Buying, selling and letting - Thursday, June 21, 2001

Car alarms, mobile phones, traffic, noisy neighbours – an urban area is an aural assault course. But what can you do when the noise starts at home?

Install acoustic ceiling tiles

These are relatively easy to install yourself and will help cut down on noise. A suspended ceiling, with tiles and blanket insulation in the cavity above them, is an expensive but more effective option.

Insulate individual items

Place your stereo against an unshared, outside wall and place speakers off the floor or on a piece of old carpeting to insulate them. The same can be done for a washer or dryer – try plumbing them into a spot where you can shut the door on them while they’re operating. Insulate your water heater and lag pipes. This will cut down on energy as well as noise.

Triple glazing

Traditional double glazing is fine for insulation, but usually not deep enough to affect noise levels. The ideal option is what’s known as triple glazing, where a single pane of glass is added a few inches away from a double-glazed panel.

Soundproof a party wall

If you are willing to lose a few inches of floor space, it is possible to soundproof the wall you share with your neighbours. This involves constructing a stud wall just in front of the existing wall, insulating the gaps and finally finishing the new wall with plasterboard.

Fit carpets

One disadvantage of a wood or laminate floor is that it’s noisy to walk on and sound travels through it easily. A thick carpet with a heavy, good-quality underlay will go a long way towards cutting out any sounds coming up from the room below.

Heavy curtains

Lined, velvet curtains like your grandmother used to have are very practical when it comes to deadening soundwaves. Update the design but keep ’em heavy.

Fit heavy internal doors

If you have internal doors, make sure they are solid rather than hollow. Like many other measures you can take to reduce noise, this will also save energy.

Talk to your neighbours

By far the most effective way of combating noise is to deal with the source. Speak to housemates, family members and your neighbours about noise levels. Try to avoid being confrontational when the noise levels are high and choose a time when you can discuss the issue calmly.

Leaving home for the first time brings some hard choices about where to live, says Andy Stuart, Editor-in-chief of Your Mortgage magazine. And unless it’s the halls of residence or council property, it’s a question of whether to rent or buy

Apart from the lucky few who come from backgrounds where daddy finds it no financial burden to shell out half a million pounds for a pied-à-terre in Chelsea, we have to look carefully at our budgets. Is it wise to get a mortgage immediately or does it make better sense to rent a place for a while and save more of a deposit? Do you even have to buy at all?

Of course, the answers depend entirely on individual needs. Steve James, 43, who bought a flat a year after he left college in 1980 and became a marketing executive, does not have doubts about the matter. ‘I now live in a £750,000 house with a £250,000 mortgage on it and I put this down partly to the fact that I bought so early,’ he says. ‘I had no special privileges when I was younger and every penny of equity in my home I’ve earned myself. To be honest, I’d feel pretty insecure without my own property, so buying was as much about the way I feel as a financial decision. And with the money in the house I know that I’ll be able to help my children when the time comes, which is an important consideration for me these days.’

A fair point, but not one shared by 25-year-old Sian Murphy, who works as a nurse at a hospital in London. ‘I’ll never buy a property in my life,’ she asserts. ‘If anything goes wrong with my flat I just call the landlord and he comes round to fix it. Buying somewhere would mean being lumbered with a mortgage for most of my life and I’d have to pay all the repair bills. This way I am free to move on after each six-month rental period. Buying is just not worth it in my book – it ties you down and your choice is restricted.’

So is there a pressing reason for buying a property as soon as you possibly can? ‘The case of Steve James is a convincing financial one and I would say the sooner you buy the better it is for your pocket,’ says independent financial adviser Martin Cunningham. ‘You can look at buying as a case of nesting and investing, because despite short-term blips the price of property will increase over the years, as will your wealth.’

So what are the problems with renting in Cunningham’s opinion? ‘Younger people like Sian tend to forget that a mortgage is only finite rent and will one day be paid off altogether,’ he replies. ‘Rent is just pouring your money down a bottomless pit after a while.

‘Young people also tend to rent houses on a shared basis and, of course, that brings the monthly cost down. But although it sounds great talking about freedom and all that when you’re in your early to mid-twenties, people’s priorities usually change within five to 10 years after that,’ he continues. ‘This is especially true when you finally get sick of other people “borrowing” your milk from the refrigerator late at night or leaving the kitchen like a rubbish tip. That’s when most renters decide that they do want to own their own place, and that a mortgage isn’t such a bad thing after all. It’s a common pattern.’

