Buying, selling and letting - Monday, February 02, 2004

Purchasers need professional guidance with the legal aspect of buying. Solicitor Pedro Emmanuel examines the process of finding the right conveyancing professional

For most people buying a house is one of the most important decisions they will ever make. However, unknown to a lot of people, the choice of their conveyancer is equally – if not more – important. A conveyancer is a lawyer who specialises in handling the legal formalities of the sale or purchase of a property. The conveyancer may be either a solicitor or a licensed conveyancer and will usually act for you and your lender. The role of the conveyancer is not only crucial to the success of the transaction but could determine whether or not you end up buying a liability.

What does a conveyancer do?

In a purchase the conveyancer obtains information about the property, checks that the seller has good title and then agrees the terms of the contract or lease for the purchase with the seller’s conveyancer. Furthermore, the conveyancer makes pre-completion enquiries including all the searches – usually environmental, water and local authority searches.
When satisfied with the terms of the mortgage offer and that the title is good, the conveyancer exchanges contracts on behalf of the purchaser, then obtains the mortgage advance from the lender and any balance, which the purchaser needs to provide. At completion (which is the day you move into your new home) the conveyancer pays for the house and registers the purchaser’s ownership and the lender’s charge at the Land Registry.

What should you consider in choosing a conveyancer?

The rule is not to choose a conveyancer simply because their fees appear low. There may be hidden extras. Even where the fees are really low, there are other equally essential matters to take into consideration. For instance, is the firm regulated by their relevant supervisory bodies? (The Law Society regulates solicitors while the Council of Licensed Conveyancers regulates licensed conveyancers). Regulation will usually ensure that the conveyancer has an indemnity insurance policy in place, just in case things go wrong.
You should also find out how experienced they are, how fast they can move and whether or not they provide regular updates. You may also want to know if they offer a personal service or whether they are a ‘conveyancing factory’. Location may also be important if for any reason you need to visit their offices.
By all means do look around and compare quotes from different conveyancers. But have a global picture when deciding which conveyancer to instruct.

If you’ve only ever been a first-time buyer, the jump to the next level of property ownership may be surprisingly complicated. So where do you start? Alex Hammond of Your Mortgage magazine investigates.

If you found buying your first home a confusing and exhausting experience, you should probably take a seat. Because there’s something you need to know: next time it might be even worse.
The major hurdle you faced first time around was probably finding the deposit. Once you’ve done this, with no chain to restrict your movements, the process can be straightforward. But when you have your own place to sell before you can move, you have to rely on a number of external forces that could easily thrown your own plans into jeopardy.

The real story

Iain Collings, an advertising manager, and Julie Shuttle, an office manager, both 29, bought their first property – a one-bedroom flat in Highbury, north London – in spring 2002. After a year and a half in the property they decided it was time to move on.
Iain says: ‘basically, we needed more space. We’d had enough of having nowhere to hang our laundry and no room for when our friends came over. When our mates stayed for the night they had to kip on the floor.’
Although Iain and Julie wanted a bigger flat, they liked the area and were reluctant to leave. Iain continues: ‘We’re looking at somewhere else in Islington, which is just up the road. We like living round there and sticking to the same area will mean little disruption to our lives. We’ve found a two-bedroom garden flat and hope to move in mid-March.’
But the process hasn’t been simple, as Iain explains. ‘Our original plan was to first sell our flat, then stay with friends while we arranged our mortgage and looked for a new home. We thought this would put us in a strong position for buying as we would again effectively be first-time buyers without a chain.
‘However, we realised that it was worth looking at properties even while we were still trying to sell our place, because this could give us a better idea of the size of offers on our flat we could afford to consider.’

Back-up plan

By moving their goals Iain and Julie did find a flat to buy, and sold their own home simultaneously. Everything seemed to be running smoothly, but then the purchase on their new property fell through.
Iain says, ‘We got through to the stage of having a survey done on the flat, which exposed some major underpinning issues. Basically, we couldn’t be sure that it wasn’t going to sink into the ground. The debate over this lasted for about three to four weeks and during this time we decided we needed to look elsewhere as a back-up plan.’
The two-bedroom flat that Iain and Julie will move into in March is the back-up plan. They found it quickly but the delay has meant that they have had to move out of their old flat and stay with friends. So does Iain think they chose to sell their flat, arrange their mortgage and buy a new home in the correct order?

