What is a Debt Management Plan (DMP) and How to Get One

Debt Management Plan is a mechanism by which you can have a third party negotiate with the people to whom you owe money and set out a plan by which you will make a single, affordable monthly payment each month.

Debts that can be included in a DMT are referred to as non-priority debts and include;

  • Overdrafts
  • Personal loans
  • Bank or building society loans
  • Money borrowed from friends or family
  • Credit card, store card debts or payday loans
  • Catalogue, home credit or in-store credit debts

Unfortunately, some debts can’t be included in a DMT. These include;

  • Court fines
  • TV Licence
  • Council Tax
  • Gas and electricity bills
  • Child support and maintenance
  • Income Tax, National Insurance and VAT
  • Mortgage, rent and any loans secured against your home
  • Hire purchase agreements, if what you’re buying with them is essential.
  • These debts are known as ‘priority debts’.

Whilst a Debt Management Plan is not specifically registered on your credit file, the fact that the implementation of a DMP will almost always be the result of you struggling to maintain (or miss previous payments to creditors) may have an effect on your credit score. However, just because you have a DMP does not necessarily restrict you from obtaining a mortgage as long as your credit history and other factors are still within parameters.

Whilst anyone can set up a Debt Management Plan, if you use a third party business then they must be properly registered with the FCA. The advantage of using a third party is that they do all the negotiating with your creditors, taking away that pain and hassle. You then pay one single agreed payment plus a once-a-month charge to your Debt Manager.

You may qualify for a Debt Management Plan if you have unsecured debt equivalent to between 15% and 39% of your annual income and you’re finding it hard to maintain repayments. It’s also usual to be on a steady income that should allow you to repay the outstanding debts over 5 years or less.

A DMP can take just a few weeks to set up and can give you the flexibility needed to repay your creditors over time.

What Does Virtual Freehold Mean?

It’s a little known fact that pretty much all land and property owned in the UK is actually the property of the Crown. Really! But don’t worry, in practical terms, if you own the freehold interest in land or property then for most intents and purposes, you are the ‘owner’ of the property and everything above and below it.

Of course, there are sometimes limitations on even our Freehold ownership. These limitations might take the form of retained rights, such as mineral rights or rights of way (easements) or restrictions, such as positive or negative covenants restricting use or requiring action (such as undertaking maintenance or not using land for specific purposes).

But, if you own the freehold interest, you will own that interest in perpetuity, until you sell it or, if it is mortgaged, the mortgagee repossesses it.

An alternative way to occupy or own an interest in the property is by way of a lease. This can be like a freehold in that you might still enjoy exclusive use of the property and have rights to it. However, leases are time-limited and therefore you will not hold the property into perpetuity. You might also have more restricted rights, such as being required to maintain the property and not allow certain uses, etc. However, you will enjoy specific rights in common law, as a tenant (or lessee).

In some cases, modern statutes have allowed tenants the right to renew their lease on similar terms or even to buy the freehold interest or the freehold interest of the building containing their flat, plus a long lease on their flat.

Of course, a flat can’t be owned freehold in the true sense of the word as this would mean owning the property above and below it, which would mean you also owned flats above and below you, plus any car parking! In order to get over this problem, it’s usual for flats to be sold on long leases of say 99 or 125 years.

In some cases, these leases might even be for say 999 years! These long leases are sometimes referred to as ‘virtual freeholds’. The owner of such a lease might not own the freehold but he does have most of the rights associated with ownership of the freehold, such as the right to exclusive possession and quiet enjoyment. In such circumstances, it is usual for the lessee (the owner of the leasehold interest) to have limited obligations under the lease, other than to perhaps pay ground rent or pay into a sinking fund. Even then, some ground rents are rarely demanded or paid, or could be for something innocuous like one peppercorn per annum.

Tips on Buying a Property with a Tenant in Occupation

There are a few reasons why you might be buying a property with a tenant still in occupation (a sitting tenant). Usually, it’s because you are buying what is known as a ‘Buy to Let’ investment. In these cases, the presence of a tenant has several benefits. You will likely be receiving rent from day one, which will improve your return on capital and internal rate of return. You should also if you’ve done your homework, have a reliable tenant already in-situ.

