maintenance of two homes. Mortgage arrangement fees, legal fees, valuation fees and completion fees may also apply – all of which should be discussed with a broker before applying. You can even use our UK mortgage calculator to work out all the costs.

Let-to-buy is therefore not an ideal solution for all homeowners but can prove a profitable venture for many.

Independent Broker Support

If you have any questions on the let-to-buy process or are considering investing in a second home, we can help. Book your obligation-free, cost-free consultation with one of our experts to discuss the options available.

We will help you assess affordability, eligibility and whether let-to-buy is the right move for you. Call or email anytime to learn more.

Categories
Other Finance News

Top-Pick Property Hotspots for 2021 – Where Have House Prices Risen the Most?

To say that 2020 has been quite an unusual year for the UK property market would be a major understatement. With the fallout of the COVID-19 crisis expected to linger for some time, real estate experts are predicting similarly turbulent conditions throughout much of 2021.

Uncertainty and economic turmoil have, however, had little impact on the appeal of some of the UK’s most desirable places to live. Looking ahead into 2021 and beyond, there are several towns and cities where property prices are predicted to continue accelerating wildly.

The Most Lucrative Places to Live or Own

According to the latest figures published by Ocean Finance, house price growth over the past two decades in some of England’s key towns and cities has been astonishing.

Right at the top of the table comes Manchester, with a whopping 143% average property price increase since 2000. This means that a property purchased for around £74,000 20 years ago would now be worth almost £180,000 – an enormous profit for those who invested at the right time.

Leicester followed in a close second position, having achieved an impressive 132% average property price growth in two decades. Those who bought in 2000 and sell in 2021 could be looking at average profits in the region of £155,000.

Bristol came in third, achieving 122% average property price growth from £137,742 to £291,839.  That’s a huge profit of more than £150,000 on the table for those who sell in 2021.

Unsurprisingly, the vast majority of people who purchased properties in London 20 years ago could make an absolutely enormous profit by selling now. On average, a £360,000 property in London would sell for approximately £785,000 today – an increase of 116%.

Surprisingly, strong performance was noted in Kingston-Upon-Hull, where average property prices have increased by 112% over the past 20 years. In monetary terms, this amounts to an average profit of around £60,000 for those who purchased two decades ago and intend to sell on today’s market.

Cambridge didn’t trail too far behind with its own 101% average house price increase over the same two-decade period. Average house prices in Cambridge have risen from £224,000 to an astonishing £450,000, amounting to a generous profit of around £226,000.

Property prices in Brighton have also increased exponentially over the years – today’s average asking price is around £372,000, compared to just £187,000 20 years ago.

Homeowners in Derby who purchase properties in 2000 would have been looking at an average cost of just under £83,000 – their homes subsequently being worth an average of £162,000 today, an average increase of 96%.

Last but not least, Coventry has performed similarly well since 2000, having achieved an average property price increase of 95%. This means that a £97,000 property picked up 20 years ago would now sell for around £190,000, pocketing you an impressive profit in the process!

Categories
Commercial Finance

Why Is Commercial Finance More Expensive?

Commercial finance provides businesses of all shapes and sizes with access to essential funding for almost any legal purpose. Where available, commercial finance rates are usually slightly higher to those of a conventional residential mortgage.

For a rough idea of what to expect, use our helpful commercial finance calculator to see how commercial finance works in practice.

Where commercial finance rates and/or borrowing costs in general exceed those of conventional borrowing by a significant margin, particularly when it comes to mainstream lenders, as opposed to specialist commercial finance providers, there is often a reason why but what is it about commercial finance that makes it a costlier financial product than a comparable conventional loan?

Elevated Risk for the Lender

One of the factors that contributes to the higher costs of commercial finance is the elevated risk for the lender. Commercial finance is considered slightly riskier in the sense that the borrower’s ability to repay is often based largely on the performance of their business.

As there are no certainties in any sector or line of work, there are no concrete guarantees the business will be able to keep up with its repayments long-term.

This risk is, however, largely augmented by the provision of adequate security to cover the costs of the loan. This is also why the security a lender may request to cover the costs of a commercial loan would need to have a higher combined value than those used to cover a more conventional secured loan.

