Wealth Distribution - Bank of Mum and Dad

More older Britons helping younger generations become first-time buyers 

 There is a growing tendency among older Britons to use the wealth held in their property to help younger generations become first time buyers, new research suggests[1].  

 Homeowners, particularly those who are mortgage-free, are planning to use investments, as well as their property, to help other family members move onto the property ladder.  

 First-time buyers 

 The research findings show that the average age people pay their mortgage off is 51. After this, property and other wealth tends to start being spread through the generations. Of the respondents, 14% say they have already helped their children to become first-time buyers.  

 A further 19% say they will ‘definitely or probably’ do this. In 2016, more respondents (19%) said they had already helped their children to become first-time buyers, yet fewer (13%) were ‘definitely or probably intending to’ compared to now[2]. 

 Shifted upwards  

 The research also highlights an increase in the number of people ready to help other family members, not just their own children. In 2022, 5% say they have already helped their grandchildren become first-time buyers, with a further 20% saying they are definitely or probably going to. 

 This proportion has shifted upwards in the last six years. In 2016, 3% had already helped their grandchildren to get onto the property ladder and 14% intended to. The same pattern emerges when it comes to helping members of the wider family to buy a home. In 2022, 3% say they have already helped with this, and a further 9% intend to, compared with 2% and 3% respectively in 2016. 

 Property ladder  

 It’s no secret that many younger people tend to encounter difficulties when seeking to enter the property market for the first time. The degree to which existing homeowners are now prepared to use their own wealth to help their other family members onto the property ladder has increased notably over the last six years. 

 The amount of money older relatives are giving to younger generations has also increased, with the typical total amount given now standing at £31,398.63, 25% higher than in 2016. Increasingly, older homeowners are a source of funding for their children and their grandchildren, and are using a greater variety of means to help younger family members out. 

 Noticeable shift  

 There is also a noticeable shift towards using property wealth over other sources of income to provide help to other family members hoping to buy a home. In the research, the use of financial help sourced through property wealth has more than doubled compared with six years ago, with 40% using property assets in a number of ways, led by downsizing and equity release. 

 In 2016, most financial help was sourced through using savings and investments to provide money for a deposit (71%), or to buy a property outright (10%). A further 3% cashed in pensions or used pension savings to enable this. Property wealth was used to help other family members in 17% of cases, mostly by releasing capital through downsizing or equity release. 

 Property wealth  

 Clearly more and more people are willing to use their property wealth in a variety of ways, and this is starting to become the norm for those wanting access to cash to help other family members. Six years ago, fewer than one in five people used wealth held in their property to assist other family members and this has now grown to 40%. 

 It is becoming increasingly accepted that wealth held in property should be considered part of someone’s total assets and can be used for a variety of purposes, including to help younger family members buy a home like their parents and grandparents did.  

Are you ready to buy your first home? 

When it comes to choosing the right first-time mortgage, we understand that everyone’s circumstances are different. To discuss your mortgage options, please contact The Surrey Mortgage Broker – telephone 01252 759 233 – email richard@thesurreymortgagebroker.co.uk

Source Data 

 [1]  Aviva research conducted for Aviva byCensuswide April 2022. 1,507 general consumers aged 45+. 

 [2] Aviva Real Retirement Report conducted for Aviva by ICM Unlimited April 2016. 1,506 general consumers aged 45+

Getting a Mortgage when You Are Self Employed

It’s proving your financial stability that can take the extra time and effort 

 The mortgage market has come a long way in recent years and self-employed borrowers now have more choices available to them. However, getting a self-employed mortgage can still be tricky, as lenders often require proof of income and business finances. 

 There’s actually no such thing as a ‘self-employed mortgage’ – mortgage products are the same whether you are employed or self-employed, but lenders consider self-employed applicants to be higher risk and consequently subject them to more scrutiny than employed mortgage applicants. 

 Approval success 

 As with any mortgage applicant, the higher your deposit, the more borrowing options are likely to be available to you – and often at more competitive rates. When applying for a mortgage on a self-employed income, being able to put a bigger deposit down can be even more advantageous in increasing your odds of approval success. 

 As of July 2022, there were around 4.29 million self-employed workers in the United Kingdom. During this provided time-period, self-employment in the UK has grown steadily, from a low of just 3.2 million in December 2000 to a peak of over five million at the start of 2020[1]. 

 Financial stability  

It isn’t necessarily harder to obtain a mortgage if you are self-employed, but it tends to require more paperwork and screening to have your application approved. Depending on the lender, the lending criteria may differ slightly, although most now offer the same deals to eligible applicants regardless of whether they are employed or self-employed. Overall it’s the additional work in proving your financial stability that can take the extra time and effort. 