‘There’s probably a lot of luck involved in how the process works. If we’d chosen to go ahead and sell our flat before buying we would have had to stay with friends. We tried to do the two simultaneously  - and as it turns out we’re doing that anyway.
‘The whole process was definitely more complicated than being a first-time buyer, which in hindsight was fairly straightforward. You potentially have to overcome a number of disappointments and extra costs. We paid £500 for a homebuyer survey on a flat we didn’t even move to. The process seems longer than the first time around. Perhaps I didn’t notice it as a first-time buyer because I was inexperienced, but it’s very frustrating that the legal work takes so long. You just want to phone someone and tell them to make a call or send the papers right then and there. It shouldn’t take long but it does.’
And what tips does Iain have for other first-time sellers?
‘Tell yourself that it will be hard work, it will be difficult and there will be disappointments. From our experience you should also make sure you have a back-up plan in case the sale of your property or purchase of another falls through, and allocated time to deal with any problems.’

Finance first

Paul Fincham from Halifax says, ‘Whether you are buying for the first time or moving home, the biggest factor you need to consider is the finance. So the first thing to do would be to work out what you can afford. Have a look at the deals available and get a decision in principle. Then start your house hunting.
‘When you have found somewhere, make an offer. If this is accepted apply for a mortgage and arrange the survey and conveyancing. When this is completed and your mortgage arrives you are ready to exchange contracts to complete the deal. Then it’s all yours. In theory the process is simple,’ he concludes. ‘But be prepared for any problems you may encounter.’
You can’t predict potential hitches when you’re moving but you can be ready for them with a contingency plan. Don’t assume it’s a done deal until you have completed on both your sale and your purchase. You’ll soon be able to relax in your new home – but until then you have to keep on juggling those tasks.

London new homes top £300,000

According to figures released today by SmartNewHomes.com, the new homes market finished last year on a high as both demand and price increased throughout 2003. The index tracks the location and price homebuyers are willing to pay for properties searched for on smartnewhomes.com; December’s figures show that buyers were willing to pay an average of £224,554 for a property, up by 1.3 per cent on November and an increase of 8.5 per cent compared to the previous year.

The price homebuyers are willing to pay for a property in London reached £300,423 – its highest point to date. Apartments proved the most popular property type, with 46 per cent of searches compared to 39 per cent for detached houses, a reversal of the figures from last year when houses were a more popular choice. Other property types remained steady although the price of penthouses rocketed further, up by 4.5 per cent since November to £329,863.
smartnewhomes.com

Homebuyers advised to do their homework

The National Association of Estate Agents (NAEA) is emphasising the importance of researching every aspect of a particular property before committing to a purchase. Issues such as cost, noise, transport links and local schools can affect the value and suitability of a particular home but are often not considered until the purchaser actually moves in, by which time it is too late.

Peter Bolton King, chief executive of the NAEA, comments: ‘It is always advisable for homebuyers to do as much research as possible before buying a property, especially if they are moving into a new area with which they are not familiar. In particular there are some specific issues, which the public might not normally consider.’ These include running costs, such as council tax, parking permits and stamp duty; transport links; noise pollution (is the house is in a flight path?); and schools.

The NAEA advises people to always undertake surveys with properties as defects will often not be apparent. Similarly, an environmental survey is advised to highlight any problems with the area, such as risk of flooding. Your solicitor will be able to organise both of these for you.
naea.co.uk

Christina Jordan of Your Mortgage magazine explains how to take a break from our mortgage repayments.