Q My wife and I are buying a flat for just over £250,000. We’ve realised that this means we will end up paying a stamp duty of three per cent of the price – more than £7,500. If the property was only a little bit cheaper, we would be paying one per cent. Is it worth making a lower offer to try to save the cost of the stamp duty?

A As you’ve realised, stamp duty can make a big difference to the cost of buying a home – particularly in the bracket you’ve just mentioned. The amount of duty payable jumps from one to three per cent at the £250,000 threshold, and it can mean a fee of several thousand pounds more.

It’s unusual to find properties very close to this price, as most estate agents are aware of the situation. Unfortunately, so is the Inland Revenue, and they will pay very close attention to the terms of sale for properties priced close to the threshold.

If the property is within a few thousand pounds of the £250,000 mark, making a lower offer may be an option. Other interested buyers are likely to try the same thing, however, so it is important to negotiate any lower offer you do make intelligently.

Another option is to explore exactly what it is you’re buying. Often fittings like carpets or large pieces of furniture are included in a property sale. It is possible to arrange for these items to be sold at the same time but separately – with a corresponding saving on the price of the property. Obviously the cost of these items must be realistic.

Q I need to sell my flat and was hoping for a quick sale. I’m a leaseholder, and I’ve heard that these sales can sometimes take longer. Is there anything I can do to help speed things up?

A There’s never any guarantee that a sale will proceed quickly, but there are certainly things you can do to help it along. There are two separate issues here – the first is finding the right buyer and the second is helping your solicitor to deal with the legal side.

You can help find a buyer by making the most of the property’s assets and choosing the right estate agent. Make certain your flat is ‘ready to view’ by giving it a good clean and clearing clutter. Look around your local area for estate agents that handle properties similar to yours, and make certain the details you give them about your flat are complete and accurate. If your flat takes more than a month to sell consider moving to another agent or opting for joint agency.

From a legal standpoint, transactions will take longer for a leasehold property if your solicitor has to wait for documents about the freehold. Although there may be nothing you can do to avoid this, you can help your solicitor by getting together what documents you can get hold of. This would include a copy of your lease, property insurance details and copies of any receipts for rent and service charge payments. Have your freeholder’s and management agent’s details to hand. Your solicitor will be able to move ahead much more quickly if this information is readily available.  

Andy Stuart, Editor-in-chief of Your Mortgage magazine on the cost of ignoring buildings and contents insurance

Last winter’s floods brought misery to thousands of home owners across the country. And for many people, no sooner had the water subsided than a new deluge brought further floods, precipitating another evacuation of their property. The Association of British Insurers (ABI) reckons that one in four homes has no insurance, so some of these unfortunate homeowners will be counting the cost of not having buildings and contents insurance in place – big bills to replace or repair their possessions as well as the property itself.

Attention at the moment is rightly being focused on the dangers of flooding. The Environment Agency warns: ‘Nearly two million homes and businesses in England and Wales lie in natural river and flood plains. Experts from the Met Office predict that we could see a very significant increase in flood risk over the next century. Today's extremes could become tomorrow's norm.’ Advice for homebuyers is simple: avoid buying a property that is at risk from flooding. But if you do, make sure that you have adequate buildings and contents insurance in place – certainly enough buildings insurance to meet the full rebuilding costs of your property. Before buying a property, ask your solicitor to find out whether there are any records of recent flooding. And check out The Environment Agency's website, which provides flood maps online, highlighting whether the property is at risk from river or coastal flooding (www.environment-agency.gov.uk).

But once flood waters have subsided, there may be further knock-on effects for homeowners, including subsidence. Subsidence is associated with long periods of very dry weather, which causes shrinking in the subsoil. The property sinks and cracks begin to appear in the walls. Without expensive remedial work the affected properties risk collapsing. Liz Nicholson of Norwich Union warns: ‘Flood water doesn't hang around for very long, but it can wash away particles in sandy soil, which might well cause properties to subside.’

