Buying, selling and letting - June, 2001

Q My boyfriend and I bought a flat together a few years ago. We both contribute to the mortgage, but he put up the money for the initial deposit. Because of this, we arranged with our solicitor to be tenants in common, with each of us owning a percentage of the flat.  

I recently came into some money from a legacy, and would like to use it to increase my share in the flat. My boyfriend is happy for me to do this, but how should we go about it?

A As tenants in common, you already recognise that it’s possible to specify the amount of investment each of you has in your flat. This would have been recorded on a deed of trust and kept with your ownership documents.

There are two ways you can legally alter this record – either a new deed of trust can be drawn up, or the majority holder, in this case your boyfriend, can sign over a portion of his percentage to you in writing. Which is most appropriate depends on your individual situation, but your solicitor will be able to advise you on the best course of action.

Another issue to consider is how you use the money you’ve been left. You may wish to give the money to your boyfriend directly, but it’s worth investigating whether you can make an overpayment on your mortgage. Many mortgages carry penalties for doing this, but if you have a CAM (current account mortgage) or offset mortgage, making an overpayment could shorten the life of your loan and save you a lot of money in interest.

Q I’m buying a house and my solicitor has asked for money for a ‘local authority search’. What exactly is this and what does he expect to find out?

A This search will highlight any issues the local authority is aware of that concern the property you are buying. These include planning permissions that have been applied for and any notices that have been served on the property. The search will also investigate the council’s planning policy and maintenance schedules for public highways and drains that may affect the land you are buying. If these inquiries bring to light any new queries, your solicitor will also pursue these or suggest further searches.

The searches a solicitor undertakes may seem unnecessarily time consuming, but they are done to protect you, and sometimes also your lender, from making an unworthy investment. Legally, you are buying a property ‘as seen’, and any responsibility for unforeseen problems rests with you. Because of this, it’s in your best interests to make sure you have as much information about the house as possible before you exchange contracts.

Q My wife and I are in the process of selling our home to buy a larger property. We’re nearly ready to exchange contracts on both our old home and the new house, and my solicitor has asked for my permission to exchange by phone. He’s assured me this won’t be a problem, but I’m a bit worried that a simple phone call at the wrong time could mean I find myself owning two homes. Am I right to be anxious?

A Although you’re entitled to be anxious when you’re involved in a chain, your solicitor is also perfectly correct in suggesting you exchange by phone. Far from hindering your situation, choosing to exchange by phone may actually help to make sure that the contracts on your old home are dealt with before those for your new house.

Exchanging contracts by phone is now the most common method used by solicitors. Far from being a simple call, your solicitor will follow a rigid format throughout the conversation and contracts will be considered binding at a specific point. The appropriate paperwork will then be sent. The advantage of this system is that the exact time of exchanging contracts can be pinpointed and controlled – a useful advantage when buying is contingent on selling another property.

It is possible to arrange to exchange in person or by post, but each of these presents its own drawbacks. Your solicitor should be well aware of your situation and doubtless will have taken this into consideration when he suggested you exchange by phone. It’s important you discuss with your solicitor any concerns you may have. Your solicitor should be willing to explain exactly what will happen and when.

Q I’m looking for a solicitor to help me with the conveyancing for my first flat. A friend suggested I check with the bank where I hope to get a mortgage to see which solicitors they use – surely this doesn’t make a difference?

A Conveyancing is one of the few legal situations in which a solicitor can act for two parties – in this case a buyer and a mortgage lender – at the same time. A mortgage lender needs to consult a solicitor to confirm that the property is a viable investment and that you are able to meet the terms of your mortgage. As a borrower, you are responsible for paying these fees.

There are many things to consider when choosing a solicitor, including how much he charges, whether he is used to dealing with properties in your area and how soon he can begin your conveyancing.

It is worth checking with your bank, if only find out whether they will want to instruct your solicitor to act on their behalf. Sharing your solicitor with your lender can speed up the buying process – results of a valuation survey can be made available to both of you at the same time, for example.

The downside of this arrangement is that your solicitor will have to act in not only in your best interests but in the best interests of your lender. Any information you give your solicitor is confidential, although if there is a conflict of interest he may decline to represent either of you.

How do you pick a winning product and lender rather than a deal that could hurt you financially? Andy Stuart, Editor-in-chief of Your Mortgage magazine discusses the army of mortgage advisers at your service

Before you choose a mortgage adviser, it is important to understand what it is that differentiates them. All reputable mortgage advisers have signed the Mortgage Code, which is the criteria for self-regulation set up by lenders and is policed by an independent body, the Mortgage Code Compliance Board (or Mortgage Board). Nearly every lender has undertaken to deal only with advisers who are registered with the Mortgage Board.

Clearly mortgage advisers who work for lenders can only advise on and recommend their employer’s own products. It is worth noting that some lenders don’t provide any advice at all, opting to provide information on a range of products and leaving it up to the borrower to select a deal. However, brokers should have access to a wide range of lenders and offer advice on hundreds or thousands of different mortgage deals.