Imagine receiving a letter from your mortgage company telling you not to bother paying your instalment this month if you are a bit short. It seems fantastic but not very likely.
However, if you had a flexible mortgage you might be able to skip a month without even telling your lender. This is because flexible mortgages allow you to take more control over how you repay your home loan.
Flexible mortgages have been in the UK for about ten years, but have become hugely popular in recent years. Most major mortgage lenders offer flexibility in their mortgage range. So what exactly is a flexible mortgage and, more importantly, how can it allow you to take a break from your repayments?

Back to basics

A flexible mortgage is not as restrictive as a traditional home loan. It includes features that allow you to control your own finances. For example, if you have extra money one month you can overpay on your mortgage; that is pay more than your agreed repayments.
By doing this you will reduce your balance and, therefore, the interest you are charged on your debt. Over the term of your mortgage the savings made by overpaying can add up to thousands of pounds. And when you overpay you create a buffer that can be invaluable if you ever need a break from your repayments.

A payment holiday is where you don’t pay your mortgage for a period. This can be for one month or six months, depending on your finances and the criteria of your lender.
Most lenders will only allow you to take a payment holiday when you have already made overpayments. So, for example, if you intend to skip two months of payments and that amounts to £1,200, you must have overpaid more than £1,200 before you do.
All of Halifax’s mortgages offer flexible features, and borrowers are able to take payment holidays if they meet certain criteria. Spokesperson Paul Fincham explains, ‘Borrowers need to have had their mortgage for six months before they take a payment holiday, and they must have overpaid to the amount they intend to miss. This ensures that they remain on track to pay off their mortgage within the term.’

Benefits

A payment holiday could help you out in many situations. For example, if your finances are stretched after Christmas, you could skip a month on your mortgage repayments in order to pay off credit card bills.
Or perhaps you want to start a family and would appreciate a gap in repayments during the first months after the child is born. Or maybe you want to go travelling the world and you simply don’t want to pay your mortgage while you are away.
Whatever the reason, a payment holiday can be a welcome break from your monthly payments. It’s your mortgage, so why not take more control over how you repay it?

Would you pay over the odds for a pair of trousers? Of course not. So why pay more than you need for your mortgage? Anna Bowden explains the ins and outs of remortgaging

Home owners in the UK are paying too much for their mortgages, according to Which? – to the tune of £2.2 billion a year. This is mainly because of inertia, says the report; most of us just can’t be bothered changing to a better deal.

If you are currently paying your lender's variable rate then you are probably paying over the odds for your mortgage. There are hundreds of deals available and interest rates are at an all time low, so why stick with your existing lender if you could do better elsewhere? Go out into the marketplace, shop around and find a deal that will reduce your monthly payments and thus save you a fortune over the term of your mortgage.
Remortgaging can also be used as a way of releasing some of the equity that has built up in your property's value, although there are certain caveats despite the fact that rates are so low: borrowing through your mortgage may be much cheaper than taking out a personal loan, but the debt is secured on your property and if you can’t keep up with the payments you could risk losing your home.

Add it up

Remortgaging is certainly more straightforward than it used to be, but borrowers shouldn’t rush into anything. The most important thing is to consider any costs involved. There may be redemption penalty clauses in your existing mortgage and/or in the next one, making you pay for leaving your lender or making you stay with the new lender after the special rate has expired. Redemption penalties do tend to be attached to fixed-rate and discount deals and are often only applied only during the special offer period, but your existing deal may still have overhanging penalties and it could cost you to leave the lender even if you are paying its standard variable rate (SVR).
Other costs could include insurance, a valuation and solicitor's fees and, in addition, any arrangement/application fees charged by your new mortgage lender which may cost as much as £500 or more. These costs, along with the penalties, could cancel out the savings you are hoping to make by switching mortgages. It's a simple question of adding it up. Obviously you don't want to switch mortgages to supposedly save money only to find yourself trapped in an unnecessarily expensive deal. The best remortgaging deal may be one that doesn't offer the lowest interest rate but doesn't tie you in either.

Before you apply for a new loan it is well worth speaking to your existing lender, as it might be able to offer you a deal which is better than your current one.
If it is unable to do so and you have found a new mortgage, you need to set the conveyancing process in motion. If your remortgage is at all complex it is worth talking your requirements through with a solicitor to get an idea of how much the legal work will cost.