Firstly, check that your mortgage lender is happy that you are purchasing the property with a tenant in situ, as most prefer the property to be unoccupied on completion.

Of course, if your tenant has been in occupation for a while, he or she may be paying a low rent that should be reviewed. This can involve negotiation and it’s important that you know the terms of the tenancy prior to purchase.

Some tenants may occupy under an old tenancy or a longer lease and in these cases, your rights as the property’s ‘owner’ may be significantly curtailed. You might not be able to gain occupation whilst the tenancy remains in place and you may even have to grant the tenant a new lease in such circumstances. It is critical that you take legal advice.

In any event, make sure that as a bare minimum you undertake the following;

  1. Make sure you and your legal representative have read the lease or tenancy agreement and that you understand all the terms.
  2. Establish whether the landlord or tenant have ever breached any of the terms of the agreement.
  3. In the case of a short tenancy, make sure that any surety deposit is properly held by an authorised third party in accordance with the law and make sure that this is addressed and accounted for when you purchase the property.
  4. Make sure to undertake a full survey and inspection of the premises before the exchange and completion of the purchase and, in the case of furnished property, undertake a detailed inventory.
  5. If possible, speak with the tenant. Establish whether they are happy there and what, if any, problems they know about. This can save you a lot of money post-purchase!
  6. If you expect to increase the rent, it might be worth floating this past the tenant to see their reaction. No-one wants to pay more but if the tenant is reasonable and happy where they are, they may be expecting a rent increase anyway.
  7. If you plan to regain possession, either to live there yourself or to refurbish and re-let or resell, make sure that you are legally entitled to do so and allow for the fact that if the tenant is uncooperative, there may be a delay and a cost implication to build into your figures.
  8. Make sure that the tenant is who they say they are and check that all necessary statutory obligations have been undertaken, such as annual gas safety inspections, electrical inspections, the installation of fire and gas alarms, where required and that any furniture is properly tagged as safe for tenanted accommodation.
  9. Make sure to check that no-one else lives in the property or has acquired rights over the property during the previous ownership. This is usually done through various searches and the completion of a TA6 form that is filled out by the seller.

Last, of all, remember that tenants are people too! It’s amazing what you can agree if you make the deal appealing to their interests. Perhaps in return for you fixing a few taps and replacing a carpet, you can get them to sign a new tenancy or increase the rent on their existing one?

For more information, book a free appointment to speak to one of our specialist buy to let mortgage advisers/

What is a Property Chain and How Does it Work?

If you’re new to buying a home, you may hear lots of familiar phrases that you don’t fully understand. One of these phrases commonly used is ‘the property chain’. If you’re unsure what this is and why it’s talked about so much, we explain here.

As a first-time buyer, purchasing a new home is relatively straightforward. Once you have your deposit and, perhaps, your government-funded Equity Loan, you just need a valuation for the mortgage and a mortgage offer and your lawyer will do most of the rest. The housebuilder finishes the home and then sells it to you. Simple.

But what about when you are buying a home from someone other than a housebuilder?

Well, in this instance things can get more complicated. In most cases, the person you are buying from is likely to be selling to move to another property and the person they are buying from might be doing the same – and so on. This can sometimes result in a long chain of transactions, each dependent on the completion of the one before.

Most experienced home owners will be wary of long chains, simply because if just one buyer pulls out of their transaction it can cause all the other transactions to stall or even fall through completely. For this reason, buying from a housebuilder or selling to a first-time buyer with no house to sell, can be a very attractive proposition. Cash buyers are also attractive for the same reason, as is selling at auction, although this brings with it its own drawbacks.

For a chain of transactions to work well, it’s important to have a good understanding of everybody else’s needs and desires. For example, one buyer in the chain might be moving conditional upon relocating for a new job, or another might be an investor that must sell before the end of the tax year. If you don’t understand these pinch points, chains can collapse and you may all be left with what is referred to as abortive costs for work undertaken by your conveyancer, solicitor, etc.

