This month, we are talking all things buying, selling, and mortgages. Did you know these warmer months are the peak season for house purchases in the UK? Generally, we see buyers come to the market around this time. After having the winter months to save up deposits, get mortgages pre-approved, and prepare for the big move! In some positive news, the Bank of England (BoE) recently decided to leave interest rates on hold at 5.25%.
We will look at a few angles. From one end of the spectrum to the other. The 99% mortgage versus using Equity Release to buy a new home. Plus, handy financial advice for this big purchase. Like what insurance you need when taking out a mortgage. Why income protection is an important one. And with this new financial commitment, we have an honest reflection: do you need Private Medical Insurance? Finally, we touch on some valuable tips when you are looking to buy.
Let’s discuss the new first-time buyers' 99% mortgage with £5k deposit by Accord Mortgages.
As you might have guessed from the name, a 99% mortgage allows you to take out a mortgage with only a 1% deposit. This could be a fantastic opportunity for those struggling to buy a house. Think renters who already pay what they would in rent. Or those who can cover repayments but can’t save enough of a deposit in time to buy a house.
With only a £5,000 deposit, potential buyers might be able to purchase a property valued at up to £500,000. Available to first-time buyers only, borrowers could take out a five-year fixed-rate mortgage at 5.99 per cent.
Yorkshire Building Society’s Director of Mortgages, Ben Merritt, said the society's research found it could shorten the time first-time buyers need to get mortgage ready. He added that it could help to encourage a “level playing field for those who don’t have financial support from their families to fall back on.”
Affordability must be addressed when taking out such a large mortgage. Issues such as losing your job or property value falling mean you will be in debt to the bank even if you sell your house.
Due to the nature of these loans, speak to us today to see if they would suit you
Think carefully about securing other debts against your home. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it. You may be charged a fee for mortgage advice.
You’ve secured your pre-approval and found your new home. But have you got your insurance in place?
There is no legal requirement to take out insurance when you get a mortgage except for Buildings Insurance. But basic insurance is still needed before you move in! At the minimum, your lender will want to see Building Insurance. After all, it’s their investment, too.
Without Building Insurance, you would need to foot the bill to rebuild your home - while continuing to pay your mortgage at the same time!
We ask some key questions to help you understand Building Insurance.
What does Building Insurance cover?
Buildings Insurance usually covers loss or damage caused by:
- fire, explosion, storms, floods, earthquakes;
- theft, attempted theft, and vandalism;
- frozen and burst pipes;
- fallen trees, lampposts, aerials or satellite dishes;
- subsidence;
- vehicle or aircraft collisions.
What is Buildings Insurance?
Buildings Insurance covers the cost of repairing damage to the structure of your property. Including garages, sheds, and fences. And even the cost of replacing items such as pipes, cables, and drains.
Your insurance should cover the total cost of rebuilding your house. Plus the hidden demolition costs, site clearance, and architects' fees.
How much Building Insurance coverage do you need?
First, calculate the cost of completely rebuilding your home. For help, check out the Building Cost Information Service online calculator on the Association of British Insurers' website.
It won’t be the price you paid for your home or its current value. Rebuild costs are usually less than the current market value. Make sure you don't over or underinsure yourself.
Some insurers offer unlimited cover, so you don't have to calculate the rebuild costs. However, if you already know what they are, it may be cheaper to shop around for a policy that fits your exact needs.
Do you need extra Building Insurance?
You might want to consider taking out extra Building Insurance to cover for you for other risks. You'll have to pay higher premiums for this cover. You can add on extra insurance for:
- flooding or subsidence if you live in a high-risk area;
- accidental damage to your home;
- alternative accommodation if you have to move out of your home after you've made a claim;
- damage to boundary walls, fences, gates, driveways, and swimming pools;
- damage to underground pipes, cables, gas, and electricity supplies;
- glass in windows, doors, conservatories, and skylights;
- liability cover if someone else's property is also damaged;
- legal expenses cover.
If your property has special features, such as a thatched roof, or is a listed building, you can pay for a survey from the Royal Institution of Chartered Surveyors to assess the rebuild costs.
