Where to invest – long-distance or local?

By Ben Gosling of Commercial Trust Ltd

Some become landlords quite by accident. But for those who make the choice to invest in buy to let property, one of the first decisions they must make is where they will make their first purchase.

By Ben Gosling of Commercial Trust

By Ben Gosling of Commercial Trust

Sometimes, the decision is made for you

Of course, not everybody lives in an area that boasts the fundamentals of a good rental property purchase. Buyers should be on the lookout for affordability balanced with stable price growth, solid demand and good local amenities.

If their local area doesn’t fit the bill, aspiring landlords will likely have no choice but to invest further afield. But if there is a good potential purchase just down the road, should they automatically go for it?

The importance of balancing risk and reward

The basic precept that should govern every decision a landlord makes is finding the appropriate balance between risk and reward.

Buying three £75,000 properties might not just be more profitable than buying a single £250,000 property; it could be less risky. If one tenant were to leave or one property were to fall into disrepair, there would be two more that were still habitable and still generating income.

The same could be said of leveraging. Using three mortgages to leverage three properties could be less risky than leveraging a single property, because if the debt on one property needed to be reduced, the other two could potentially act as a source of ready capital.

Conversely, each additional property adds additional risk of defaults, repairs, voids or any of the other misfortunes that can befall a landlord – so it is important to consider all angles.

Hands-on or hands-off?

Some are content to invest from the comfort of their armchair, whilst others like to get more involved in the management of their property.

This could simply be because they would prefer to save money on management fees; but in other cases, they might want to renovate the property to add value (whether to sell for a profit, or release as a deposit for a second purchase).

Whilst not impossible, overseeing renovations and other projects from afar is certainly more difficult. It means using potentially unknown traders, and being unable to keep close tabs on the progress of the project.

So those who wish to invest in a property to add value have another reason to consider how far afield they are prepared to look for their first purchase.

It’s crucial to get good local intelligence

The value of specific local knowledge can’t be overestimated – the more specific the better. A landlord buying in his or her locale will probably know not only what areas are better to invest in than others, but what streets too.

When investing further afield, such exact knowledge is harder to obtain – but not impossible. Online resources that detail precise local metrics are plentiful, as are forums and other communities that allow like-minded individuals from opposite ends of the country to connect.

Employing an accredited local agent

If investing long-distance, instructing a management agency is practically mandatory. A full management service can typically cost between 10% and 15% of the monthly rent, as well as one-off fees for tenant finding, tenancy contract provision, deposit protection, inventory management and more, but a long-distance landlord will find managing all of this alone extremely difficult.

Established local agents, rather than chains, can have knowledge of the local market, and may even be able to assist in sourcing a suitable property if approached prior to the purchase.

Most importantly, however, landlords should only use agents who:

  • Belong to a professional body such as ARLA, NAEA or RICS
  • Are members of a redress scheme (Ombudsman Services, the Property Ombudsman or Property Redress Scheme)
  • Have a professional indemnity insurance or professional liability insurance policy in place
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BTL remortgage costs: a guide for landlords

By Ben Gosling of www.commercialtrust.co.uk

Switching your buy to let mortgage can be a good way to cut down on running costs and plan for the future – but remember to take the cost of remortgaging into account.

Remortgage activity was the primary driver of buy to let lending in the second quarter of 2015 [1], and between the landlord tax announcements in the July Budget and renewed talk of interest rate rises, Q3 could well see yet more landlords switching their loans.

If you are planning to refinance your property, it pays to know what sort of costs you may encounter so that you can budget ahead of time.

Costs from your current lender

Early repayment charge

The majority of products are subject to early repayment charges during the initial deal period, which is typically between two and five years. Early repayment charges (ERCs) are usually a percentage of the amount repaid.

You should therefore be wary of switching mortgage during an ERC period, as the charges will be levied on the full outstanding loan amount.

Exit fee

Some buy to let lenders also charge exit fees (sometimes called ‘discharge fees’, ‘mortgage fees’ or ‘redemption fees’) for repaying the loan in full before the end of the mortgage term, including when you switch mortgage – though an exit fee may not be levied if you stick with the same lender.

This fee is typically a fixed amount between £50 and £300.