Different Types of Commercial Finance

Commercial borrowing costs can also be affected by the type of commercial finance the business or individual applies for. In some instances, commercial finance is applied for and accessed in the form of an overdraft, in which case, the borrower can expect higher overall borrowing costs than a similar applicant taking out a commercial loan from the same lender.

Competition also plays a role in establishing commercial finance rates and overall borrowing costs. There is not quite as much competition on the commercial lending landscape as in the residential mortgage sector, which means lenders do not have to be quite as competitive with the rates they provide.

Along with these factors, additional considerations like the applicant’s credit history, the performance of their business to date, their business acumen and so on, may all influence the competitiveness of the deals they are offered.

In most typical cases, commercial finance costs at least slightly more than conventional borrowing.

Independent Broker Support

Irrespective of how much you intend to borrow and your intentions for the funds, seeking independent broker support at an early stage is essential. This will enable you to not only compare as many options as possible from specialist lenders across the UK, but also present your case in such a way as to open the door to competitive rates.

For more information on any of the above or to discuss your requirements in more detail, call anytime for an obligation-free consultation with a member of the team.

Categories
Secured Loans

Should I Fund Home Improvements with a Second Charge Secured Loan?

Homeowners planning major alterations or improvements to their properties have a variety of funding options to choose from. One of which is a second charge secured loan which is effectively a second mortgage secured against your property and usually for a smaller sum than the first charge.

Remortgaging which is applying for a loan with a higher loan-to-value (LTV) to release equity has traditionally been an option, although for many this is not the most cost-effective solution.

Usually provided by a specialist lender with the help of an independent broker, a second charge secured loan has the potential to be a far more flexible and cost-effective option.

What is a Second Charge Secured Loan?

The term ‘secured loan’ applies to any loan issued on the basis of security. Most secured loans are secured against the applicant’s home, though other assets of value may be accepted by highly specialized lenders.

Second charge secured loans are typically available in sums of £20,000 or more and are secured when a first charge mortgage is already in place. Credit checks and financial status assessments can be more relaxed than with a personal loan, as the balance of the loan is effectively ‘insured’ by the security provided.

If the borrower fails to repay the secured second charge loan as agreed, the lender is entitled to take ownership of their property in the same way as they would if a first charge mortgage were not paid on time.

What Are the Best Second Charge Secured Loan Rates?

Interest rates on second charge secured loans vary significantly from one product and lender to the next. On a typical second charge secured loan the APR could be set at between 3% to 5% per annum.

With a short-term second charge bridging loan, monthly interest can be as low as 0.5% or less or approximately 6% per annum.

Comparing the market in its entirety with the help of an independent broker holds the key to accessing the best secured loan rates available. The amount you need to borrow and how quickly you intend to repay it will have a major impact on overall borrowing costs.

How Much Can I Borrow with a Second Charge Secured Loan?

Maximum loan size is based primarily on how much equity you have tied up in your property. If you own your home and it has a market value of £300,000, you will be able to borrow close to this amount. If you have a mortgage of £200,000 in theory, you may be able to borrow £100,000 on a secured loan.

The more you need to borrow, the greater the extent to which your financial circumstances will be checked. Working with an independent broker is essential to ensure you find a better deal to suit your needs and your budget.

What Are the Benefits and Risks of Secured Loans?

The main benefits of secured loans are simplicity and affordability. A typical secured loan will not only attach lower rates of interest than a comparable personal loan but can also be arranged and accessed much quicker than a typical mortgage.

You can also borrow much more with a secured loan, in accordance with the value of your home. Poor credit applicants can be accepted by many specialist lenders, as are the self-employed and those with a history of bankruptcy.

Additionally, arranging a second charge secured loan may work out cheaper than a full remortgage.

The downside to a secured loan is the risk of forfeiting your assets in the event of non-repayment. In the vast majority of instances, though, lenders will do all they can to prevent this from becoming necessary. All potential risks and key factors to consider will be disclosed by your broker during your initial consultation.

Categories
Secured Loans

Secured Second Charge Lending Sector Remains Buoyant During Second Lockdown

Secured second charge lending activity has maintained its momentum across much of the UK, despite difficult conditions during the recent lockdown. Published data suggests that in October, monthly volumes increased a further £19 million to reach £71 million. Total secured loan completions were also up more than 30% from the month before, reaching 1,816 loans completed.

