Renting

Renting an apartment can be stressful, especially if time and money are limited. It’s not uncommon for people to leap before they look just to relieve the pressure of apartment hunting. Selecting a place to live is important. If you’re unhappy with your home, it can have a significant negative impact on your life.

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To assist you to narrow down the search for your new mortgage, you should first decide which payment method best suits you. Whether it is to be a repayment, interest only or perhaps a flexible mortgage. To help you decide on the method most suitable for you, it would be sensible to take into account your attitude to risk . Only a repayment mortgage can guarantee, assuming all mortgage payments are maintained properly, that your mortgage debt will be repaid at the end of the original mortgage term.

Always shop around for the best rates, but be sure you are comparing like with like. To do this check the APR of the loan. You also need to bear in mind that the interest payments in respect of fixed rate mortgages can rise steeply once the initial 'fixed' period ends. Therefore your planning should always include the possibility of sharp changes to future interest payments.

If you are intending to sell your home in the near future, check whether there are any redemption penalties attached to the mortgage or if your mortgage deal will allow you to take the mortgage on to the next property.

Check what arrangement fees the lender charges and whether these are refundable should you decide not to proceed midway through the application process.

Check for additional costs such as mortgage indemnity premiums and buildings and contents insurance.

More information on interest only mortgages

Consider using a mortgage broker and taking independent financial advice, this can save you a lot of time checking the differences between the various lenders; it can also help clarify which mortgage package best suits your circumstances.

If you elect to have a interest only mortgage then your payment to the lender only represents the interest due on the outstanding debt. In order to repay that debt then normally you would use an additional savings vehicle. One that enables you to build a fund of money from which you can clear the mortgage at the end of the agreed term. The lender may also expect you to have sufficient life assurance cover to enable your next of kin to repay the debt if you die during the term of the mortgage.

The three most common savings vehicles used for mortgage repayment are:-

ISA: you can benefit from the tax concessions available within these plans. Under current legislation any income or gains achieved from your ISA plan are tax-free. It is from the proceeds of your plan that pay off your mortgage. An added opportunity, if your ISA performs exceptionally well, or you can afford additional payments to it, is that you may be able to repay your mortgage ahead of schedule.

Pension: by using the tax-free lump sum facility available from your pension plan to pay off your mortgage debt, you can take advantage of the tax relief that are available on pension contributions. You must remember that under normal circumstances the benefits under pension plans may not be drawn before age 50. Therefore the earliest likely date at which you could repay your mortgage debt would be 50.

If pension benefits are provided by your employer, these cannot normally be taken until you actually retire from that employment. According if you are looking to pay off your mortgage earlier than when you retire then a Pension may not be the appropriate repayment vehicle for your needs.

Since part of your pension fund is being used to clear the mortgage debt, you should be aware that your income in retirement will reflect this fact as less money will be available for the provision of income. Careful consideration needs to be given to this repayment method. You would be wise to seek advice from your financial adviser before adopting this approach.

Endowment: These are Life Assurance policies that serve two purposes. Firstly they provide financial protection in case you die before the end of the mortgage term. Secondly, if you survive throughout the policy term,the investment element of the policy provides a lump sum (maturity value) that can be used to repay the outstanding mortgage debt.

The use of these arrangements has been very popular in the past but has received negative press coverage during in the 1990s. There is some suggestion that many of the problems were associated with poor advice when homebuyers first took out the endowment policies along side their mortgage loans. It must be understood that endowment policies are long-term investments, the value of which may rise and fall in line with the stock market. However over 25 years, they may yield more than the amount you need to pay off your mortgage although there are no guarantees available.

There are three types of endowment policies:

With profits: you share in the profit of the life company through which you buy the policy. This profit is added to the amount in your funds

Unit-linked: the value of your units rise and fall in line with the underlying funds into which your money is being invested

Unitised with profits: a new version of the traditional with profits concept that provides the ability to value the policy quick and allows the charges to be specified and collected in a similar manner to a unit linked plan.Please note that none of the above methods are guaranteed to repay your mortgage at the end of the mortgage term.

How large a mortgage can I have?

Three factors determine the size of mortgage you can have:

The deposit you pay on the house: a lender would usually expect you to put down at least 5% of the purchase price of the house, though some lenders will consider a 100% mortgage
Your salary: generally, you can have a mortgage equivalent to 3 times your salary. If you have a joint mortgage, you could apply for 2.5 times your combined salaries, or 3 times the main salary, plus the second salary.
The amount of any existing commitments you have: the amount of personal loans, hire purchase agreements may be deducted from the amount available for you to borrow.
The lender will expect to see proof of your salary and will write to your employer for confirmation. If you include commission or bonuses in your salary amount, the lender would expect confirmation from your employer that these are regular payments. However, if you require a mortgage of less than 75% of the value of the property, the lender may allow you to self-certificate your income.

