How does a Gifted Deposit Affect a Mortgage?

If you’re looking to buy a new home, it’s likely that you’ll need to put down a deposit. These days, the minimum deposit is usually equivalent to 5% of the value of the property. A 5% deposit will mean you have a 95% LTV (Loan to Value) ratio.

With house prices in the UK currently at a staggering 8 x average earnings, just getting on the housing ladder can be very difficult. This is where a gifted deposit might help.

A gifted deposit is a sum of money given to you by someone else, usually a member of your family, so that you can put down enough of a deposit to buy a home. Importantly, the money you are gifted must be given by way of a gift and not a loan.

Many mortgage lenders will accept a gifted deposit as all or part of the proof of deposit and borrower provides when requesting a mortgage. However, in order for the deposit to be accepted, the lender will normally require that the following questions are addressed;

  1. What is the relationship between the mortgage applicant and the gifter
  2. What is the amount of money they wish to gift;
  3. Confirmation that the gift is non-refundable;
  4. That the gifter will hold no legal charge over the property

It’s not unusual for the gifter to be requested to provide a statement of account for where the money has originated. This is usual, for protection against money laundering. Also, should the gifter die within 7 years of giving the money, and the estate is in excess of the current Inheritance Tax (IHT) allowances at the time, there may be some IHT to pay on the gift, usually on a sliding scale.

For more information, book a free appointment with one of our mortgage advisers now.

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 Get a Mortgage on a Zero Hour Contract

Many people believe that it’s impossible to obtain a mortgage if your sole income is derived from employment on a zero hours contract. Whilst this is a more precarious type of employment and does make obtaining a competitive mortgage offer more difficult, it is possible.

With the growth of zero hours contracts in the UK over the last decade or more, lenders appreciate that more and more people are likely to be employed on these less predictable contracts of employment. However, just because your employment contract might not guarantee hours of work every month (and therefore income) many employees on zero hours contracts might well be earning a respectable income month in – month out, despite the lack of formal hours in their contract.

It is, therefore, important to make sure that you make the best case possible when making your mortgage application. For example, some lenders might want to see at least three months proof of income. Others might need 12 months. Making an application to the wrong lender for your needs could be time consuming and costly, involving you in wasted effort and perhaps even damaging your chances of obtaining a mortgage elsewhere if you are rejected by a lender that was never likely to fit your circumstances.

Mortgage lenders will want to reduce their risk. This means that higher earners with skills are likely to be a more attractive proposition. So are lenders with a larger deposit, especially those with a Loan To Value of 80% or less. Having worked in the same industry for a decent period of time or, better still, for one employer for a good while, will help.

It’s also worth noting that many people borrow as a couple and if one borrower has a salary and the other has an income through a zero hours contract the impact might be less relevant. Also, where you are buying a property to let as an investment your income might have little or no relevance as some lenders in the buy to let market assess their lending criteria on other factors such as LTV and net rental income.

Therefore, when on a zero hours contract, it’s important to make sure you apply to the right lender for your circumstances and present your application in the most favourable light.

For an initial chat and a no-obligation consultation contact BlueQ, today.

Budget 2016 – Key Points For You

Insurance Premium Tax

The standard rate of Insurance Premium Tax (IPT) will be increased from 9.5% to 10%. This ensures that the impact of the rate increase is spread broadly across the entire general insurance industry.

IPT is a tax on insurers. However, if they do pass the cost of this rate increase onto their business and household customers, the average combined home and contents insurance would only increase by £1, and the average motor insurance premium by £2 per year.

All the revenue raised from this increase in IPT will be invested in flood defence and resilience measures.

Stamp Duty

Residential additional properties

As part of the government’s commitment to support home ownership and first-time buyers, the Autumn Statement 2015 announced that from 1 April 2016, higher rates of Stamp Duty Land Tax (SDLT) will apply to purchases of additional residential properties, such as second homes and buy-to-let properties. The higher rates will be 3 percentage points above the current SDLT rates and will apply to purchases of additional residential properties in England, Wales and Northern Ireland.

Following consultation, the government announced in Budget 2016 that it has decided that:

  • To help those moving in difficult circumstances, purchasers will have 36 months rather than the originally proposed 18 months to either claim a refund from the higher rates or before the higher rates will apply, in the event that there is a period of overlap or a gap in ownership of a main residence; and
  • There will be no exemption from the higher rates for significant investors, and the higher rates will apply equally to purchases by individuals and corporate investors

Income Tax

Personal Allowances

From 6 April 2016 there will be no higher age related personal allowance for people born before 6 April 1938 which means that the basic personal allowance for everyone will be £11,000. This will increase to £11,500 from 6 April 2017.

Capital Gains Tax

From 6 April 2016, the Capital Gains Tax (CGT) rate of 18% for non, starting rate and basic rate tax payers will be reduced from 18% to 10% and the 28% rate for higher and additional rate taxpayers (and most trusts) will be reduced to 20%.

The annual exempt amount will remain at £11,100 (for individuals) and £5,550 (for most trusts).

Inheritance Tax

The nil rate band will continue to be frozen at £325,000 until 2020/21.

The rate of IHT during lifetime remains at 20% and the rate on death remains at 40%.

Individual Savings Accounts

Adult ISAs

In 2016/17, the annual ISA allowance will remain at £15,240. From 6 April 2017, the annual ISA allowance will then increase to £20,000.

The Lifetime ISA

From April 2017, people under the age of 40 will be able to open a Lifetime ISA and contribute up to £4,000 in each tax year. The government will then provide a 25% bonus at the end of the tax year on the contributions that have been made. This means that anyone who saves the maximum amount in the tax year will be subject to a £1000 bonus. Savers will be able to make contributions from the age of 18 up to the age of 50.

The Lifetime ISA aims to help young people save flexibly for the long-term throughout their lives. It will help them to simultaneously save for a first home or for their retirement, without having to choose one over the other.

Opening a Lifetime ISA will work in the same way as opening any other ISA, as will saving into one. Individuals will also be able to transfer their Lifetime ISA in line with the existing ISA rules.

There will however be some additional rules to consider:

  • Individuals will be able to contribute into a Lifetime ISA and receive the 25% Government bonus up to the age of 50.
  • The Government Bonus will be paid on contributions of up to £4,000 per year. This is essentially £1 from the Government for every £4 the individual invests.
  • Individuals will be able to transfer funds from other ISA’s as a way of funding their Lifetime ISA.
  • Where people choose to withdraw savings from the Lifetime ISA to make a first home purchase, they will be able to withdraw up to 100% of their balance including the Government bonus. Their withdrawal can be put towards a first home located in the UK with a purchase value of up to £450,000. There will be an initial holding period of 12 months from the account opening before withdrawals can be made for a home purchase.

Whilst the purpose of the Lifetime ISA is to encourage long term saving for buying a home or saving for retirement, the Government have also stated that they want to ensure that people can access their money for any other purposes. This will however incur a 5% charge.