Under the Mortgage Code advisers must make clear to the borrower what type of advice they offer and who they work for. For example, the adviser has to say whether a particular loan has been chosen from the whole market or from a selected but limited panel of lenders. And the adviser has to state whether he is independent and working for the borrower or if he is the appointed representative or agent of a single lender.

Charcol, one of the largest and best-known firms of mortgage advisers, has been in business for over 25 years. Siobhan Hotten, a spokesperson for Charcol, explains the benefit of a mortgage adviser: ‘Quite simply, it makes sense for most people to use a professional adviser because of the complexity of the market, with the sheer number of providers and products.

‘And the market is constantly changing – for example, a number of major lenders have recently adopted different strategies on pricing of products. It is very difficult for experts to keep up with the market and it is even more confusing for the average borrower. An adviser can help borrowers find the right mortgage product for them and help point out the potential pitfalls.’

For example, two seemingly similar mortgage deals with an attractive two-year discount may have very different redemption penalties. One deal may come redemption-free, so the borrower can walk away from the deal at any time, with a small ‘sealing fee’ of £35. The other deal may have redemption charges running to thousands of pounds that apply during the discount and possibly for years after the initial benefit has ended, effectively locking the borrower into the lender.

Hotten suggests another reason for talking to a mortgage adviser: ‘There are a number of lenders that have attractive deals and have offered consistently good interest rates but they have no high street presence, and borrowers could miss out on them if they don’t talk to an intermediary.’

Borrowers need to be aware that a good mortgage adviser doesn’t work for free. In the past, many mortgage advisers didn’t charge a fee, simply relying on the healthy commission earned from selling an investment product such as an endowment alongside the mortgage. These days few borrowers opt for an endowment mortgage and more advisers are charging a fee.

For example, Charcol charges up to one per cent of the size of the loan. However, Charcol’s parent, Bradford & Bingley, which has recently become a mortgage adviser, charges customers who choose to go to a branch and use its MarketPlace facility up to 0.4 per cent of the loan with a minimum fee of £200.

Why the difference in charges? Different types of client with different needs in different parts of the country, it would seem. But borrowers need to weigh the cost of fees against the possible savings on mortgage payments as well as the value of the ‘hand-holding’ that a good adviser should provide during the process of choosing a loan and moving home.

Under the Mortgage Code, advisers have to flag up any fees that they charge the consumer upfront, plus tell the borrower how much cash they may earn from placing your loan with a lender, if the procuration fee is more than £250.

So you should be aware of how much money the adviser stands to earn and where it comes from before you sign up for advice. And if you choose well you could employ a professional who will help you buy a winning mortgage product.

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.

Cary Grant and Sophia Loren found romance on one, and Damien Hirst recently bought one. Critics wonder why anyone would want to live in a glorified broom cupboard where a small misstep means banging your head painfully or drowning. For enthusiasts, it’s a fantasy-alternative to traditional homes and holidays and one of the last expressions of a traditional folk-culture. Stephanie Thomson tests the water and asks whether it’s really worth it to live on a houseboat.

Faced with rocketing property prices, pollution, the daily commuter gridlock and routine, living on a houseboat seems like an attractive alternative lifestyle – particularly in the overcrowded city. But is reality as romantic as the dream? For those not put off by basic amenities, cramped quarters, a lot of work and a lot of water, a houseboat may seem worth considering – but it’s worth weighing up the facts.  

In order to navigate Britain’s 2,000 miles of internal waterways, boats have to have a strict size limit. A Dutch barge may be as wide as 14ft, but to get through the narrowest locks on the system, you will need a narrow boat – often up to 60ft long, but less than 7ft wide. And even on the larger boats, the lack of available space will mean doing without all but the barest necessities.

The other main issue for most houseboat owners is the cost. It’s true that buying a houseboat is significantly cheaper than buying a flat – prices can start as low as £20,000 – but necessary additional costs quickly add up. Along with a boat, you’ll find yourself paying for:
Moorings – Residential moorings are limited, especially in London, and can cost upwards of £2,000 a year.
A licence – You need one to travel on canals and rivers run by British Waterways (the largest navigational authority) or other agencies. The cost will vary depending on the size of your boat and the provisions of the licence.
Insurance – You will need both boat insurance and third-party insurance in order to get a licence. The cost can vary, but a general rule-of-thumb is about 0.5 per cent of the value of the boat.
A Boat Safety Certificate – Your boat will need to meet a certain standard for waterway licencing. If you are buying a boat, check whether it has a current valid certificate or be sure you know exactly what work’s required to bring it up to standard.
A Survey – A mortgage lender will require a valuation and hull integrity assessment before extending you a boat loan. As a rough guide, this can cost £250–£300.
And don’t forget other running costs like fuel, heating, engine oil and repairs or maintenance.

Quick Contacts

British Waterways: www.britishwaterways.co.uk or 01923 226422
Details on all canals and waterways run by the authority, information and advice on all aspects of boat ownership and canal safety, as well as a database of boat hire companies and links to other sites.
Environment Agency: www.environment-agency.gov.uk
Acts as the navigational authority for the River Thames.
London Tourist Board: www.londontown.com or 020 7932 2000
Information about holidays, short breaks and events in and around London.
London Walks: www.london.walks.com or 020 7624 3978
Regular guided walks along London’s canal banks
Canal Junction: canaljunction.com.
Entertaining and useful site about all aspects of canal boating.