Fees for switching before a mortgage completes

A further switching fee may be charged if you change deals prior to the completion date for a mortgage you’ve already applied for. In addition, you might lose any other fees you’ve paid up to that point – so be mindful that you are applying for the right deal!

Costs from your new lender

There are several different types of fee that a lender might charge for a new buy to let mortgage loan. Not all lenders will charge all of these fees, many of the terms can be used interchangeably and they can often be rolled up together.

However, your mortgage advisor should always provide you with a detailed breakdown of what you need to pay, how, and when.

Application fee

This fee is charged, as the name suggests, upon application, and is usually non-refundable. It might also be called a ‘booking fee’, and is charged for reserving your chosen product whilst your lender processes your application.

Insurance administration fee

If you choose to take out landlords building and contents cover with an insurance provider other than your lender (or a provider chosen by your lender), you may be charged for the cost your lender incurs in checking that the cover is appropriate.

This might also be called a ‘freedom of agency fee’, an ‘own building insurance fee’, an ‘insurance contingency fee’ or many more besides – but you should always be told what the fee is and why you are being charged it.

Legal fees

Your lender will usually charge you fees to cover the cost of instructing their own conveyancing solicitors. There is typically far less legal work involved in a remortgage than a purchase, and the legal fees are therefore likely to be lower. Your lender might even offer free basic legal fees as an incentive.

Mortgage account fee

A fee for setting up and maintaining a mortgage account, an account fee is usually non-refundable and added to either the up-front costs or the loan principal, at your lender’s discretion.

Product fee

This is usually the main fee advertised by the lender, and can either be a set amount or a percentage of the loan. Some buy to let mortgages are advertised as ‘fee free’ – this usually means that they have a product fee of zero.

You might see product fees referred to as ‘arrangement fees’ or ‘admin fees’, as they essentially reflect the cost of processing the mortgage application. They could also be called ‘completion fees’.

Lenders will often allow you to add this fee to the loan amount (subject to affordability, loan-to-value, rental cover and other applicable criteria). Bear in mind that if you do this, you will need to pay interest on the fee amount, which will increase the cost of your mortgage in the long term.

Transfer fee

This fee covers the cost of the telegraphic transfer of funds from your lender to your solicitor, and may be charged by either party if it is charged at all.

Valuation fee

Usually charged on a sliding scale relative to the value of your property, these fees cover the cost of the property valuation. They are usually payable up-front and are only refundable if the valuation does not go ahead.

Many lenders offer free or reduced valuation incentives to remortgage customers. This is usually subject to a maximum amount.

Broker fee

If you have sourced your new mortgage through an intermediary, such as a buy to let mortgage broker, a broker fee may also be payable.

This fee reflects the work undertaken in matching you to an appropriate mortgage and packaging the deal for the lender in order to give you the best chance of acceptance.



  1. “House purchase lending up 22% in June”. CML. 11 Aug 2015.

This article is intended for information purposes only and should not be taken as advice.

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Pros and cons of a high LTV buy to let mortgage

By Ben Gosling of www.commercialtrust.co.uk

The average loan to value (LTV) of a buy to let investment – the ratio between the loan size and the value of the property – tends to sit between 60 and 70%. But some landlords opt for 75%, 80% or even 85% LTV when taking out a new loan.

Here, we look at why someone might want a high LTV mortgage, as well as the pros and cons of opting for this potentially riskier option.


First, it might be handy to bust a little jargon.

‘Gearing’ – sometimes known as ‘leverage’ – is a term used in finance, and is another way of referring to the ratio of debt to capital. When investing money, it is important to make it work as hard as possible, and gearing can allow investors to achieve far higher returns by minimising the start-up cash needed.

A very simple example: imagine you purchased a £100,000 property using a £15,000 deposit, and then in three years’ time sold it for £115,000.

Assuming that the rent covered the operating costs throughout the three year period, your profit (after repaying the £85,000 mortgage) would be £15,000, meaning that you’d have doubled your initial outlay. Though the asset itself would only have appreciated by 15%, the return on your original investment would be 100% – more than six times the asset growth alone.

The pros of a high-LTV BTL mortgage

Low entry cost

One of the biggest barriers to property investment (and ownership) is the cost. Many novice or first-time landlords don’t have access to the capital required to put down a large deposit.