Loan completion times were also found to have improved between September and October, averaging around 11 days compared to the previous 12 days.

Further Growth Predicted

The Finance & Leasing Association (FLA) reported a major spike in second charge lending in August, fuelled primarily by pent-up demand being released on the sector following the first national lockdown.

Going forwards, experts believe that activity will double by the end of the current quarter.

The message from the secured loan industry is very clear: It is business as usual in lockdown 2, with no significant changes or restrictions to criteria announced following the PM’s announcement of a second lockdown.

When coronavirus hit in March lending figures dropped over 80% but this time round it is very different as October showed the biggest monthly growth of 2020.

There is now no restriction on physical valuations and for over a decade the industry has offered a huge range of products available using Hometrack or similar desktop valuation models.

The optimism stems from several lenders announcing a securitisation in recent weeks.  First, we saw Pepper Money owned by Optimum Credit announce the first securitisation (specifically for second charges) since the start of the pandemic to the tune of £277m and a huge easing of criteria followed to ensure a return to pre-COVID-19 lending levels in the coming months.

West One parent company Enra Specialist Finance also announced their first ever securitisation of £267m to be split across their first and second charge products.

Categories
Other Finance News

New Up-Front Rental Payment System Launched in the UK

Following a successful two-year trial, a new up-front rental payment system is being rolled out across the UK. Known as the Advanced Rent Option, the new system provides letting agents with the option of offering landlords one year’s rent in advance as part of their service package.

According to those responsible for the ARO, the scheme could radically change the private lettings industry by enabling agents to build better relationships with landlords.

The Advanced Rent Option simply enables letting agents to provide upfront payments when securing the business of landlords and has proven to be an extremely popular and powerful prospecting tool during the scheme’s initial trial.

Simon Shinerock, who created and launched the ARO, said that response among small to medium sized businesses in particular has so far been outstanding.

“This project has been two years in the pilot stage, and it has proven to bring huge benefits to the lettings market, offering peace of mind to landlords, as well as an invaluable marketing and prospecting edge for selected agents,” he said.

“The response since launch has been beyond our expectations and we have been able to demonstrate that ARO is the holy grail of landlord prospecting and lead generation, attracting more landlord enquiries at a lower cost than any other form of marketing,”

“Now agents across the UK can stand out from the crowd by offering landlords something that no one else can. ARO is available for reliable, proactive and go-ahead agents, who understand the value of the ARO and how to use it to fast forward their businesses and grow their managed portfolios,”

“We are looking forward to working with our ARO licensed agents to offer landlords a better, more secure and versatile service.”

Elsewhere, Moss Property director Sanjay Gandhi has been making use of the scheme for several months – ARO having played a direct role in helping him grow his local business.

“I wanted to look at ways to generate new landlords and thought that ARO would be the perfect product to do that. We have competitors in the town who offer a rent guarantee, but the difference with that product is they take a 35 per cent cut and don’t really offer market value,” he said.

“Since launching ARO a few months ago, we’ve grown our portfolio by around three to four per cent. I’ve got to highlight that it’s not for everyone. I’ve had many landlords who’ve said they like the idea but are happy to have the rent monthly and go on our standard service. But we would not have been able to speak to that landlord if we didn’t ARO in the first place,”

“It’s been a great new business generator and has helped to bring more landlords into our standard service, as they know that with us, they can switch over to an ARO licence, should they decide they want it at a later date.”

Categories
Mortgages

Equity Release – The Perfect Product for ‘Rightsizing’ Your Home?

For some, skyrocketing property prices are making it borderline impossible to relocate. For others, it is more a case of not wanting to abandon everything they have worked hard to make their own over the years.

Motivations and justifications vary, but the popularity of ‘rightsizing’ is at an all-time high across the UK.

The COVID-19 pandemic has resulted in more UK households than ever before reconsidering their priorities. Spending more of their free time at home and in many cases now working from home, we are being forced to rethink the potential value tied up in the homes we live in.

According to economists, that is one of many reasons why equity release application volumes are likewise hitting record numbers up and down the country.

The ‘Rightsizing’ Phenomenon

Downsizing has traditionally been a popular choice among retirees, those approaching retirement and individuals looking to retire early. You decide your current home is not suitable for your needs, so you set your sights on something smaller, with the potential to free up some cash while doing so.