I am self-employed: how can I get a mortgage?

If you can supply 3 years audited accounts and show a continuing good income trend, then most lenders will consider your application.

My income is erratic: does that put me out of the running for a mortgage?

You can apply for a self-certification mortgage for up to 75% of the value of your property. This means that you do not need to show proof of your income. You should note that the interest charged on self-certified loans might be higher than if income is confirmed, this is normally to reflect the perceived higher risk of lending to someone without verification of their income.

What are mortgage indemnity payments?

If you take out a mortgage for more than 75% of the value of your home , the lender will normally ask you to provide additional security to cover their potential loss should you default on the loan. The most common method of providing this additional security is for the lender to effect an insurance policy (the premiums for which will be pay for by you). The lender uses the money received from the insurance policy to cover the costs they suffer involved in the repossession and resale of the property.

Please note that after any claim the insurer will normally look to recover, from you, any payments they make to the lender. The amount they will try to recover would include any legal fees they have suffered during the process.

What about protecting my mortgage payments?

There are now very limited state resources for meeting mortgage payments. It is sensible to look at insurance policies that pay out if you lose your job or are unable to work because of illness. Mortgage protection insurance policies generally pay out up to 12 months’ mortgage payments. They are frequently combined with other insurances such as critical illness or permanent health insurance.

What other costs are involved when buying a house?

In addition to your mortgage, you should bear in mind the following one-off costs at the time or purchase (or re mortgage if you are changing mortgage lenders):

Legal fees: unless you intend to carry out your own conveyancing, you will need to pay a solicitor or other suitably qualified person to complete the legal work
Land Registry fee: the Land Registry registers your ownership of the property
Searches: your solicitor (or you) will need to check to see if there are any plans for the neighborhood which could affect the value of your property, such as the building of a new road
Survey and valuation: the lender will insist that a survey and valuation is done on the property. You should think about a more comprehensive survey to check for structural or other defects
Stamp duty: all transfers of property of £60,000 or over attract stamp duty. For property transfers between £60,000 and £249,999 stamp duty is charged at 1% of the property price, for properties between £250,000 and £500,000 then the rate is 3.0%. The rate of Stamp duty for transfers of property over £500,000 is 4%.
STOP PRESS: In his Pre-Budget Report of 27 November the Chancellor of the Exchequer announced his Government's intention to implement the first phase of the stamp duty exemption relating to the purchase of property in certain designated disadvantaged areas of the UK, which will apply where the consideration, or premium for a lease, does not exceed £150,000. Relief will be available for all transfers of property in the designated areas with effect from 30th November 2001..gov.uk/so/1

What is a CAT standard mortgage?

A CAT standard mortgage meets the requirements set up by the government for fair Charges, easy Access and decent Terms.

What if I can’t meet my mortgage payments?

Contact your lender as soon as you realise you have a problem. Although your mortgage is secured on your home, lenders see repossession as the last resort: they stand to make more money from your mortgage than the sale of your home. Lenders will work out a plan with you to reduce your payments for a time or stop them temporarily, and work out a new term for your mortgage.

More information on CAT standard mortgages

To achieve the government’s mortgage CAT standard:

All fees must be explained from the beginning
Interest must be calculated on a daily basis
The interest rate must be no higher than 2% above the Bank of England rate
No early redemption charges for variable rate mortgages
Redemption charges on fixed or capped mortgages can only be charged a) during the lower rate period b) at no more than 1% of the loan for the remaining years
Maximum £150 arrangement fee if the mortgage is capped or fixed rate
No separate charge for mortgage indemnity insurance
The mortgage can move with you to another property
You can choose the day of the month you want to make payments
You can repay earlier if you wish
No products can be tied in to the mortgage (such as buildings insurance)
The terms must be fair, clear and not mislead

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Mortgages

Mortgage is used for house or property purchase. A loan is given against the security of the property and interest is payable until the loan is repaid. Mortgages can be interest only or repayment. An interest only mortgage relies on a repayment of capital from, for example, an ISA , endowment or pension and interest is paid on the full amount of the loan until repayment. With a repayment mortgage, the monthly payments are part interest, part repayment of capital. Mortgage providers will normally insist on some form of life insurance to effect the repayment in the event of the death of the borrower (or any one of the borrowers in the case of a joint mortgage). This would normally be in the form of term assurance for interest only mortgages and decreasing term assurance for repayment mortgages.