In a successful chain, all the people involved in the transaction will understand the needs of each other and will communicate difficulties honestly and promptly. An element of flexibility might also go a long way. Especially on timescale. When everyone is sure they can ‘perform’ as required (in other words, they know they will be in funds for the purchase, etc) they will exchange contracts for the sale or purchase. At this point all the terms are set, including move dates, etc.

It’s unwise to exchange on a contract unless you know you can fulfill its terms, although sometimes it’s necessary to exchange based on the exchange of contracts with another. If at some later stage you cannot fulfill the terms of your contract because of the breach of another contract made with you, there is a route by which you can pursue a claim for damages incurred as a result of these breaches. Hopefully, it never gets to that stage.

How To Make Your Home More Energy Efficient

With energy prices likely to rise in the long term, it makes sense to consider how you can make your home more efficient. Especially as, under the Government Green Homes Grant scheme, hundreds of thousands of people will be able to access vouchers of up to £5,000 and in some cases £10,000.

The grants, provided in the form of vouchers, can be used to make your home more efficient, thus saving you money in heating and electricity bills.

The Government grant scheme will cover at least two thirds of the cost that homeowners spend on energy efficiency green upgrades, while those on the lowest incomes will not have to pay anything.

So what sort of improvements are worth considering?

INSULATION – A significant proportion of the heat generated to heat your home is lost through drafts and poor insulation. In older properties with solid wall construction, internal dry-lining can help improve insulation in the winter months. Older homes often don’t have under floor insulation either. But the primary and most effective way to stem heat loss and bring down your heating bills is via additional roof space insulation.

DRAUGHT PROOFING – It seems silly, but the addition of some inexpensive draft exclusion strips to doors can make a difference at a relatively small cost.

NEW WINDOWS & DOORS – Single glazing is a great way to lose heat generated in your home! In the winter months, single glazed homes suffer from condensation and dampness, especially in kitchens, bathrooms and laundries where steam and warm air meets cold panes of glass. Replacing windows and doors with double or triple-glazed units can be a very effective way of reducing your heating bills.

NEW BOILERS – Modern boilers are considerably more efficient than older models and it makes sense that if you need to burn less fuel for the same output, you will be doing your bit for the environment. Improving hot water tank insulation, installing smart heating controls and thermostats and thermostatic radiator valves can help you heat different parts of your home only as much as you need. After all, why keep a spare room as warm and toasty as you might your child’s room?

LOW CARBON HEAT SOURCES – Sustainable heat sources such as solar and air and ground pump heat sources are becoming more popular and whilst these options can sometimes be expensive to install, they can save you a lot of money in the longer term.

To qualify for the grant funding, households will need to install at least one ‘primary measure’ Primary measures are defined as; Solid wall, cavity wall, under-floor, loft, flat roof, room in roof, park home or a an air source heat pump, ground source heat pump or solar thermal system.

So long as there is at least one primary measure in the package of works, households will also be able to install secondary measures. Secondary measures can only be subsidised up to the amount of subsidy provided for primary measures. (e.g. if a household receives £1,000 for primary measures, they can only receive a maximum of £1,000 towards secondary measures).

The secondary measures are:

  • Draught proofing
  • Windows and doors: Double/triple glazing (where replacing single glazing), secondary glazing (in addition to single glazing), upgrading to energy efficient doors (where replacing doors installed prior to 2002).
  • Heating controls and insulation: appliance thermostats, hot water tank thermostats, hot water tank insulation, smart heating controls, zone controls, delayed start thermostat, thermostatic radiator valves
    For low-carbon heating to be installed, households will need to have adequate insulation (e.g. wall and loft, where applicable). These can be installed as part of a package – they do not have to already be in situ.

Adding insulation and making your home more energy efficient will add value, as well as reducing your monthly energy bills. When getting your home improved, retain all paperwork as this will be useful when getting your home valued and surveyed, and will mean your EPC is updated too.

Documents Needed When Selling Your Property

It’s easy to assume that once you’ve agreed to sell your home, it’s just a matter of your solicitor or conveyancer ‘doing the legal stuff’ and that’s that. Unfortunately, your job is still only partly done – there’s more to selling a property than many first time buyers realise.