The immediately obvious benefit of a high-LTV buy to let loan is that it permits entry into the market at very low outlays. Subject to minimum property values, some landlords might be able to invest in a property with a deposit as low as £10,000 1.


Property is often treated as a medium to long-term investment because, over time, house prices trend upwards. This means that, assuming it stays level, the relative size of your mortgage debt should gradually shrink.

So what starts out as an 85% LTV loan on day one might, after five years of steady price increases, become a 65–70% LTV loan. After 10 years, the LTV could be as low as one half.

Price inflation isn’t guaranteed, but the longer-term your investment, the more likely it is that your initial encumbrance will slowly shrink entirely on its own.

Spreading risk and returns

We already touched on boosting returns in the introduction to gearing. By using a larger loan to leverage your capital, it is possible to increase the return on your investment.

£54,000 could be used as a 45% deposit on a single property worth £120,000. By splitting this into three 15% deposits of £18,000 instead, you could purchase two more properties of a similar quality, and potentially triple the return on your initial outlay.

This also helps to spread certain investment risks: in a single property, rental arrears or voids effectively cut off your only line of income. If you had two more properties, then your income would only be down by a third.

The cons of a high-LTV BTL mortgage

Reducing your cash flow

Though it is possible to boost your return on investment with a smaller deposit, your cash flow is likely to take a hit.

A larger and (probably) pricier mortgage will accrue more interest. So whilst your initial outlay might be working harder, your overheads will be higher, and you will have less working cash flow month-on-month to reinvest in your property, set aside for emergencies, or simply put into your pocket.

The flip side of this is a reduced tax bill. Buy to let mortgage interest can be offset against rental income when calculating income tax; thus, the more interest you pay, the lower your tax liability.

Less equity

The way many landlords build buy to let ‘empires’ is by regularly releasing equity from their existing portfolio to fund new purchases. Of course, this strategy is dependent on their being enough equity in their properties to do so.

Even if you can release enough to fund a new purchase and remain within your lender’s LTV limits, your rent might not be enough to cover the new repayments by the required amount (usually 120–130%).

This makes a highly-geared portfolio more difficult to expand without finding cash elsewhere.

Added risk

Higher LTVs are naturally riskier. This is why lenders tend to charge higher rates and fees for higher LTV mortgages.

Though property values trend upwards, they can also fall, particularly in the short term. During last decade’s financial crisis, average values fell by around 15% 2– meaning that anyone with less than 15% equity in their property was at serious risk of falling into negative equity and being unable to sell without losing money.

There is also the fact that higher overheads means less cash for your contingency fund, meaning that you might need to pay for repairs or other emergencies out of your own pocket.


Ultimately, whether or not a high LTV loan is the right choice for you comes down to a number of factors.

If you are risk averse or after short-term returns, then a larger deposit might be necessary. On the other hand, if you are comfortable with the higher risk levels and happy to wait for longer to see your returns, then a higher LTV loan might be for you; similarly, it can be a good leg-up onto the ladder for budding landlords without a lot of capital to invest.

Every investor is different, as is every investment, and finding a strategy that works for you is one of the most important developments in your early career as a landlord.



  1. “Buy to let mortgage deposit requirements”. Commercial Trust. N.d. Accessed 12 Jun 2015.
  2. Based on house price index data for Nov 2007 to Apr 2009 retrieved from http://landregistry.data.gov.uk/app/hpi

This article is intended for information purposes only and should not be construed as providing investment advice.

Your property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured against it.

The FCA does not regulate most forms of buy to let mortgage.

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What to expect when taking out a BTL mortgage

By Ben Gosling of commercialtrust.co.uk

For almost twenty years, people hoping to borrow money in order to be able to invest in rental property have been able to do so with the use of a buy-to-let mortgage.

But it is not just professional property investors who do it, nor even keen amateurs and first-timers with their eyes on building up a portfolio; many landlords are actually forced by circumstance into letting out their home. Because of the wide range of borrowers that buy-to-let attracts, certain areas of the market require more consumer safeguards.

Therefore, if you are investing in buy-to-let, it is important to know what to expect – particularly with the approach of new pan-European legislation, known as the Mortgage Credit Directive, that will have pronounced effects on the way the UK mortgage market is run.