Norwich Union doesn't believe that the recent wet weather will have an impact on heave (the opposite of subsidence, in which the ground swells, forcing buildings upwards and causing walls to crack). But Direct Line concedes that the wet weather may have an influence, though spokesperson Gill Murphy adds: ‘Heave isn't common, but it normally affects newer properties that are built on forest-type land that was cleared to make way for the development. Once the trees have gone, less moisture is removed from the soil and so it swells up, causing heave. Basically, the building slowly pops up out of the ground.’

So the message is: beware of newish homes built in the sixties and seventies on land that was previously heavily wooded. As always, it is a case of buyer beware. But the essential thing is to have full buildings and contents insurance in place when you buy a home.

How does the mortgage code adopted by the industry affect the service you receive from your lender?

Andy Stuart, Editor-in-chief of Your Mortgage magazine offers advice for finding your way through the mortgage maze

Borrowers can expect high standards of service when taking out a home loan thanks to the mortgage code developed by the Council of Mortgage Lenders. Initially introduced for lenders and then extended to include intermediaries, the code now covers virtually the entire mortgage market.

Choosing a mortgage

Currently, the code covers the whole of the mortgage lending process. It spans the initial marketing and sale, the ongoing administration of the mortgage and how lenders will handle cases of financial difficulty. The section on helping you to choose a mortgage, for example, explains that there are three different levels of service that might be given by the lender or intermediary:
·    Advice and a recommendation as to which mortgage is most suitable for you
·    Information on the different types of mortgage product offered so that you can make an informed choice about which to take, but no advice
·    Information on a single mortgage product only (where the lender only offers one mortgage product) and no advice

Whichever level of service is provided, the lender or intermediary arranging your mortgage must also ensure you’re given information on all of the following. Check if you are unclear about any of these:
·    The repayment method and repayment period
·    The financial consequences of repaying the mortgage early
·    The type of interest rate, and what future repayments might be after any fixed or discounted period
·    Whether you have to take out any specific insurance
·    The general costs and fees which might be involved
·    Whether your selected mortgage terms can be continued if you move house
·    When your account details may be passed to credit reference agencies
·    Mortgage interest tax relief
·    Whether you are required to pay a high-percentage lending fee and if so, what this means to you

The code’s key commitments

These specify that mortgage lenders and intermediaries will:
·    Act fairly and reasonably in all dealings with you
·    Ensure that all services and products comply with the code, even if they have their own terms and conditions
·    Give you information on services and products in plain language and offer help if there is any aspect which you do not understand
·    Unless you have already decided on your mortgage, help you to choose a mortgage to fit your needs
·    Help you to understand the financial implications of a mortgage
·    Help you to understand how your mortgage account works
·    Ensure the procedures staff follow reflect the commitments set out in the code
·    Correct errors and handle complaints speedily
·    Consider cases of financial difficulty and mortgage arrears sympathetically and positively
·    Ensure all services and products comply with relevant laws and regulations

Mortgage intermediaries

These include financial advisers, estate agents, mortgage brokers, accountants, solicitors and others. As well as meeting the conditions of the code already mentioned, mortgage intermediaries must also:
·    Tell you whether they are acting on your behalf or are an appointed agent acting on the lender’s behalf
·    Explain whether they arrange mortgages from a selection of preferred lenders or from the market as a whole
·    Tell you if they will receive a fee for arranging your mortgage and if so, how much

Compliance with the code

Compliance with the mortgage code is policed by the Mortgage Code Compliance Board (MCCB). In addition, any lender or intermediary that subscribes to the code must be a member of a recognised complaints scheme. These include the Banking Ombudsman and the Building Societies Ombudsman.

Endowment mortgages, once the most popular type of home loan in the UK, have fallen out of favour. The media is full of stories about endowment misselling and there has been speculation about an endowment mortgage scandal rivalling that of personal pensions. So if you have an endowment mortgage, what do you do?

Clearly a new borrower should exercise caution before taking an endowment-backed mortgage. Firstly, they should consider whether it makes sense to take an interest-only loan repayable by an investment product rather than a straight repayment loan. And if they are sold on an interest-only mortgage, the tax-free benefits of an individual savings account (ISA) are probably more suitable than an endowment policy.

But what if you already have an endowment mortgage? What should you do?

First of all, don’t cash in or simply stop making payments to your policy. Even the worst endowment policy is better than none at all if you have an interest-only mortgage. How else will your loan be repaid?