Once you are in a position to instruct your conveyancer, you are going to need to provide them with proof of your address and ID. This is required in accordance with anti-money-laundering legislation and you will be required to provide a specific proof before your solicitor can proceed. They will also write to you setting out their terms of business.

Once your solicitor is engaged, make sure that they are fully briefed on the terms of the agreement you’ve reached, especially with regard to pertinent facts like a timetable for the exchange of contracts, etc. If your purchase is strictly constituent on this timetable make sure your conveyancer is bought into it – or there may be tears later! Also, be sure to react swiftly to all requests your conveyancer makes of you, returning paperwork properly completed and by return.

What paperwork will be needed?

Title Deeds

The title deeds consist of paperwork that details the ‘demise’ being sold and sets out how the property is owned (its tenure), together with other information regarding various rights of way or other ‘easements’. It will also illustrate an unbroken chain of ownership from the past.

Nowadays, most properties in England & Wales are registered meaning that the title deeds have been scanned and the information is kept on a central database. However, some information detailed on the deeds may still be required, so the deeds will be needed.

In most cases, where a property is owned subject to a mortgage, either the lender or the solicitor you used when purchasing the property will have the deeds. Your solicitor will need to make inquiries for them to be presented.

Energy Performance Certificate (EPC)

You must have a valid Energy Performance Certificate (EPC) before you start marketing your property. All properties that are built, sold or let must now have a valid EPC. EPSs are valid for 10 years. You should be sure to keep the EPC safe when you buy your property. If it has expired when you come to sell it, you’ll need to commission another inspection. They usually cost between £50 – £100 plus VAT.

If you lose your EPC, there is a central register you can visit to obtain a copy. Where can I get an Energy Performance Certificate?

Property & Information Form (TA6)

The TA6 is a standard form which details lots of information about the property. As the owner, in many cases, you will be best placed to answer the questions contained within. It is very important that you are truthful when completing this form as any misrepresentation can have serious consequences. Completion of form TA6 forms part of what is sometimes referred to as ‘enquiries before contract’.

Fittings & Content Form (TA10)

As the name suggests, this form details what is included in the sale of the property. For example, carpets, curtains, blinds, garden shed, etc. Again, make sure to be clear when completing this form and, if something has not been agreed, it will probably save time if you clarify with the buyer before completing the form and returning it. Always take advice from your solicitor here, as there are specific legal definitions that relate to fixtures & fittings.

Leasehold Properties: Additional Information

If you are selling a property subject to a lease or a leasehold property, then you’ll need to provide further information, usually in form TA7.

Everything Else (Including Special Circumstances & Additional Paperwork)

If you are selling a rented property or perhaps you are managing a sale of property forming part of probate (the estate of a deceased person) then you may have various other obligations to provide information such as proof of grant of probate, gas and electrical certificates, etc.

You may also need to provide subsidence/damp guarantees and/or warranties, party wall agreements, specialist asbestos surveys, listed building consent, conservation area consent, Japanese knotweed management plans, planning permissions and window certification to name but a few. These can be covered in a comprehensive building survey.

The key is to be organised from the outset so that you are not delaying matters trying to find important information. And don’t forget to ensure that your new mortgage is agreed before exchanging contracts.

How to Speed Up Your Buy to Let Mortgage Application

Buying to let requires a specific mortgage product designed for the purpose. But in large part the process is very similar. Mortgage lenders will tend to concentrate on things like the rental income and less on your own earnings, largely because the loan is likely to be supported by the rent generated from the property.

Many buying to let will find themselves competing against buyers with significant cash resources and with cash comes the ability to act swiftly. Something which is appealing to most sellers. Therefore, if you are buying at auction if there is a tight time constraint, arranging an interim bridging loan might be a better short term funding option.

In most cases, the process of obtaining a buy to let loan usually takes between 4 – 6 weeks, although, as with all purchases, there are a variety of steps to the process which will delay or even stall the process.

The Buy to Let Mortgage Process.