Types of buy-to-let borrower

There are currently two types of buy-to-let borrower: unregulated and regulated. The latter group fall under the remit of the Financial Conduct Authority (FCA), which also oversees mortgage sales to owner-occupiers. The vast majority of buy-to-let business is not currently regulated 1.

Under the current rules, a buy-to-let mortgage will need to be regulated if:

–        The borrower intends to occupy two fifths or more of the property for their own use;


–        The property will be let to a close relative of the borrower – either a spouse or partner, parent, grandparent, sibling, child or grandchild 2

When Part 3 of the Mortgage Credit Directive Order 2015 comes into force on 21 March 2016 3, a third type of buy-to-let borrower will exist, known as buy-to-let ‘consumers’. Consumers are borrowers who are not considered to be letting out a property “wholly or predominantly” for business purposes, such as those who decide or are forced to rent out their home in order to relocate or because they are unable to sell, or those who rent out an inherited property. In the industry, borrowers such as this are often referred to as ‘accidental landlords’.

As such, from 21 March 2016, all new buy-to-let lending will fit into one of the following three types:

  1. Mortgages that are regulated because the borrower will partly occupy the property or will be letting it to at least one immediate family member
  2. Mortgages that are regulated because the borrower will be considered a consumer not acting in the course of a business
  3. Mortgages that are not regulated because the borrower will be considered to be acting in the course of a business

What does it mean if you take out a regulated mortgage?

Mortgage regulation is intended to offer borrowers more protection from misselling, ensure that they receive the most appropriate product for their circumstances, and provide guidelines for how they are treated throughout the mortgage term with regards to issues such as payment arrears and complaints.

It also means that their application will be subject to more stringent suitability checks. The borrower may have to undergo affordability checks that they otherwise would not with an unregulated mortgage and the amount they can borrow may be affected by their income. For this reason, many buy-to-let investors prefer to take out unregulated loans, which can be assessed on the strength of the potential rental income of the property being purchased.

When the Mortgage Credit Directive comes into force next year, some borrowers will essentially be able to ‘opt-out’ of regulation by declaring that they are acting wholly or predominantly in the interests of a business venture. Unless the person granting the mortgage has reasonable cause to suspect that this is not the case, the borrower will not be considered a consumer, and will be able to apply for an unregulated mortgage 4.

What does it mean if you take out an unregulated mortgage?

Borrowers who take out a mortgage for business purposes are generally considered to be more risk-aware than consumers, and as such, the protections and remedies that are afforded to all regulated borrowers are not always extended to unregulated borrowers. This means that, if you take out an unregulated mortgage, you may have fewer options for redress in the event that the product proves to be unsuitable, and your lender may be less lenient with things like payment arrears.

However, a number of buy-to-let lenders currently employ checks that are reminiscent of those carried out by lenders of regulated mortgages. This is particularly the case with first-time or otherwise inexperienced landlords, who may have to prove that they earn a certain amount in addition to the rental income that the property can fetch, in addition to other safeguards.

Furthermore, the Council of Mortgage Lenders has also recently released a ‘statement of practice’ which, as of 7 April, had been adopted by approximately 9 out of 10 buy-to-let lenders 5. This will apply to unregulated buy-to-let lending and outlines best practice regarding the handling of applications and the information given to customers, affordability checks, complaints and financial difficulty, among other things.

So even if you are taking out an unregulated mortgage, your chosen lender should hopefully still aim to provide objective advice and recommend the most appropriate product. For the avoidance of doubt, though, consider only approaching a lender or broker who follows FCA guidelines when recommending buy-to-let mortgages, and be sure to know exactly what entering into a mortgage contract entails and what your responsibilities as a borrower will be.



  1. “Buy-to-let mortgages – implementing the Mortgage Credit Directive Order 2015”. FCA. Feb 2015.
  2. The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, art 61(3)(a)
  3. The Mortgage Credit Directive Order 2015, art 1(5)(c)
  4. The Mortgage Credit Directive Order 2015, Sch 1 para 4(22)
  5. “CML members adopt new statement of practice on buy-to-let mortgage lending”. CML. 7 April 2015.

Your home may be repossessed if you do not keep up repayments on a mortgage or another debt secured against it.

The FCA does not regulate most forms of buy-to-let mortgage

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A property investor’s guide to buying in a subdued market

By Ben Gosling of commercialtrust.co.uk

The recent news that nearly three quarters of properties sold during the first month of 2015 went for less than asking price 1 might prompt the question: is this a buyer’s market?