 Ultimately, all lending applications are underwritten to ensure that the applicant can afford to repay the debt. When you are self-employed, your income tends to fluctuate, and no one specific person can satisfactorily confirm your salary details. Consequently, lenders need to collate more information to determine that you are eligible for the loan you require.  

Did you know? 

 When applying for a mortgage, you are classed as self-employed if you 

• are a sole trader 

• are a partner of a business on a self-employed basis 

• earn your primary income from owning a 20% or more stake in a limited company 

• are a partner in a limited liability partnership 

One of the biggest challenges 

 Most lenders need to verify an applicant’s self-employed financials over the previous two or three years. This can be one of the biggest challenges facing self-employed people, with some having no choice but to wait it out until they have sufficient evidence to back their applications up. 

 To prove your self-employed income you will typically need to provide two or more years of accounts that clearly detail your income, as well as your business’s expenses and overheads. These accounts will preferably have been prepared by a chartered accountant. In addition to these accounts, lenders may request a copy of your Tax Calculation (used to be called SA302) form, and an HM Revenue & Customs (HMRC) tax year overview for the past two or more years. The Tax Calculation shows what you earned and the tax due and the Tax Year Overview confirms how much tax you have paid. The Tax due on the calculation needs to match the tax paid on the Overview. 

 Current earnings  

 The SA302 form is issued to individuals who derive income outside of the PAYE system to assist them in proving their income and any tax deductions. A lender will use these documents to verify your previous and current earnings, but they will also want to see some proof of future earning prospects. Depending on your business setup, lenders may request copies of current and upcoming contracts, expected commissions, etc. 

 When preparing your proof of self-employed earnings, you need to consider how lenders will perceive them. For example, if you have experienced some falls in income it’s vital that you can satisfactorily explain the reason for these fluctuations to minimise the lender’s doubt in your financial stability. Include any relevant proof to back up your explanations.  

 Taxable income 

 It’s quite possible that in the past, you and your accountant have used whatever legal methods available to reduce your taxable income. However, now that you want to apply for a loan, you need your income to be the largest figure possible. 

 If you are a director of a limited company, you may choose to retain some profits within the business, rather than withdraw them as dividends or salary. Some lenders will include a business’s retained profits when considering your application. However, not all do, so it would be prudent to find one that does before you begin your application process. 

 Financial circumstances 

 As a sole trader, the amount you will be eligible to borrow will be calculated by taking an average of your verified profits as stated on your self-assessment tax returns. If you are a limited company director, the calculation may be based on either salary plus your share of net profit, or your salary plus any dividends.  

 But, again, each lender’s process can differ, with some using the latest year’s figures and others using a two or three-year average. That is why it is vital to take the time to find the lender whose process best suits your financial circumstances. 

 Mortgage application 

 Lenders typically take an applicant’s general spending habits into consideration, too, and they will likely request copies of your bank statements. Most lenders will scrutinise all spending, including household bills, childcare and leisure outgoings to ensure that you will be able to afford the repayments. 

 As with any mortgage application, lenders will also need to conduct credit checks to ensure that you are a reliable borrower. Therefore, it’s prudent to get a copy of your credit score before lodging an application to see if there is anything that needs addressing first.   

Looking for a mortgage lender that best suits your circumstances? 

If you are self-employed we can assist in matching you with a lender that best suits your circumstances. We’ll advise on what you are likely to be eligible for and assist you with the application preparation. To find out more and discuss your options, contact The Surrey Mortgage Broker – telephone 01252 759233 – email richard@thesurreymortgagebroker.co.uk

Source data: 

[1] https://www.statista.com/statistics/318234/united-kingdom-self-employed/#:~:text=As%20of%20July%202022%2C%20there,at%20the%20start%20of%202020

The Rental Factor - Landlord Dilemmas

Landlords facing a dilemma – to raise rents or support tenants 

 Landlords are facing a real dilemma at the moment in dealing with the continued rising cost-of-living crisis. This is causing concern among many landlords, as they face a decision to raise rents or support their tenants by taking a financial hit themselves, according to research[1]. 

 Around three-quarters (74%) of landlords say they feel a responsibility to support their tenants during times of financial hardship and, with the cost of living continuing to rise, more than four in ten (44%) have financially supported their tenants during the last 12 months, such as reducing or pausing rent.  

 Financial challenges 

 The research shows that some landlords are prepared to reduce their rents by an average of 7.6% before coming under pressure – equating to around £50 per property a month based on a typical landlord’s rental income[2]. 

 While many are able to reduce rent, close to half (45%) of all landlords say any reduction would harm them financially. Around four in ten (38%) said they intend to keep rents the same for the next year despite the financial challenges, while more than half (55%) say they need to increase rents over the next 12 months. One in four (25%) plan to raise the rent on all their properties. 