Where do I start?

Get in touch with your lender and ask for a redemption statement. This should be fairly straightforward. When it arrives it will include information concerning the amount still owed on your mortgage and any penalties you will face if you want to pay off the loan. Armed with the redemption statement you can think about your new mortgage. Always get three quotes for comparison purposes. Once you have found a potential deal request illustrations showing what the monthly repayments will be. These figures can be compared with your current repayments to show the real monthly savings. Remember, if you are nearing the end of a fixed- or discount-rate deal you should also get an illustration from your current lender showing the repayment on its standard variable rate (SVR) as a comparison.

Lenders will often let you book a deal two or three months in advance, so you don’t need to wait until your existing special offer period is at an end before you start the remortgage process. If you are organised you could even complete on the day that your existing deal switches to a higher rate!
It should take about a month to complete the remortgage. You will get an offer of advance if the lender's surveyor is satisfied with the value and condition of your home, and your new lender will liaise with your existing lender. Once you have received a completion statement from your solicitor or new lender, the process has finished and you can relax. Just remember, remortgaging your property is not something to be ashamed of or shy about. You do not owe your lender loyalty and they are certainly making money out of you, as most lenders do not reward loyalty with a reduction in rates. Look around, find the best rate and spend the difference on yourself!

A punter’s view of the London property market

A grass root level survey by London property specialist Chesterton International gives an insight into the sales and lettings market in the capital from the home owner’s perspective. Property would appear to be the new pension alternative, as 63 per cent of landlords are aged over 45 years and 55 per cent have acquired their property as a 'buy to let' investment. Nearly half have seen their property increase in value by more than 50 per cent since they bought it and 70 per cent have no intention of selling in the near future. Property ownership is split equally between male and female landlords and both are hopeful of finding the perfect tenant, preferably a non-smoker (13 per cent), professional (14 per cent), no pets (12 per cent) pays rent on time (16 per cent) and leaves the property in a good condition (17 per cent).

Tenants, on the other hand, have shown themselves to be canny negotiators when it comes to initial rental agreements with 86 per cent getting their rent reduced by up to 19 per cent of the asking price. Male tenants are slightly more effective at this (56 per cent). The most common restrictions in rental agreements are that 62 per cent have a no pets clause and 24 per cent allow 'no noise after designated times'. It also appears that tenants are becoming increasingly discerning – nearly a quarter of tenants surveyed took up to two months to get what they wanted, with a shopping list of criteria that included the right number of bedrooms (34 per cent), proximity to local transport (25 per cent) and adequate living space (23 per cent).

The same criteria also appears on potential purchasers' wish lists, with 31 per cent looking for more space, 19 per cent an improved location and outdoor space and 22 per cent a contemporary décor. Male respondents are particularly interested in more space (60 per cent) whilst 57 per cent of women are keen on the latter. Half the respondents were looking to buy on their own and 55 per cent of them had already bought over three times in the past. The predominate age category looking to buy (55 per cent) was 35-44 years old, although overall 32 per cent did not currently live in London.

Conversely, 56 per cent of people with their property on the market were not looking to buy another property in London, and more than half of those were looking to move 25 miles or more outside the M25 – 86 per cent of these people were single and 67 per cent were women. Nearly half had lived in their property for up to four years and 45 per cent cited the need for a bigger property as the main reason for moving. They also believe in spending money to make money – 39 per cent have carried out decorations in order to sell their property and 29 per cent have installed a new kitchen or bathroom, with 27 per cent having spent up to £5,000 on work to enhance their sale offer.

A punter’s view of the London property market

A grass root level survey by London property specialist Chesterton International gives an insight into the sales and lettings market in the capital from the home owner’s perspective. Property would appear to be the new pension alternative, as 63 per cent of landlords are aged over 45 years and 55 per cent have acquired their property as a 'buy to let' investment. Nearly half have seen their property increase in value by more than 50 per cent since they bought it and 70 per cent have no intention of selling in the near future. Property ownership is split equally between male and female landlords and both are hopeful of finding the perfect tenant, preferably a non-smoker (13 per cent), professional (14 per cent), no pets (12 per cent) pays rent on time (16 per cent) and leaves the property in a good condition (17 per cent).