The dip in price paid relative to price requested, which is far more pronounced than is typical for the season, certainly suggests that buyers are wielding more control. Other factors that indicate a buyer’s market include the average length of time that a property is on the market, which according to separate figures stands at 125 days 2.

This is only part of the story, however. The same figures show that average marketing periods have actually shrunk by 18 days since February 2014. In fact, the time taken to shift a property has been trending downwards for the last five years. So while properties are selling more cheaply than expected, they are also selling more quickly.

In short, buyers may have the upper hand, but a transaction is still a high-pressure scenario and there is the potential to make a mistake. A bargain is still not guaranteed, so to limit the likelihood of making a property purchase you’ll regret, bear the following tips in mind:

1: Research the area

Look at both local listings and local statistics for the area in which you wish to buy before making a decision. By way of example, let’s compare the national picture to that of London.

Asking prices in the capital have risen by 1.8% in the last month and 14.6% in the last 12 months, both of which are more than double the rise seen nationally. The median marketing time is 87 days in London, compared to 125 days nationally.

But London has also seen a 51% increase in supply, compared to 19% across the rest of the UK. The average marketing period has also increased by 20 days since last year, compared to the 18-day national dip.

When we look at sold prices, we get a fuller picture: prices in London took a 0.2% dip in January, compared to a 1.3% increase in England and Wales. The annual change was still higher (12.0% in London compared to 6.7% in England and Wales) 3, but the glut of supply and growing marketing time point to a possible price slump in the capital.

If this occurs, then London buyers could be in a better position than the figures initially suggest.

2: Research the purchase

A seller who has first listed their property several months ago and has reduced their asking price on more than one occasion is usually keener to sell than someone whose property has only just come onto the market. When a seller is more motivated, your bargaining position is strengthened, giving you more room to negotiate things like the listing price and what is included in the sale.

Of course, a new market entrant might also be attempting to affect a quick sale, so the time that has elapsed since the first listing is not the only measure of keenness. How the asking price compares to those of comparable local properties (particularly those marketed by the same estate agent) can also be a good indicator.

3: Don’t skimp on the checks

Desperate sellers are a common sight in a suppressed market, and it can be easy to forget the more traditional reasons one might be eager to offload a property such as overriding interests, planning restrictions and local factors and structural problems with the property itself.

–        Consider commissioning a homebuyer’s report for anything other than a new-build property, and consider a more detailed building or structural survey for older or more unique properties.

–        Make sure your solicitor conducts in-depth local searches to find any local factors that might affect the property’s use or value.

–        Consider paying for a Land Registry search on the property to confirm ownership, the size of the property’s boundaries and flood risk.

–        Visit it at different times of the day and night and ask around about the neighbours.

–        Research local crime statistics. The comprehensive crime maps provided by Police.UK allow you to map locally reported crimes by area, time period and type of crime, so you can find out not only how desirable (or not) a street is, but how frequent and persistent individual problems are.

4. Stick to your set price

You should already have run over the numbers and decided exactly how much you can afford. By sticking to this price you avoid getting caught up in potentially volatile (and expensive) bidding wars with other buyers keen to grab a bargain. The desire to win for winning’s sake shouldn’t override the desire to not break the bank, so keep a cool head and remember that there are other deals out there.

5. Have finance in place

If you want to be able to grab a bargain at the drop of a hat, it is best to have the behind-the-scenes processes – such as your finance application – in motion. It helps to know that you are submitting your case to a lender who is likely to accept it, so consider using a professional broker to place your deal more quickly, and try to obtain a decision in principle from a lender before you start making bids.

A decision in principle is non-binding, and is not the same as an official mortgage offer. It is, however, a good indication that a lender will proceed with your application should your property bid be successful.


  1. National Association of Estate Agents Housing Market Report: January 2015. NAEA. Retrieved on 2 Mar 2015.
  2. Asking Price Index: February 2015. Home.co.uk. 12 February 2015.
  3. http://landregistry.data.gov.uk/app/hpi/
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Will my buy-to-let property purchase be regulated?