 Larger portfolios  

 Landlords with larger portfolios are more likely to increase rent on at least some of their properties, the research highlights. Three-quarters (75%) of those who own more than ten properties aim to increase their rents over the next 12 months, compared to just 44% of landlords owning between one and three properties. 

 In fact, 46% of those landlords with a small portfolio plan to keep rents the same. Across the regions, landlords in Yorkshire & The Humber (68%), outer London (65%), the North West (63%) and Wales (63%) are most likely to increase rents on some or all of their properties over the next 12 months. 

 Rental payments 

 Those landlords using their rental properties to offset their mortgages are also more likely to raise rents, with nearly two-thirds (63%) planning an increase compared to just 44% of unleveraged landlords. 

 Despite the plan to increase rents, well over half (57%) of landlords are concerned about whether their tenants can maintain their rental payments, with more than one in ten (13%) admitting they are very concerned. This increases to nearly three-quarters (74%) of landlords who let to claimants of Local Housing Allowance and 71% of landlords who let to retired people. 

 Support provided  

 Regionally, landlords in East Midlands (74%), Wales (70%) and Yorkshire & The Humber (62%) appear to be most concerned about the ability of their tenants to pay the monthly rent. However, perhaps unsurprisingly, only around a third (32%) of landlords in Central London are worried about receiving their rent. 

 In terms of the support offered to tenants by 44% of landlords, temporary rent reductions and rental payment holidays are the most common options. Support provided includes: temporary rent reduction (22%); rental payment holiday (15%); permanent rent reduction (4%); and lent money to support their day-to-day living (3%). 

 Smaller portfolios  

 Landlords with smaller portfolios are able to reduce rents by a slightly higher amount. Compared to the average of 7.6% for all landlord types, those with one property can reduce by an average of 8.7%, while those with two or three properties are able to reduce rents by 9.3%.  

 Of those who could reduce rents, nearly half (47%) of them say they could sustain it for six months or more, while 42% say they could keep the reduction going for between three and six months. Those landlords making a full-time living from their lettings activity (60%) and those who are retired (51%) are significantly more likely to say they could sustain the rent reduction for more than six months.  

Looking for a buy-to-let mortgage? 

 Whether you’re thinking about buying to let or expanding your property portfolio, to discuss your options contact The Surrey Mortgage Broker– telephone 01252 759233 – email richard@thesurreymortgagebroker.co.uk 

Source data: 

 [1] Research conducted by BVA Group / BDRC with 729 UK landlords between January and March 2022. 

 [2] Source: BVA BDRC’s Core Landlords Panel tracker. Mean annual per property gross rental income: £7,625.

Moving home?

Tips to help you get ultra-organised for your big move 

 Making the decision to move home is a big one. From changing lifestyles to the ‘race for space’, there is no shortage of households looking to up sticks. 

 Whether you’re moving to be closer to the great outdoors, or simply for work and family reasons, there’s no doubt that getting the keys to a new place is an exciting prospect. But it’s also true that all this upheaval brings the potential for stress.  

 Once you’ve put your property on the market, there’s a lot to think about – from finding the right buyer to dealing with the legalities of selling up. 

 But don’t worry, we’re here to help. Follow our top tips and you’ll be moving into your new home in no time: 

 1. Get your paperwork in order 

 The first step is to get your paperwork in order. This includes things like your mortgage offer, proof of income and ID, and any information relating to the sale of your property (such as estate agent contracts). 

 2. Find a good conveyancer or solicitor 

 Once you’ve got your paperwork sorted, it’s time to find a good conveyancer or solicitor. They’ll be able to help with the legal aspects of selling your property, and it’s worth getting a few quotes before you make your final decision. 

 3. Get your home valued 

 It’s also a good idea to get your home valued by a professional. This will give you an idea of how much your property is worth and can help you negotiate with prospective buyers. 

 4. Find the right estate agent 

 When you’re ready to put your property on the market, it’s important to find the right estate agent. They should be experienced in selling properties like yours and should be able to give you advice on things like pricing and marketing. 

 5. Set a realistic sale price 

 Once you’ve found an estate agent, it’s time to set a price for your property. You need to be realistic, as overpricing your home can put off prospective buyers. 

 6. Prepare your home for viewings 

 Once you’ve set a price, it’s time to start preparing your home for viewings. This includes things like decluttering, cleaning and making any necessary repairs or improvements. 

7. Handle viewings and offers 

 When you start getting viewings, make sure you are prepared. Your home will need to be available for viewings to show people around at short notice, so be ready to answer any questions they have. 