If you face a shortfall in your endowment, the endowment company should have written to you, but even if you have heard nothing, it’s worth contacting them to see whether it is on course to repay your loan in full.

If there is a potential shortfall, you could increase your premiums. Otherwise, you could make additional contributions into an individual savings account (ISA), which may help to cover any shortfall. You’ll need to be strict with yourself and not raid your ISA.

You could ask the lender whether they will accept overpayments to the mortgage in order to reduce the debt. It is likely however, that they may accept overpayments but won’t reduce your loan until the end of the year unless you have a flexible mortgage.

If you are moving home and taking out a larger loan, you should always think long and hard before cashing in, selling or stopping an endowment. It usually makes sense to keep the endowment going and simply reduce the amount of loan it covers when you take out a new mortgage.

Let’s say, for example, you have an existing endowment mortgage for £100,000 and need to borrow £150,000 to fund your new purchase. You could reduce the amount your endowment covers to £90,000. The additional £60,000 could be taken on a repayment basis or possibly as an interest-only loan backed by an ISA.

There are plenty of other options open to you – so seek independent financial advice before you take any action that you could live to regret.

Quick contact
Mortgage Code Compliance Board
Hotline 01785 218200
Website www.mortgagecode.org.uk
E-mail enquiries@mortgagecode.org.uk

Whether you’re lucky enough to have a dedicated utility room or just want to get organised, the following hints will make washdays a little easier.

Get organised

The key to an efficient utility area is to have what you need, where you need it. There is a huge range of plastic storage bins and trays currently on the market to help you get organised. Take a tip from the professionals and store cleaning materials, laundry detergents or polishes together with cloths or tools in a bucket with a handle. As well as keeping things tidy in the cupboard, you can easily pull out the bucket and carry it with you.

Put together a stain kit

Gather a selection of degreasers, enzyme powder, vinegar, specialty stain removers and pre-wash treatments together and keep them near the washing machine. You’ll be more inclined to tackle stains on the spot.

Add a sewing box

This is another encouragement to deal with small, fiddly jobs quickly. Keep an assortment of sewing cotton, buttons and snaps and do small mending jobs right away.

Colour-code washing

Buy two hampers rather than one and sort clothes as you drop them in rather than at the machine. Choose lightweight hampers or clothes bags to avoid having to carry the extra weight to the machine.

Don’t overload and use energy-saving programmes

Your washing machine will get clothes cleaner and last longer if you don’t overload it. Aim to fill it only two-thirds to three-quarters full. All but the most soiled clothes will wash just as well on an energy-saving programme, which can also save you money.

Service your machine regularly

Be aware of what routine maintenance your washing machine needs and schedule regular service checks. Even if you don’t choose to service your machine every time, you will be more aware of your machine’s performance and any problems that may crop up.

Install a sink

If you have a dedicated utility area, seriously consider putting in an extra sink for messy clean ups. This is a particularly good idea if your utility room has a door to the outside as well as the kitchen.

Add a shoe rack

A shoe rack to hold Wellingtons or outdoor footwear will save mud being tracked into the main part of the house. A coat rack and hook for keys or pet leads are similarly useful if the room leads outside.
 
Add a rug

Most utility areas have tile or linoleum floors that are very slippery when wet. A small washable rug will help everyone keep their footing.

Are you better off with an interest-only or a repayment mortgage? Andy Stuart, Editor-in-chief of Your Mortgage magazine, offers advice for finding your way through the mortgage maze

There is one thing that will never change about a mortgage – eventually you will have to repay the loan.

You only get two choices when it comes to paying off your mortgage and, as with many things in life, one means playing it safe while the other means taking a risk.

Your first option is an interest-only mortgage. Every month the only responsibility you have is to meet the cost of the interest on your loan. This obviously means cheaper monthly payments. But you are then left with the rather large problem of how you are going to pay back the amount you originally borrowed.

The solution is to use the proceeds of a separate investment plan. For many years this meant taking out an endowment policy, but now you can also choose to invest in an ISA or even a pension plan to clear your mortgage. The idea is that you put money into your chosen investment vehicle every month. This should then grow at a rate that will enable you to pay off your mortgage debt at the end of the term, possibly leaving you with a tidy tax-free lump sum into the bargain, although there are no guarantees.