Remember to regularly review the amount your Buildings Insurance covers. As we’ve seen quite dramatically in recent times, rebuild costs rise over time! And remember, if you improve your home, like an extension or a loft conversion, the rebuild costs may go up. You will need to make sure you're covered.
So, don’t leave protecting your biggest asset up to chance.
Speak with us today about ensuring your home is properly insured
For ultimate peace of mind in an emergency, don’t forget Income Protection Insurance when buying a home.
Income Protection Insurance serves as a financial safety net. If illness or injury stops you from working, this insurance provides an income. It’s usually a percentage of your pre-tax earnings, depending on how much cover you take out.
You want to ensure you can always repay your mortgage and cover the essentials. Your first step is assessing your financial situation. What are the most significant risks if you lose your job due to illness? Do you have three months of living expenses in savings? Or similar sick pay benefits from your employers?
Ultimately, whether it’s worth taking out depends on you. If you are self-employed and would struggle to pay the bills if you became unwell, then it is worth considering. Or if employed, and your employer only offers limited sick pay.
You may get access to statutory sick pay through the government if you’re too unwell to work. However, this is only £99.35 a week. Unlikely to cover all your bills!
Most people don’t know that policies can cover up to a set percentage of your income. E.g. 65%, or up to a set monthly amount, e.g. £2,000. Or you could find a policy that lasts for just a year or up to your retirement date. The longer the policy, the more expensive it is.
The cost of Income Protection Insurance varies. Factors like age, occupation, health status, coverage amount, and policy features. Someone in their mid-30s may pay an average £29 a month for Income Protection.
The Times reported that only 7% of British adults have policies. Compared to 10% with Critical Illness Coverage, and 24% with Life Insurance. Cost is partly the reason why Income Protection is less common. Income Protection tends to be more expensive than Critical Illness and Life Insurance. BUT because it covers a broader range of reasons. You are more likely to use this insurance.
Work with a mortgage and insurance broker to assess your income and needs. We'll find the best value, matching you to the policy for you and your budget
If you’re 55+ and have been eyeing up your dream home but aren't sure how you'll be able to afford it. Equity Release could help you purchase a new home! From a fresh space to live to a holiday retreat. We delve into how to use Equity Release to buy a new property.
Say you have an existing mortgage that you would like to pay off. You can clear your outstanding costs rather than borrowing more. Avoid committing to larger monthly payments. And even receive additional funds to purchase your new property!
The property sale, mortgage repayment, and new property purchase are all finalised together. Cash from your current property and the equity you release from the new home will give you enough to purchase your new home. Without having to make any monthly payments if you don't want to.
Other options to consider include paying all or some of the interest off. Either with regular monthly payments or ad-hoc voluntary payments. Our advisers can discuss payment options for the best plan available.
Once you have found the property you wish to buy. You sell your old property. Clear the mortgage, and move into your new home. Your new home will have the Equity Release mortgage on it. The process is similar to a regular property purchase. But you'll have a new home without monthly mortgage payments and not based on your affordability.
Let us help you achieve your dream of owning a holiday home. Either in the UK or abroad. Releasing equity from your primary residence can help. Allowing you to split time between your main home and your holiday home. Six months in each! You may want to purchase the property outright. So there is no additional standard mortgage requirement.
If purchasing a holiday home in the UK, remember stamp duty. Depending on the value of your second home. More information on stamp duty for second homes is here: hoa.org.uk/advice/guides-for-homeowners/i-am-buying/stamp-duty-for-second-homes/
Regular changes and updates mean more options are available. Even if you have been refused Equity Release in the past.
Why not see if you can release equity today? If you have further questions, speak with one of our qualified advisers. Hit reply-to to chat instantly
This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration. Check that this mortgage will meet your needs if you want to move or sell your home or you want your family to inherit it. If you are in any doubt, seek independent advice. A fee may be charged for mortgage advice. The exact amount will depend on your circumstances.
Private Medical Insurance (PMI) can be expensive. Unfortunately, the NHS is under a great deal of strain, and some procedures and appointments have long wait times. We get honest. Here are some things to consider when taking out Private Medical Insurance.
- Do you have any pre-existing medical conditions?