Tenants, on the other hand, have shown themselves to be canny negotiators when it comes to initial rental agreements with 86 per cent getting their rent reduced by up to 19 per cent of the asking price. Male tenants are slightly more effective at this (56 per cent). The most common restrictions in rental agreements are that 62 per cent have a no pets clause and 24 per cent allow 'no noise after designated times'. It also appears that tenants are becoming increasingly discerning – nearly a quarter of tenants surveyed took up to two months to get what they wanted, with a shopping list of criteria that included the right number of bedrooms (34 per cent), proximity to local transport (25 per cent) and adequate living space (23 per cent).
The same criteria also appears on potential purchasers' wish lists, with 31 per cent looking for more space, 19 per cent an improved location and outdoor space and 22 per cent a contemporary décor. Male respondents are particularly interested in more space (60 per cent) whilst 57 per cent of women are keen on the latter. Half the respondents were looking to buy on their own and 55 per cent of them had already bought over three times in the past. The predominate age category looking to buy (55 per cent) was 35-44 years old, although overall 32 per cent did not currently live in London.
Conversely, 56 per cent of people with their property on the market were not looking to buy another property in London, and more than half of those were looking to move 25 miles or more outside the M25 – 86 per cent of these people were single and 67 per cent were women. Nearly half had lived in their property for up to four years and 45 per cent cited the need for a bigger property as the main reason for moving. They also believe in spending money to make money – 39 per cent have carried out decorations in order to sell their property and 29 per cent have installed a new kitchen or bathroom, with 27 per cent having spent up to £5,000 on work to enhance their sale offer.

On a high

The UK new homes market looks set to finish the year on a high as recently-released figures by SmartNewHomes show a significant increase in demand and price. November figures show that buyers were willing to pay an average of £221,654 for a property, up by 2.7 per cent on October and an 11.6 per cent increase compared to the previous year. The greatest increases in price over the past year have been in Greater London (20.5 per cent) and the North (16.4 per cent).
As well as across all regions, the increase in demand was also consistent across property types. November saw a 10.71 per cent increase in semi-detached properties, and penthouses have seen a strong recovery from slipping prices earlier in the year with buyers now willing to pay an average of £313,671.

David Bexon, Chief Executive, Smart New Homes comments: ‘The increased demand for new homes shows no signs of diminishing, with prospective buyers willing to pay an average of £22,991 more for a property than a year ago.
‘Sustained low costs of borrowing, growing incomes and the inherent desire to own a brand new home all point to fuller growth in 2004. We are convinced that new home demand growth will continue over the next 12 months.’

Long-term customers subsidise cheap deals for new borrowers

Banks and building societies could face an investigation into the way they offer low-rate mortgage deals to lure new customers at the expense of long-standing borrowers, it was revealed yesterday. A study commissioned by chancellor Gordon Brown found that millions of home owners are subsidising the cut-price deals offered to first-time buyers and people who are remortgaging. The report's author, Professor David Miles, indicated he may recommend that the Financial Services Authority or the Office of Fair Trading use their powers to tackle this ‘undesirable’ cross-subsidisation.

‘There is no evidence of classical anti-competitive behaviour, but I am concerned that some features of the market are not working as well as they should and in the interests of all borrowers,’ he said.
It is not only lenders in the firing line. The report also takes a swipe at borrowers, saying many people who take out mortgages are too concerned with what the initial monthly payments will be and are ignoring the benefits – in particular the payment certainty – that long-term fixed-rate home loans can offer.

One lender that will feel vindicated after this news is Nationwide, which in 2001 stopped offering cut-price mortgage deals to win new customers at the expense of established borrowers. Instead, a new range of mortgage products was launched, available to all borrowers. The lender took heavy criticism and lost market share, but last month finally announced that its net mortgage advances in the six months to October 4 were £7.5 billion, compared with £2.9 billion in the same period last year.