Borrowers may now be offered the option of a fixed interest rate for a period as well as the more traditional variable interest rate. The advantage of the fixed rate is that it protects the borrower during the fixed rate period against rises in interest rates, though, if interest rates fall the borrower will not benefit from lower rates.

Flexible or Fixed

Part of finding the most suitable mortgage is deciding on which style of rate to choose from. Making this decision is of paramount importance, thus ensuring that the selected mortgage matches your requirements from day one.

Interest rates vary from one lender to another. The following provides a description of the choice available to you.

Standard Variable Rate
This rate is set by lenders and dictated by the Bank of England base rate. Essentially this means that there is a good chance of your monthly mortgage payments increasing or decreasing. The standard variable rate will generally be set higher than some of the following.

Flexible
As the name suggests this type of mortgage offers flexibility. The benefit here is that you may be able to make over payments, under payments, lump sum payments, repay the loan early or take advantage of payment holidays. The options with this style of loan are vast and will vary from lender to lender.

Fixed Rates
With this type of mortgage your monthly payments are secure and are not effected by the movement of the variable rate. This is particularly useful if you prefer to budget each month, as mortgage payments remain static over a chosen period. The longer the fixed term you choose the higher your interest rate will be.

Discount Rate
This is simply a variable rate mortgage but with a guaranteed discount to provide a saving over a chosen or stipulated period. At the end of the discount period your interest rate will revert back to the standard variable.

Capped Rate
In this type of mortgage your monthly payments have an upper limit. If the variable rate moves above your capped rate, your monthly payments will not increase. However, should the variable rate fall below the capped rate then your mortgage payments will reduce accordingly

Cashback
The incentive with this style of mortgage is that the lender will offer a lump sum at the commencement of the loan. In many cases obtaining a cashback will restrict or disqualify you from obtaining any fixed or discount offers. The exception to this would be lenders offering a combination of cashback with fixed or discount.

Tracker
A tracker will follow the movement of the Bank of England base rate and not the lenders variable. Typically this rate will be slightly lower than the lenders standard variable rate, however this differential cannot be guaranteed.

Cat-standard
Due to recent and growing resentment towards hidden conditions attached to mortgages, cat standards were introduced. A mortgage with a “Catmark” will meet stringent criteria set down by Government. This means there should be no compulsory lender products (such as buildings and contents insurance); interest is calculated daily, no redemption penalties and arrangement fees of no more than £150, which should be disclosed up front.

Current account mortgage
This method combines all finances together in one package. This allows your salary to be paid in to the same account as your mortgage, taking advantage of daily interest rate calculations. The downside to this is essentially what you have is a rather large overdraft

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Solicitors
A solicitor job is to take care of all the legal aspects of moving house. These "disbursements" include:

Local Search Fee
Land Charges Search Fee
Land Registry Fees
Stamp Duty
On top of these costs a solicitor will charge their own fee (+VAT). Often, personal recommendations are a good way of choosing prospective solicitors, but always ask for a written quotation (not an estimate) as charges can vary. Remember however that cheaper solicitors may be lower for a reason. A solicitor may charge between £400 and £750 for properties worth up to £100,000 and anywhere from £750 to over £1,000 for more expensive houses.

Additionally you should always get a minimum of three quotations to compare. Use HouseWeb's free service to quickly find three competitive quotes in your area.

What do Solicitors Do?
Check the property is actually owned by the vendor
This involves "searches" of deeds and checks with the local authorities to establish if any new developments are planned in the vicinity (e.g. new motorway, road widening, etc).

Draw up a Contract of Sale
This draft contract will detail the conditions of sale. A "preliminary enquiry" will be sent to the vendor asking a standard set of questions. As the solicitor is unlikely to visit the house, it is important that you establish any specific issues which need to be included in the contract.
Be sure of what contents the vendor will be taking with them and what you are buying. Use the Fixture and Fittings Checklist to run through with the vendor the house contents you are buying. When complete, give this list to your solicitor.

The contract is likely to bounce between the solicitors of both parties and refined. Expect this process to take anything up to ten weeks.

Exchange of Contracts
This is the point at which both parties become legally bound to the sale and purchase of the property. The solicitor overseas the signing of the contracts.