How new mortgage rules will affect ‘accidental’ landlords

By Ben Gosling of Commercial Trust Limited

In  new legislation published on 26 January, HM Treasury clarified how it will implement new European mortgage rules, including outlining which buy-to-let mortgages will be exempt from the new regulation.

The legislation follows a period of consultation which ran from September to December last year.

The EU’s Mortgage Credit Directive (MCD) allows member states to exclude buy-to-let borrowing from the new regime, but requires that an ‘appropriate alternative framework’ is implemented in its place 1. The Treasury announced last September that this would bring more of the buy-to-let market under Financial Conduct Authority (FCA) regulation, but did not confirm how much of the market would be affected.

Key to landlords is the distinction made in the new legislation between mortgage loans for business purposes and mortgage loans to consumers. The former will not be regulated; the latter now will. The Mortgage Credit Directive Order 2015 makes the distinction as follows:

 ‘“…consumer buy-to-let mortgage contract” means a buy-to-let mortgage contract which is not entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower…’

What does this mean for buy-to-let consumers?

The UK government believes that the existing FCA regime affords UK consumers most of the benefits and protections that the MCD requires. The government will therefore simply need to expand the remit of the FCA to cover a greater range of mortgage business. This means that some parts of the buy-to-let market that are not currently under FCA regulation will need to be regulated.

This will likely include:

  • Properties which the borrower has previously lived in but is unable to sell, so must let it out in order to live elsewhere (known as ‘let-to-let’ or ‘let-to-buy’)
  • Properties which, at the time of purchase, the borrower intends to occupy at a future date
  • Properties which the borrower intends to let to a close relative
  • Properties which the borrower has inherited and is unable to sell, so has decided to let it out

Source: The Mortgage Credit Directive Order 2015, s 4 (4)

Some of these scenarios, such as so-called ‘family buy-to-lets’ or cases where the borrower intended to occupy the property in the future, already fell under the FCA’s remit 2. Regulation afforded borrowers greater statutory protection, ensured that certain rules were followed by the person or company providing mortgage advice, and made it more difficult for lenders to repossess their home if they fell into arrears.

So far, so good – from a consumer perspective, regulation appears to have few downsides.

With the implementation in early 2014 of the Mortgage Market Review, however, this changed. Strict new affordability and stress-testing made regulated buy-to-let lending much more difficult, and several lenders pulled out of the market, saying that the small number of such niche customers did not justify the resources required 3.

It is feasible that other buy-to-let ‘consumers’, such as accidental landlords, will find themselves similarly underrepresented when the MCD comes into effect in 2016. In its final stage impact assessment, released last December, the government claimed that roughly 11% of the buy-to-let market would be affected – approximately 18,000 mortgages per year 4.

By this time, however, mortgage lenders will have had ample time to come to grips with the new rules, which the government has announced this far ahead of time in order to give consumers and firms time to prepare. While there may not be many finance options at present for a regulated buy-to-let customer, this may change by the time the new rules come into effect.

To read more about how the EU Mortgage Credit Directive will be implemented in the UK, visit the GOV.UK website.


  1. “Consultation outcome: Implementation of the EU Mortgage Credit Directive”. HM Treasury. Retrieved on 27 Jan 2015.
  2. Financial Conduct Authority Handbook, PERG 4.4.8
  3. Blackmore, N. “New mortgage rules pushing up rates?” The Telegraph. 26 Apr 2014.
  4. “The Implementation of the EU Mortgage Credit Directive – Impact Assessment”. HM Treasury. Retrieved on 27 Jan 2016.
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Getting on to the housing ladder – 5 options you might not have considered

According to recent predictions from a specialist buy-to-let mortgage lender, Kent reliance, the value of the private rented sector will break the £1 trillion barrier in 2015 1.

By Ben Gosling of turnkeymortgages.co.uk

By Ben Gosling of TurnKey Mortgages


Indeed, though it is a long way from overtaking it, the rented sector is growing far more quickly than the owner-occupied sector. The percentage of owner-occupied households has fallen steadily since the recession, from 68% in 2007 to a little over 64% today – a fall that represents nearly half a million properties 2.

The crux of the problem is, of course, affordability. According to the most recent data from the Office for National Statistics, house prices have increased an average of 4.7% year-on-year in the last decade, and 2.0% year-on-year since the recession 3, well in excess of wage growth.