The alternative is to take out a repayment mortgage. Every month you make a payment that partly pays the interest on the amount you have borrowed and partly repays the outstanding loan. At the end of the term the mortgage is guaranteed to be repaid in full.

With an endowment policy, the provider calculates how much your investment will be worth assuming it grows at four, six or eight per cent for each year of the term of your mortgage. However, these are only projected figures and there is no guarantee your endowment will grow at a rate that will enable you to eventually pay off your mortgage debt.

In fact, there were many endowment policies sold during the late eighties and early nineties that have not performed as well as expected. Following the well-publicised misselling scandal, there are now thousands of borrowers who have been told that they must substantially increase their premiums or face the prospect of having an outstanding debt when their policy matures. This is a scenario that has not gone unnoticed by the next generation of homebuyers.

‘In the late eighties endowment policies were very popular because you were initially guaranteed a good return,’ says Mark Hemingway of Halifax. ‘Then these returns dropped, some people got their fingers burnt and, as a result the market has shifted back towards repayment mortgages. These now account for 95 per cent of our mortgage business.

‘People want more flexibility but they also want to see their debt reducing and have the certainty of knowing that the loan will be paid off. You don’t get that with an interest-only deal. We anticipate the majority of people will continue to choose repayment mortgages.’

Interest-only mortgages are no longer just linked to endowments. Today, you can also choose from an ISA or a pension to pay off your mortgage. But although they may be tax-efficient and offer good returns, there is a risk that you may not clear your debt.

Which option you choose depends on your circumstances and the type of person you are. If you enjoy taking a risk, then the prospect of the pot of gold at the end of the interest-only rainbow may be too much for you to resist. But if you crave security and certainty, look no further than a repayment mortgage.

Interest-only

Pros
·    Potential to pay off your mortgage ahead of schedule and earn a tax-free lump sum
·    Built-in life assurance
·    Do not have to start a new loan if you move house

Cons
·    There is no guarantee your loan will be repaid
·    You may to have to increase your premiums to cover any shortfall
·    If you have to cancel or sell your endowment policy early the potential return will be greatly affected

Repayment

Pros
·    Your loan is guaranteed to be repaid by a set date in the future
·    More flexibility. Many lenders will allow you to overpay, underpay, borrow back money or take a holiday without any charge
·    Provides more security and is easier to understand.

Cons
·    You have to organise your own life assurance – a must if you have dependants
·    No possibility of a tax-free lump sum
·    You have to start a new loan every time you move house.

Q My boyfriend and I have just moved into our new flat, only to discover that the previous owners have taken the carpets, taps and even the lightbulbs with them. All these things were in place when we went to view the home, and we feel tricked. Is this legal? Is there anything we can do?

A Unfortunately, it’s fairly common to discover something you saw when you viewed a property and expected to find when you moved in is no longer there. Lightbulbs seems a little extreme, but it’s not unusual for some sellers to take anything that can be defined as a ‘fitting’ – an item which is not directly attached to the property.  As you now legally own the flat, it’s important you check through the documents that constitute your contract.

It is standard practice for conveyancers to ask a seller for a detailed list of contents that will or will not form part of the sale. This outlines exactly which items in the property are being sold with it, and would have accompanied the draft contract sent to your solicitor for you to sign.

If things have been taken that are listed in your contract to be included with the flat, your seller should not have taken them. It is possible to contest this, but it’s worth bearing in mind that the cost of resolving such disputes is often greater than you’d pay to replace these items. It’s important that you discuss this with your solicitor, as you will need to consider carefully whether this is worth your while.

Q I’m currently living in rented accommodation while I wait to buy a house. Contracts have been exchanged on the house I’m hoping to buy, but the completion date is not for another month. The house is now vacant, and the seller is happy to let me move in before we complete. This seems much more economical. Is it possible?

A Although moving in is possible, the question you should be asking yourself is whether or not it’s wise.

You can arrange through your solicitor to be granted a so-called buyer’s licence, which would allow you to move into the property before you complete. The conditions of the licence can vary and be quite complicated, but in broad terms you would have many of the same rights as a tenant would. A percentage of the purchase price is paid to the seller for the term of the licence, and you will be responsible for insuring the property.

However, real difficulties can arise if completion is delayed for any reason. If your licence is up before the completion date, you may find yourself having to compensate the seller with an additional payment depending on the cause and length of the delay.