Conveyancers

Licensed Conveyancers will do similar tasks to Solicitors. They offer skills in residential as well as commercial property. These skills include the sale, purchase and remortgage of freehold and leasehold houses or flats, the creation of new leases and tenancies, and the transfer of interests in domestic property. Additionally, some conveyancers act for a large number of mortgage lenders and can assist with mortgage advice.

You will typically find two types of conveyancing companies. The first type operate a national service where all correspondence with the customer occurs by telephone, post or over the internet (or a combination of all three). As they have a national coverage, they often deal with a larger number of customers. The second type is a more local business that may specialise in knowing the local area and may discuss your requirements and their services face-to-face. This is more of a personal and local service. Many companies now offer a facility on their web site to track the progress of your property.

You may find that fees vary greatly depending on which type of company you use. Conveyancing costs are often very competitive, therefore it is worth shopping around. It is important to look at the services they offer - if you choose the cheapest, you may not get value for money. It is essential to get three quotes to compare costs and make sure you are comfortable with the conveyancer. Try HouseWeb's free Service Centre to find three competitive quotes in your area.

Often, estate agents, mortgage brokers and building societies have their own conveyancers and may parcel them into the package they offer. Note that Conveyancers can also work on behalf of the seller.

Relocation Agents

If you want to avoid the headache of moving house and are prepared to pay someone else to do it for you, relocation agents are your answer. Typical tasks a relocation agent will do include:

Using an estate agent to sell your own property.
Finding suitable properties for you to view.
Raising the appropriate finance needed.
Dealing with paperwork.
Seeing the entire negotiation through.
For their work, they may charge around 1% to 1.5% (+VAT) of the purchase price of the house you are buying. Click here to get three quotes to compare using HouseWeb's free Service Centre.

Why Use a Relocation Agent?
The main factor is time-saving. You have to weigh up whether the cost of using a relocation agent is lower than the cost of your time spent selling and buying a house. If you are self-employed for example you may need to move but just don't have the time to go through the motions.
Relocation Agents will only accept commission on properties over a certain value (e.g. over £200,000) to make the jobs worthwhile. Also remember that the relocation agent's skill in finding appropriate properties for you to view relies heavily on the description you give them. Use the Perfect House form to start focusing on your desired features.

The Estate Agent typically offers the following:
Suggesting an Asking Price (not Valuation) for your property
It is important to realise that an Estate Agent does not value your property. A property valuation is carried out by a qualified surveyor and costs several hundred pounds. An estate agent has no qualification in house valuation, and their estimation would not be accepted by an insurance companies as a basis for your buildings insurance.

An estate agent uses their experience of similar properties in the area to suggest an asking price. As it is a "gut feel", there is no science and you are likely to have as much of an idea as an estate agent. Always get more than one estimation - you might be surprised to find a large difference in each agent's estimation.

Never accept an agent's estimation at face value. An Estate Agent is in business and their aim, like most other businesses, is to maximise their profits. If you feel their estimation is too low, it might be because they want to make a quick sale so they receive their commission faster (cash is king). Estate Agents, at the end of the day, are salesmen.

Remember that the valuation only sets the asking price. At the end of the day, your house is only worth what someone will pay for it.

Photographing house and producing publicity material (including house description).

Advertising your house in their window, through "For Sale" boards, via mail-outs and possibly the press.

Organising appointments for prospective buyers to view the property.

What commission do they charge?
Expect anything from 1.5% to 4% of the house price.
Don't forget to add VAT at 17.5%. For example, a £200,000 property at 2.5% commission is £5,000. You need to then add another 17.5% (£875), which means you actually pay £5,875 in total commission.

Can I negotiate the commission?
Everything in life is negotiable.

How many Estate Agents?
Choose one (a sole agent) and you'll pay less commission. Choose two or more and commissions could double.

Can I advertise my home with HouseWeb and with an Estate Agent?
Yes. If you are thinking of using an estate agent, check that their contract does not have the term "sole selling rights" (this is different from "sole agent rights"). If it does have this in, ask for it to be removed before signing. If they won't remove it and you still wish to use an agent, find another estate agent that will.

If I sell my home with HouseWeb do I still need to pay the Estate Agent?
No. The Office of Fair Trading state that so long as you have not signed a contract with a clause giving the agent "sole selling rights" you do not have to pay them. As HouseWeb is not an estate agent, even if your estate agent contract specifies "sole agent rights", you still do not have to pay them commission.
Choosing an Estate Agent
Here are some tips for choosing the right Estate Agent:
Where they recommended to you by someone? If not, find someone who has used them to get the inside story. Would they use them again?
Interview the agent before instructing. Find out if he/she has a sound local knowledge and knowledge of comparable properties in the community.
Does the agent have any links with the community?
Does he/she look you in straight in the eye?
Do you feel comfortable with the person (if you do not, how will the buyer feel?).
Do you trust the individual?
Will the service really be worth £3,000 plus? Would you prefer to save the commission?
Could you do a better job selling your house without an agent (through HouseWeb)?