The Inland Waterways Show is being held from 29 June – 1 July this year at the NEC National Indoor Arena in Birmingham. Ring 0121 767 4430 for ticket information or visit the NEC website at www.necgroup.co.uk for further details.

Getting on the water

If you want to try boating for yourself, there are several options for getting your feet wet.
Many companies offer day trips, restaurant boats or  ‘hotel cruises’ on canals. Local tourist boards, mooring centres and the nearest British Waterways office all have details on boating holidays. Specialist boating magazines can also provide useful contacts.

Boat hire companies are a good first port of call for novices looking to gain experience on the water. You don’t need any previous experience, but you will need to be fairly fit and energetic and have at least one other person on board to help with navigation and locks. A reputable company will offer you instruction and support in handling a boat as well as insurance and service backup. Contact your local tourist board or British Waterways for help in finding licenced companies.

If you decide you want to buy a boat, there are several issues to consider. New boats are often built to order by specialist boat builders – canal boat magazines are useful for making initial inquiries. However, most new canal boat owners choose a second-hand boat as their initial investment is lower. While it’s true a second-hand boat may need more maintenance initially, it is also more likely to have the basic fittings and facilities you need – including things a novice may forget to arrange for when buying a new boat. Again, British Waterways and specialist publications are excellent places to start looking. Second-hand boats are available from marinas and boatyards, through brokers and estate agents in areas around canals and by private sale.

To consider when choosing a boat:

·    Which waters will you be navigating? Some of the smaller locks on canals measure only 60 or 70ft long and 7ft wide. Your boat will need to be smaller than this if you plan to navigate these areas.
·    What will you use the boat for? How often will you use it? You can get away with very basic facilities on board if you only plan to use your boat for day trips or short stays, but if you plan to use it more often or live on the boat, you will need many more amenities.
·    How much work are you prepared for? All boats need regular maintenance and upkeep, but some are more demanding than others.

The latest threat to the property market comes from what used to be considered almost a negligible fee – stamp duty.
Influences like a weakening US economy and the foot and mouth crisis may be minor in comparison to a fee that has not kept pace with the changing property market. Ed Walker investigates
The National Association of Estate Agents (NAEA) has highlighted stamp duty as a major contributing factor to the widening differences in regional price variations. As house prices have risen, more and more properties are now falling within the bands attracting stamp duty at higher rates. Treasury figures bear this out – the amount collected between 1999­–2000 increased by 173 per cent over the previous two years.

There is an increasing gap between prices in ‘hot spots’ such as London and outlying areas which the current Stamp duty arrangement exacerbates. ‘Research recently published by the DETR indicates that increases in stamp duty lead to quite significant reductions in mobility,’ says NAEA’s Chief Executive Hugh Dunsmore-Hardy, ‘Yet for an efficient economy it is vital that the country have a mobile workforce able to move where the jobs are.’  
The NAEA is arguing for a more graduated system of stamp duty payable only on properties worth more than £100,000. Says Mr. Dunsmore-Hardy, ‘We believe a new structure should be devised which will produce a fairer system, making it more cost effective for many people at the bottom end and middle of the property market to move to find work.’
In spite of the problem, the NAEA are predicting property transactions will increase slightly in 2002, with house prices rising an average of six per cent.

What is stamp duty?

This charge is levied by the Land Registry office to cover the cost of transferring the record of ownership of registered land or handling a conveyance. It’s payable on all properties valued at more than £60,000. Stamp duty is payable on properties under £60,000 if they form part of a larger purchase of several properties or a series of purchases.

How much is it?

The duty is one per cent of the purchase price for homes over £60,000 but below £250,000. For homes between £250,000 and £500,000, the rate rises to three per cent. For homes over £500,000, stamp duty is five per cent of the purchase price.
A certificate of value must be submitted along with the payment, or else the higher rate of four per cent will apply, regardless of the purchase price.

Who pays it?

The buyer. If you have engaged a solicitor to act for you in buying your home, your solicitor may submit the payment on your behalf and charge you for it.

What else do I need to know?

For many home buyers, stamp duty is a cost they may not have budgeted or bargained for. If you are concerned about whether duty is payable on the property you’re purchasing, check with your solicitor or phone the Stamp Offices helpline on 0845 603 0135. You can also visit the Inland Revenue’s website at www.inlandrevenue.gov.uk.

Avoiding your duty

The strict thresholds for stamp duty can have a huge effect on what it costs to buy a property. A home priced at £252,000, for example, will cost the buyer an extra £7,650 pounds in stamp duty, whereas a home only £2,000 cheaper would be only £2,500 – a saving of over £5,000.

Inland Revenue is very aware of the situation and sensitive to buyers’ attempts to reduce the asking price, but there still may be some ways you can legitimately avoid a higher rate.
·    If the price is open to offer, the simplest option is to make a lower offer initially.
·    Stamp duty is only payable on the property – not on extras like carpets or furnishings. If these items are included in the sale, it may be possible to arrange for them to be sold separately.