This includes health issues that you already have when applying for insurance. They may include long-term conditions such as diabetes, high blood pressure, asthma, or Crohn’s disease.
Having a pre-existing condition doesn't mean you're automatically excluded from getting insurance. But insurers might not cover related treatments. You're also likely to face higher premiums.
- Can you afford to self-fund treatments?
By paying for private treatments, you can choose your preferred clinics, consultants, and treatment timelines. Without worrying about the constraints of insurance policies! This flexibility can be helpful if you need specialised or tailored care. But you can be expected to fork out a large sum and may face the unexpected with more costs than planned.
PMI allows you to pay a monthly fee. They will contribute to any treatment you may need. This helps to reduce the shock factor of a hefty bill!
- How old are you?
Premiums increase as you get older, and your policy may become a more significant cost. This reflects the greater the risk of needing medical treatment as you age. Compare quotes from different insurers to ensure you get the best coverage for your age and circumstances. Chat with us to see how we can help you get the best policy for your needs.
- What level of cover do you need?
Considering your specific needs can help you save money. For example, a 60-year-old man won’t need pregnancy cover! But he may need to consider adding hospital cover.
From there, start thinking about your choice of hospitals. Many insurers offer a list to choose from. Opting for a shorter list may lower your costs. Instead of full coverage, you can opt-in for treatment or drug coverage unavailable through the NHS.
Adding an excess to your policy is another way to save. You can lower your premiums by agreeing to pay a portion of the treatment costs yourself. The higher the excess, the lower your premiums – but make sure you can afford the excess!
- How fit and healthy are you?
Factors such as age, medical history, and lifestyle are considered for PMI. Living a healthy lifestyle may reduce costs. A smartwatch or fitness tracker can help you track your activity. Some providers may offer incentives or discounts for evidence of exercise.
- Do perks matter to you?
You might even get offered free cinema tickets or discounted gym memberships! But you will probably be paying for them overall. So, ensure you understand what perks are available and whether they add value to your policy. While perks can be a good bonus. It's crucial to prioritise cover levels and cost when choosing the right PMI policy for you.
Chat with us to see if we can help you find the right policy to suit you.
Risk warning: Think carefully about securing other debts against your home. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it. You may be charged a fee for mortgage advice.
Property buyers are forced to compete hard in many markets. So, how can you improve your chances of securing your dream home?
Here are five tips to beat out other buyers:
Have a home loan pre-approval in place. This will make you look more attractive in the eyes of estate agents. Positioning you as a serious buyer who can move quickly if their client accepts your bid.
Build good relationships with agents. Estate agents work for vendors, not buyers, so they prioritise their clients' interests. But if you can establish a good working relationship with agents. Even while keeping some of your cards up your sleeve. They might favour your offer over those of other buyers.
Be realistic with your offers. If you're buying via private treaty. Avoid the temptation to begin with a lowball bid. Otherwise, agents will take you less seriously than buyers who make serious offers.
Make an offer before the auction. If you're buying via auction, get ahead of the competition by making an offer before the auction. If your price matches what the agent expects to get at auction. They might tell their vendor to play it safe and accept your offer.
Be flexible around settlement. Tell the agent you're willing to accept different settlement conditions. (Assuming that’s possible). This might include a short or long settlement or a scenario where you let the vendor rent the property for some time before you move in.
Let us take some of the stress out of home purchases. If you need pre-approval, contact us, and we’ll help you secure your dream home!
https://www.ftadviser.com/mortgages/2024/03/27/first-time-buyers-99-mortgage-with-5k-deposit-launched
https://www.citizensadvice.org.uk/consumer/insurance/types-of-insurance/buildings-insurance/#:~:text=Buildings%20insurance%20covers%20the%20cost%20of%20repairing%20damage%20to%20the,cost%20of%20rebuilding%20your%20house.
https://www.thetimes.co.uk/money-mentor/insurance/life-protection-insurance/income-protection-vs-mortgage protection#:~:text=However%2C%20only%207%25%20of%20adults,income%20protection%20is%20less%20common.
https://www.moneyrelease.co.uk/Equity-Release-To-Purchase-Property/#:~:text=If%20your%20dream%20is%20to,home%20and%20your%20holiday%20home