Why do so many home owners pay uncompetitive rates when cheaper deals are all around? The rewards of remortgaging are great and the process easier than ever, finds Sean Horton, director of Enhanced Wealth Limited.

When was the last time you considered changing your mortgage lender? The vast majority of people only contemplate this when they move home or perhaps wish to borrow more money. But the opportunity to remortgage, and the advantages it can bring, should be high on a borrower’s list of priorities.

The current mortgage market is well developed and hungry for remortgage business. The lenders have streamlined their application process and criteria to make it as easy as possible. Most will waive the solicitor costs and valuation fees, making it almost cost-free. Applications can be made over the internet, with mortgage offers available in days instead of weeks.

But why do it at all? Well, if you took out a mortgage product two years ago that has just finished, you will now be paying a higher monthly payment based on the lender’s standard variable rate of about 5.75 per cent. Taking advantage of a ‘fees free’ transfer could reduce that rate down to 3.50 per cent with a new lender. That’s a saving of £2,250 per year on a £100,000 interest-only mortgage.

Other reasons could be to transfer over to a competitive fixed rate now that interest costs are rising, to make use of a flexible mortgage product or simply to raise extra funds for home improvements or a second property purchase etc. These schemes are not restricted to residential mortgages on your own home. Anyone with a buy-to-let mortgage can also remortgage for the same reasons and advantages.
The process is not excessively complicated and certainly much simpler than when moving home.
But before you rush off and apply for a new mortgage there is one task that needs to be done. It is important to first check with your current lender what fees or penalties, if any, will be payable when the loan is paid off. This will help to establish the viability of remortgaging as the new lender will not pay these fees.

By using the services of an independent mortgage broker you will not only save time but will also receive comprehensive guidance on which new mortgage is the most suitable for you, with a full breakdown of the costs involved. Many will then undertake the administration and assist with any questions or further requests from the lender.
The restrictions are few and the advantages great. So go out and grab yourself a remortgage bargain.

Why do so many home owners pay uncompetitive rates when cheaper deals are all around? The rewards of remortgaging are great and the process easier than ever, finds Sean Horton, director of Enhanced Wealth Limited..

When was the last time you considered changing your mortgage lender? The vast majority of people only contemplate this when they move home or perhaps wish to borrow more money. But the opportunity to remortgage, and the advantages it can bring, should be high on a borrower’s list of priorities.

The current mortgage market is well developed and hungry for remortgage business. The lenders have streamlined their application process and criteria to make it as easy as possible. Most will waive the solicitor costs and valuation fees, making it almost cost-free. Applications can be made over the internet, with mortgage offers available in days instead of weeks.
But why do it at all? Well, if you took out a mortgage product two years ago that has just finished, you will now be paying a higher monthly payment based on the lender’s standard variable rate of about 5.75 per cent. Taking advantage of a ‘fees free’ transfer could reduce that rate down to 3.50 per cent with a new lender. That’s a saving of £2,250 per year on a £100,000 interest-only mortgage.

Other reasons could be to transfer over to a competitive fixed rate now that interest costs are rising, to make use of a flexible mortgage product or simply to raise extra funds for home improvements or a second property purchase etc. These schemes are not restricted to residential mortgages on your own home. Anyone with a buy-to-let mortgage can also remortgage for the same reasons and advantages.
The process is not excessively complicated and certainly much simpler than when moving home.
But before you rush off and apply for a new mortgage there is one task that needs to be done. It is important to first check with your current lender what fees or penalties, if any, will be payable when the loan is paid off. This will help to establish the viability of remortgaging as the new lender will not pay these fees.

By using the services of an independent mortgage broker you will not only save time but will also receive comprehensive guidance on which new mortgage is the most suitable for you, with a full breakdown of the costs involved. Many will then undertake the administration and assist with any questions or further requests from the lender.
The restrictions are few and the advantages great. So go out and grab yourself a remortgage bargain.