As appealing as it may be to save the cost of rent, the drawbacks of this situation are obvious. Unless you are very, very sure of yourself and your seller, you could find the option of a buyer’s licence much more expensive.

The following list is very general, but should help you understand what a conveyancer does at each stage of the buying process.

First steps – instruction

It all begins when you instruct a conveyancer to act on your behalf. You should receive confirmation of this in writing, with an outline of what the conveyancer will do for you and roughly how much it will cost.

Your conveyancer will approach the seller’s solicitor for deeds, a contract outlining terms and details of ownership for the property you are hoping to buy. They will also chase up answers to any queries about the documents, organise a local authority search and sometimes an environmental search – a process known as ‘the searches’. When these are complete, your conveyancer will send you a written report detailing their findings and any recommendations. If you are happy at this stage, they will prepare your contract.

Exchanging contracts

At this point you are officially agreeing with the seller to purchase their property. Your conveyancer will ask you for your deposit and send deeds to you to sign. They will also carry out final searches and accounts. Any outstanding fees will usually be payable at this time.

Completion

Once you and the seller have completed the sale, your conveyancer will send the balance of the purchase price to your seller’s solicitor, collect the deeds and send them to you, your bank or building society. They will also register your ownership with the Land Registry and pay any stamp duty required.

What you need to do

At each of these stages, you will also need to take steps to further the purchase process. Your solicitor or mortgage lender may ask you for specific things as they’re required, but the following list will help remind you of what you need to do.

First steps – mortgage and surveys

You will need to make an offer on the property and instruct a conveyancer to work for you. If you have not made mortgage arrangements, you should begin doing so at this point.

Your mortgage lender will most likely ask for a valuation survey to be done before agreeing to lend you money. This is to reassure the lender that the property is actually worth what you intend to borrow. It is also in your interest to arrange to have a homebuyer’s report done by a qualified surveyor.

When you buy a home, it is effectively ‘sold as seen’. If there are any problems with the property, they are your responsibility. Because of this, it is worth having a survey done, especially if the valuation survey poses any questions. If after the homebuyer’s report, you still feel unsure about the property, a full structural survey is advisable. Your conveyancer should be able to advise you on how to go about arranging these surveys, which can cost several hundred pounds.

Exchanging contracts

You will be asked to pay a deposit to the seller at this point. Ten per cent of the price is customary, although you may be able to negotiate a lower rate, especially if you are borrowing a large portion of the money.

At this stage, the sale becomes fixed and there may be heavy penalties if either party chooses to pull out. If you have paid a lower deposit to the seller, bear in mind you may be liable to pay the full ten per cent if you later refuse to buy.

Completion

Once a completion date has been set, the time has come to organise the practicalities of your move. Organise your removals, insurance and utilities at this stage, as well as making any job or school arrangements. Continue to liaise with your conveyancer at this point – in rare cases a completion day may have to be changed if final searches are not complete.

Since the abolition of student grants, students have had to take on hefty loans to pay for their tuition fees. According to Barclays Bank, the average student has debts of £5,286 when they finish their education. It’s no wonder that young adults are avoiding the expense of buying and running their own home in favour of living with their parents for longer. Laura Quiggan looks at one solution for hard-pressed families

In a report by the Universities and Colleges Admissions Services, one in six students will be living in their family home this year while they study. Developer Weston Homes have taken this surprising statistic as inspiration for the design of their family homes at the Ashcroft Grove development in Buntingford, Hertfordshire.

By incorporating attic living space into the design of the properties, Weston Homes give independence to families who want to support their children studying into their mid to late twenties. Loft conversions in a similar second-hand property could cost between £20,000 and £35,000, but three out of five homes at Ashcroft Grove have attics built in.

While scholars can take advantage of the home’s study, the rest of the family can enjoy three reception rooms, a fitted kitchen, utility room, bathroom, shower room, cloakroom and garage.

Educational facilities in the area include Haileybury College, St Edmund’s College, Bishop’s Stortford College and Heathmount School. Transport links are excellent with road and rail links to London and Cambridge, Stanstead airport on the Essex border and market towns of Bishop’s Stortford and Hertford.

Prices for a five bedroom house start at £370,000. For more information contact the marketing suite on 01763 274427.