  1. First, sit down with us so that we can better understand your situation and be better informed of your needs. We can also give you a general overview of the market, how much you are going to be able to borrow based on property type and rental income and your own circumstances.
  2. Then, we’ll trawl the market and source suitable lenders and rates for your consideration. Each lender has their own strict criteria, so one lender might be perfect for one investment but not be interested in funding another.
  3. Once we have selected the most attractive mortgage lender and product, we will apply for a Decision/Agreement in Principle (AIP) from the chosen lender. This will necessitate us compiling a good deal of information on your behalf.
  4. Once the AIP is agreed, we’ll help you complete the lender application.
  5. Once received, the lender will instruct a valuation on the property. This will confirm the buy to let property’s value, rental income and overall condition of the property.
  6. Once the valuation is complete and satisfactory, the lender can process your application. At this point you will need a solicitor or conveyancer involved to act for you (and probably also the lender) in the conveyance and the mortgage offer.
  7. When the lender is satisfied, they will issue a formal mortgage offer which outlines the terms and conditions of the loan. If happy with the terms, you’ll instruct your solicitors to complete the legal requirements.
  8. Once contracts are exchanged, you can agree on a date for completion and your solicitor will liaise with your lender to arrange for funds to be made available. If you’re remortgaging, your solicitor will request the funds from your lender.
  9. Completion! You are now the legal owner of the property and can get the keys.

For this process to run smoothly, it is important that no problems that might cause delays are ignored. Possible causes of delay include;

  1. Failure to provide all necessary information accurately and promptly, when requested by us. It might seem obvious, but if the lender needs information to make a decision or to issue a mortgage offer, a few days getting information to them can easily cost a week or more.
  2. Inefficient conveyancing! Yes, you heard right. Choosing your advisors wisely will save you time in the long run. Many people stick with who they know. If you don’t know anyone, don’t be afraid to ask friends and family who’ve had good and bad experiences of conveyancers and lawyers. At Mortgage Required we are happy to help.
  3. Poor communication. Especially during the holiday season, it can be very hard juggling between several parties’ diaries. Maintaining good avenues of communication so that delays are not incurred whilst your advisors and perhaps yourself or the seller are away sunning themselves can pay dividends.
  4. Make sure to transfer funds to your solicitor in good time and make sure they have funds for agreed expenses incurred on your behalf.
  5. Make a list of all the information you need to provide and start bringing together the information efficiently. Grabbing P60s, payslips, copies of tenancy agreements, etc can be time consuming and tedious, but it has to be done. We’re here to help you through the process.

To speak to an adviser about buy-to-let mortgages or make an appointment please call us on 01245 218018.

green deal

Government’s New Green Homes Grant

The government’s new Green Homes Grant is part of the Government’s £3 Billion ‘Green Investment’ package which was announced by Rishi Sunak in the 2020 summer statement. The £3 Billion investment is aimed at improving energy efficiency and also to help stimulate the economy post-Covid19 lockdown.

The government initiative will start in September 2020 and will allow homeowners to apply online to receive help from the government in the form of vouchers to pay for as much as ⅔ of the expenditure incurred for work such as double glazing, insulation, the installation of heating systems, draft proofing and the installation of renewable energy.

Vouchers will be available for up to £5,000, with the poorest homes sometimes eligible for vouchers of up to £10,000.

In order to qualify for this help you must first request an assessment from a Green Deal Assessor.

The assessor will consider the following when making his/her assessment;

  • Whether you own or rent the property
  • your home is a listed building, in a conservation area, built before 1900 or constructed in a non-traditional way
  • there are access issues, such as access to your loft
  • you can provide bills showing your recent energy use
  • When the assessor visits

You may be asked:

  • how many people live in your home
  • what type of heating and appliances you use
  • how often you use your heating
  • what energy-saving measures are already installed
  • After the visit

You’ll get a document, called a Green Deal advice report, that contains:

  • an Energy Performance Certificate (EPC) that rates your home for energy efficiency
  • an occupancy assessment that measures how much energy you and other occupiers are using
    improvements your assessor recommends
  • an estimate of the money you could save on your annual energy bills
  • a statement on whether the improvements will pay for themselves through reduced energy costs

A Green Deal advice report is valid for 10 years, or until you make changes or energy saving improvements to the property, for example you build an extension or change the windows.