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 could really 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 you are interested in an 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 in the UK to find out the 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.

Equity release has been growing in popularity across the United Kingdom for many years; however, the market remains subject to scepticism 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 continues 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 similarly to a mortgage, i.e., the loan balance is, in many instances, 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 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 customer’s 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 assets. 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 it 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 the exact costs.

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

Last but not least, 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.

Technically speaking, right to buy is not a separate mortgage category. Eligibility for a mortgage to fund a Right to Buy home purchase is established in the same way as a conventional mortgage; however, there is a separate mortgage category for bad-credit mortgage applicants, who would be unlikely to qualify with any mainstream lender. If you intend to purchase a property under the Right to Buy scheme and have issues with your credit history, it is essential to target specialist bad credit mortgage specialists with the help of an independent broker. You can even use our mortgage calculator in the UK to work out how much a mortgage would cost you.

Are bad-credit mortgages for the right to buy available?

The short answer is yes, although you are unlikely to find the support you need on the High Street. The specialist bad credit mortgage sector, aka subprime lending, is growing and diversifying and remains a facility most major banks and lenders are reluctant to offer or even fairly consider.

Subsequently, the key to finding and qualifying for a competitive bad credit mortgage lies in working with a specialist broker, who can compare the market on your behalf and find your perfect lender.

How can I tell if I have bad credit?

The three main credit reference agencies are Experian, Equifax, and Call Credit. Establishing if you have bad credit is therefore simply a case of checking your credit score with all or one of these three agencies.

If you have any questions, concerns, or doubts, they can be raised and discussed with your broker. If your credit score is low, specialist bad credit mortgages may be the only viable option. If your credit score is imperfect but far from catastrophic, you may be advised to work on improving it before applying for a mortgage.

Will I qualify for the right to buy a mortgage with bad credit?

The extent of the damage to your credit score will play a role in determining your eligibility or otherwise for a Right to Buy mortgage; however, specialist subprime lenders consider multiple additional factors alongside credit scores.

For example, your employment status, income level, current financial position and performance, assets, and other contributory factors will be considered. Ultimately, your lender simply needs to establish whether you are in a comfortable position to keep up with the repayments on your home loan.

How does bad credit affect the right to buy a mortgage?

Poor credit can affect a right-to-buy mortgage in the same way it affects any conventional mortgage. Interest rates and borrowing costs may be higher, and it may be more challenging to qualify in the first place; however, it is still perfectly possible to access an extremely competitive deal with expert broker support. Rather than approaching any lender directly with your application, you will find the process quicker, easier, and more cost-effective with a reputable broker in your corner.

For more information on any of the above or to discuss bad credit Right to Buy mortgage applications in more detail, contact a member of the team at UK Property Finance today.

After flatlining throughout much of the coronavirus crisis, the UK’s buy-to-let market is showing reassuring signs of a strong recovery. Property purchases and portfolio expansion plans put on hold during lockdown are now being unleashed on the sector, spurred in part by the current stamp duty holiday recently introduced by the Chancellor.

According to the results of an industry survey conducted by Cherry, upwards of 30% of brokers have reported a spike in individual buy-to-let purchase activity and interest. Likewise, almost the same amount (27%) reported growing interest in buy-to-let property acquisitions from limited companies.

In total, buy-to-let market activity in terms of planned purchases or purchase enquiries is on the up at around 57% of brokers across the UK. At the same time, brokers are also seeing an upturn in the number of clients applying for short-term financial products like bridging loans. Most of which are being used by landlords and investors for property refurbishments and improvements.

“It’s clear there has been a spike in buy-to-let activity in recent weeks. Whereas the BTL market has been dominated by remortgage business in recent years, it is purchase inquiries that are currently keeping brokers busy,” said Donna Hopton, director at Cherry.

“This window of opportunity for reduced stamp duty land tax will certainly be helping to drive this demand, but we are seeing that the market is generally buoyant, which is a positive sign for advisers and the economy.”

A golden opportunity for landlords and investors?

Traditionally, Buy to Let has been seen as something of a safe haven for investors in the UK. To some extent, an investment opportunity that more or less guaranteed generous and ongoing returns with little to no risk involved

More recently, the government announced a temporary stamp duty adjustment. By significantly increasing the threshold at which stamp duty is payable on property purchases, from £125,000 to £500,000, the Chancellor effectively shaved thousands of pounds off the purchase prices of properties for buy-to-let investors.

Coupled with rock-bottom mortgage calculator UK rates over the past few months, it was seen by many as a potential golden opportunity for landlords and investors.

A leading source stated, “In the right hands, buy-to-let can still be a useful and profitable investment vehicle.

Landlords will rush to buy homes before the stamp duty holiday ends in March next year, after which I think there may be a natural drop in activity.”

Mortgage applicants naturally seek the best possible deals, which for most means choosing lenders that offer the best introductory rates. Unfortunately, research suggests that a surprising proportion of home buyers do not realise that when their initial deal comes to an end, the mortgage is automatically switched to a standard variable rate (SVR) mortgage.

Banks and lenders are legally obliged to explain this caveat when organising and issuing mortgage contracts, though thousands are apparently unaware of the terms of their home loans.

A new study conducted by MoneySuperMarket suggests that a full 12% of mortgage payers have lapsed onto SVR rates by accident. This results in an average additional monthly repayment of approximately £133, with a typical SVR mortgage costing around 15% more than an introductory mortgage deal.

Worse still, among those who accidentally wound up on an SVR and found themselves essentially out of pocket, many claimed they were not made aware of the automatic switch at the end of their initial deal. The same study from MoneySuperMarket found that around 15% of all mortgage borrowers do not know that the transfer to an SVR at the end of the introductory period is automatic.

Switching deals at the right time

In total, MoneySuperMarket estimates that around 1.3 million Brits could have lapsed onto an SVR mortgage, amounting to total collective added costs of more than £175 million per month. By contrast, those who switch to a better deal at the right time, i.e., prior to their introductory rate coming to an end, stand to save an average of £340 per year.

For those already tied into an SVR, the potential monthly savings increase to approximately £1,602 per year.

According to MoneySuperMarket, the importance of switching to a competitive deal at the right time simply cannot be overemphasised.

“Standard variable rates on mortgages are notoriously expensive, and with 15% of those remortgaging being unaware of how they work, automatically lapsing onto them is a common and costly financial pitfall,” commented Money Supermarket’s Emma Harvey.

“Regardless of whether you’re on an SVR mortgage or another type, there could still be significant savings to be made when your initial mortgage deal comes to an end. In fact, we found that the average saving for mortgage holders still within their initial product period is £28.36 per month, which really adds up.”

“In order to stay on top of how much you’re spending on your mortgage, be aware of when your current mortgage deal is due to come to an end and start researching rates several months in advance.”

“You can arrange your new deal three months before the end date so that you switch over at the end of your initial term, ensuring you are always on the best deal.”

Independent broker support

If you are reaching the end of your introductory deal or believe you are paying too much on your current mortgage, we can help. You can contact a member of the team at UK Property Finance, and we will conduct a whole-market search on your behalf, enabling you to find a more competitive deal and make ongoing savings on the life of your loan. Along with this, you can even use our UK mortgage calculator to work out the costs more accurately yourself.