Nevertheless, the appeal of scaling things down to fit into a smaller home is far from universal. The prospect of going through the selling and relocating process in general can also be off-putting.

An increasingly popular alternative to the above, ‘rightsizing’ is all about making the best of the home you currently live in.

From major interior renovations to the construction of extensions and comprehensive exterior landscaping works, there is much that can be done to improve the appeal and enjoyment of your existing home. Even something as simple as the addition of a conservatory coupled with a new kitchen, really could make all the difference.

In any case, rightsizing is almost always cheaper and easier than moving.

Tapping into Your Home’s Equity

The options available for funding projects like these are also broader and more attractive than they have ever been. Among retirees and older homeowners in particular, equity release is growing in popularity like never before.

Equity release involves taking out a lifetime mortgage against the value of your home, which is subsequently repaid when your home is sold (either at the time of your death or when you move into permanent care).

You are handed a lump sum based on the value of your property and the size of the loan you need, or you can opt for a long-term series of monthly instalments.  In both instances, the money is yours to use in any way you like.  Major home improvements are a popular choice for many equity release customers.

After which, you are free to continue living in your home exactly as before, with no monthly repayments to worry about.

Consult with a Broker before Applying

If interested in equity release, it is essential to consult with an independent broker in advance. This will enable you to find an unbeatable deal from a reputable lender, while at the same time verifying equity release as an appropriate product for you. You can even use our Mortgage calculator UK to find out exact costs.

Most lenders impose very few restrictions with regard to how the funds can be spent, though this is also something to verify before going ahead with your application.

Categories
Mortgages

Five Longstanding Myths about Equity Release

Equity release has been growing in popularity across the United Kingdom for many years, however, the market remains subject of skepticism and scrutiny.

Assumptions and untruths about equity release can be harmful, steering potential candidates in entirely the wrong direction. Sourced from a main equity release provider, each of the following five long standing myths continue to create an inaccurate picture of how equity release really works:

1 – Equity release is too expensive to be a worthwhile option

An equity release scheme works in a similar way to a mortgage i.e. the loan balance in many instances is subject to a competitive APR. According to the latest figures from Age Partnership, the average interest rate charged on a quality equity release product today is around 3.29%. One-fifth of equity release products are currently being offered with an APR of less than 3% and most of them are fixed at that rate for over 15 years.

Rates are not only competitive but are also getting lower. In 2015, average rates in the region of 6% were the norm.

2 – I could fall into debt if my home’s value decreases

Traditionally, there has been the risk of ending up paying back more than the actual value of your property. This has occurred in instances where an equity release customer’s property has substantially fallen in value, to such an extent that the loan value exceeds that of their home. Most responsible and reputable providers today however cover their products with a negative equity guarantees.

This means that even if the subsequent sale of the property doesn’t raise enough money to cover the total costs of the loan and all associated fees, the customer or the customers estate will not be liable for the excess.

3 – The provider will take control of my home

Policies differ slightly from one lender to the next, though most providers enable equity release customers to maintain total control of their asset. There may be some limitations imposed, such as the extent to which you can structurally modify your home or implement changes that could severely impact its market value. Nevertheless, your home will remain almost completely under your control, meaning you can do with it as you like.

It is nonetheless important to check the terms and conditions outlined by the provider, prior to going ahead. Consult with an independent broker to ensure you fully understand the conditions of your agreement.

4 – There will be nothing left behind for my family to inherit

Equity release inherently reduces the size and value of your estate, though by no means wipes it out entirely.  Again, it depends on the terms and conditions of the equity release product you choose, mainly in relation to the size of the loan against the total value of your property.

If your main concern is ensuring adequate inheritance for your loved ones, discuss the available options with an independent broker ahead of time, you could even use our UK mortgage calculator to find out exact costs.

5 – The money raised can only be used for specific purposes

Last up, it’s true to say that the vast majority of people release the equity tied up in their homes to pay off their mortgages and fund home improvements, however, there are no specific limitations placed on how the funds can be allocated.

Whether you are looking to improve your everyday living standards, buy a new car or take the trip of a lifetime, the money is yours to do with as you wish. It is important to consult the terms and conditions of the provider carefully, just in case there are any limitations or restrictions in the small print.

thumb

Live Chat

hi Olivia here,
how can I help?