Yet our desire to have a place of our own – something that seems entrenched in our national psyche – is indefatigable. As well as the various government schemes that are in place, there are numerous ways to get on the UK housing ladder. Here are a few that you may not yet have considered:

Gifted deposit

You may be fortunate enough that you have a close relative who is able and willing to contribute towards your deposit. This is known as a family gifted deposit.

Developers also ‘gift’ deposits by offering a discount – usually around 5% – from the market value of the property. The loan to value (LTV) ratio is still calculated against the market value.

For instance, a home building company might offer a 5% deposit gift on a new-build home worth £200,000, meaning that you only need to pay £190,000. This is effectively £10,000 towards your deposit, even though no money has yet changed hands.

Gifted deposits are not something every mortgage lender will consider, as many generally prefer to see evidence that you are able to afford a mortgage yourself. The important thing to remember is to ensure that the lender is aware that a gift or incentive is involved in the transaction – your conveyancer can help to make sure that all the relevant paperwork is complete.


Not every family member will have the cash to pay for some or all of a deposit. But if they want to help, and they have spare equity in their own home, they can offer the lender a charge over some of that equity as security for your own mortgage. This makes them a ‘guarantor’ for your mortgage.

With this option, your guarantor’s income and expenditure will also be factored in to your application.

This is a risk for both parties. Using this option to borrow at very high LTV percentages will increase the size of your repayments, and puts you at risk of falling into negative equity. If you fall behind on your mortgage repayments, your guarantor will become liable for them, putting their own home at risk of repossession.

Longer mortgage term

Average mortgage terms are growing. In the 1990s, less than 5% of mortgages taken out had terms exceeding 25 years; in 2013, the figure was over a third 4.

Having a longer mortgage term means that the amount you need to pay is spread out, reducing the size of your monthly repayments and making it more likely that you will pass a lender’s stringent affordability checks. Beware, though; this option will mean repaying more interest overall, as it will have more time to build up.

If your extended term will take you past retirement age, many lenders will want to see evidence that your retirement income will cover the repayments, whilst some lenders won’t allow it at all.

Joint mortgage

By pooling your resources with (typically) up to three other individuals, saving up for a home becomes that much easier.

This option helps with loan-to-income and affordability checks, though most lenders will only consider the two highest-earning applicants’ incomes. The main appeal of a joint mortgage is how quickly they enable you to save up for a deposit.

Joint mortgagees will either be ‘joint tenants’, who collectively own and are liable for the property, and ‘tenants in common’, who each own and are responsible for their own share, which may or may not be equal.

Whatever the case, you will have entered into a binding financial and legal agreement with other people, who are also at risk if you find yourself unable to keep up your mortgage repayments. Like a guarantor mortgage, you should approach this option with care, and ensure that every party is completely happy with the arrangement and aware of their obligations and risks.

Shared ownership

Local housing associations offer shared ownership schemes that enable first-time buyers to purchase a ‘share’ of a leasehold property that is worth at least 25% of the total value. The share is financed in through a combination of a deposit and a mortgage, just like any other purchase, but the amount required is significantly lower. You then rent the remaining share of the property from the housing association.

You and the housing association share any increase in (or loss of) equity, as well as the proceeds from the sale. You are also allowed to purchase a larger share when you can afford to do so. This is called ‘staircasing’.

The biggest risk with this option is that you owe money to two parties – the lender who provided your mortgage, who can repossess your share if you fall behind on repayments, and the housing association, who can evict you if you fall behind on rent.

There are only a limited number of shared ownership schemes at any one time. This option is usually only available to households earning less than £60,000 per year (£80,000 in London), and existing local authority and housing association tenants are given priority over other applicants.

Find out more about shared ownership schemes from the Gov.UK website.


[1]      http://www.financialreporter.co.uk/mortgages/btl-property-to-hit-1-trillion-in-2015.html

[2]      Table 101: by tenure, United Kingdom (historical series) [XLS]. Retrieved from https://www.gov.uk/government/statistical-data-sets/live-tables-on-dwelling-stock-including-vacants

[3]      House Price Index, June 2014: Annual Tables 20 to 39 [XLS]. Retrieved from http://www.ons.gov.uk/ons/rel/hpi/house-price-index/august-2014/stb-august-2014.html

[4]      Ibid

Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured against it.



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