 If you receive an offer on your property consider it carefully before making a decision. If you’re not happy with the offer, you can negotiate with the buyer or look for another buyer. 

 8. Exchange contracts and move out 

 Once you’ve accepted an offer on your property, it’s time to exchange contracts. This is a legal agreement between you and the buyer, and means that the sale of your property is now legally binding. 

 After exchanging contracts, you’ll need to start packing up your belongings and arrange for them to be moved to your new home. Once everything is ready, you can hand over the keys to the new owners and start your new life in your new home! 

Ready to discuss finding the right mortgage for your new home?  

We’ll help make your move a good one. If you’re thinking of buying your dream home, we’re here to help find the mortgage that’s right for you. To find out more, contact The Surrey Mortgage Broker – telephone 01252 759233 – email richard@thesurreymortgagebroker.co.uk

Retirement location, location, location

Choosing where to spend your retirement is an important decision 

 Many people are reaching retirement age and looking to leave behind towns and cities in favour of rural or coastal areas, and areas of natural beauty. When it comes to thinking about where to live when you retire, you might be considering a similar change of pace. 

 Some people have been thinking about it for a while, and if you asked them where the best place to retire in the UK is, they wouldn’t hesitate to answer. For others, there’s more to consider. When it comes to deciding your perfect retirement location, it’s common to consider a range of factors. Wanting to be close to family, or favouring somewhere peaceful or by the sea are popular choices. 

 Sizeable budget 

 The most popular retirement locations have lots in common, with picturesque landscapes, quaint villages and a long coastline. While these areas are beautiful, their house prices can reflect their popularity. 

 Relocating or downsizing could open up more options in your retirement relocation. If you’re selling up in a big city and moving to somewhere more remote, you could find yourself with a sizeable budget. 

 Closer to loved ones  

 Among the most important retirement location considerations, second to your budget, may be proximity to loved ones. Many people move to be closer to loved ones in retirement, especially when grandchildren arrive and the extra support is welcome. 

 Making this move can be quite an adjustment if you’re leaving a busy city with excellent transport links and relocating to a rural town with limited bus timetables and no local train station. If you don’t drive, having access to public transport to visit friends and family, as well as amenities such as shops, doctors and your favourite social activities, is an important consideration. 

 Long-term move 

 Medical and care facilities are also particularly important if you’re considering where to live when you retire as a long-term move. Living within easy travelling distance to your local doctor or hospital could be something you should consider now, as you will likely need to think about it in the future. 

 Other considerations include your safety and crime rates. Low crime rates and feeling safe in your new home are really important. You might have a neighbourhood watch programme in your local area, which can be reassuring. 

 New destination  

 If you have an active social life that you’ll miss when you move, it can be reassuring to know that your new destination has plenty of community groups and activities to look forward to. Visiting ahead of your move or reaching out on social media could help you connect with the local community and find people who have similar hobbies. 

 So if you’re looking to retire in the UK, there are a few key locations to keep in mind.  

 Popular retirement property hotspots in the UK 

 The Cotswolds 

 This picturesque region of England is a top retirement destination for many reasons. It’s close to major cities like London, Oxford and Birmingham, but it also has a slower pace of life that makes it ideal for retirees. There are plenty of quaint villages and country towns to explore, along with gorgeous countryside views. 

 Cornwall 

 Cornwall is another popular retirement destination, thanks to its beautiful coastline and mild climate. It's a great place to enjoy outdoor activities like walking, cycling and golf. And, with plenty of small towns and villages to choose from, you can find the perfect place to settle down. 

 The Lake District 

 The Lake District is a stunning region of England that's perfect for retirees who love the outdoors. With its picturesque lakes and mountains, it’s easy to see why this is such a popular destination. There are plenty of walks and hikes to enjoy, along with other outdoor activities like sailing and fishing. 

 Devon 

 Devon is another county in England with a lot to offer retirees. It has a beautiful coastline, lovely countryside, and plenty of quaint towns and villages. Like Cornwall, it has a mild climate, making it a great place to enjoy retirement. 

 Dorset 

 Dorset is another county in England that’s popular with retirees, thanks to its sprawling selection of coastline towns. From Poole to Sandbanks and Bournemouth to Christchurch – there are a whole host of towns that suit the retiree perfectly. 

 These are just some of the retirement property hotspots, but if you’re looking for a place to retire, these are all great places to keep in mind. 

Mortgages for older people  

If you’re 55 or older, you might be thinking about your retirement options, or you may have already retired. Equity release could help you use some of the value you’ve built up in your home to put your retirement plans into action. To discuss your options contact The Surrey Mortgage Broker– telephone 01252 759233 – email richard@thesurreymortgagebroker.co.uk