Check to see how experienced he/she is. Remember that there are no qualifications needed in order to set up as an Estate Agent, so be very careful.

What are your first impressions? Do you get along well right away? Are they really sincere?

Will they treat you as a special customer, or will you be be just another name on the list?
Are they a member of the national estate agent body - NAEA (the majority are not!).
Do some research before valuation. This will give you a realistic idea of your home's worth, and test their own assumption. It has been know for some agents to price a house for a quick sale, so that they earn their commission quickly, at the expense of the homeowner.

What Estate Agents Scams have been Reported?
Some Estate Agents have been caught and punished by the Office of Fair Trading for conning client. In some cases this has lead to a homeowner losing thousands of pounds. A number of reported scams, including "Back-to-Back Selling" are detailed on the Discussion Forum under "Estate Agent Horror Stories". You have a right to know about these and should make yourself familiar with them. If you have been the subject of any scams, please detail them on the Forum.
As the estate agent sits between the buyer and the seller, they are ultimately the only party who have all information. This position of power can be potentially abused, possibly at the expense of the buyer, seller or both parties. One common complaint is the inventing of fictitious buyers making offers to force the price up.

Managing the Estate Agent
In a lot of cases, you need to manage the Estate Agent to ensure you get the best service. Here are some tips:
It is important to make clear all matters of the sale before it is completed. Never assume anything - don't forget to talk about fixtures and fittings.

Save yourself and the agent time and aggravation. Only call her/him when you've made a definite decision to sell.Confirm each stage of the sale in writing with the agent.

Arrange for a solicitor or conveyancer as soon as you think you might be ready to place an offer. If the agent recommends one, do not simply except their recommendation. Do some research yourself.

Pay all your fees on time. If you do not feel the agent has earned their money, let them know and dispute what you should pay them

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Who Do I Need to Tell about the Move?

Who to Inform?

Family Friends

Employer

School

Doctor

Dentist

Bank

Electoral Register

Building Society

Credit Card Companies

Insurance Companies

Share Registrars

Rental Companies

TV Licensing Authority 08705 246 246

Post Office

Gas Company

Water Company

Electricity Company

Phone Company

Inland Revenue

National Insurance Office 0191 213 5000

Council Tax Office

Driving License Centre (DVLA) 0870 240 0009

Motoring Organisations

Opticians

Publications

Subscriptions (Magazines, Charities etc)

Mail Order Companies

Sports & Social Clubs

Professional Organisations

Other

Packing

Before...

Plan your move in advance. An extra box from every supermarket trip over time will save you a lot of hassle later on.
Do yourself a favour and throw out all the accumulated junk that you know will never be of use! (Try HouseWeb's Homeowner Auctions and make some extra money).
Collect packing materials early. Ask your friends to save you anything of use. (If using a Removal Firm, they will often supply you with containers). Keep hold of that stack of newspapers too.
Try to pack non-essential items in advance to prevent a nervous breakdown on the week of the move!

During...

Clearly label all boxes (and carpets), stating which room they should go to.
Spread the weight of heavy items over several boxes.
Avoid a slipped disc... keep the weight of boxes to a minimum.
Make sure the boxes are easy to carry and the tops are secured.
Use bubble wrap and newspaper to wrap fragile items.
Disconnect appliances such as washing machines and dishwashers in advance.
Defrost freezers so they are clear of ice on the day of the move.
Don't pop the bubble wrap! (Oh alright, but just a few!).
State which boxes contain fragile items for the benefit of the removal company.
Take apart large items (e.g. tables) as much as possible.
Pack a seperate "emergency" box with things you'll need on the day before the move.

After...
Open that bottle of Champagne.

The Removal Process

When the day of the move arrives, you will have the unenviable task of getting all of your possessions from A to B. Most (sane) people will leave the task to a removal company, while others may hire a van and do it themselves.
Removal Companies on the Web

The following factors will influence you decision:

Cash.
Distance of the Move.
Quantity of Belongings.
Size of Certain Objects (Could you really carry that piano?).
Accessiblity of your New Property (narrow hallway/stairs?).
The Removal Firm
It is a good idea to approach three firms and get quotations. This will probably include a brief visit from the companies to assess your belongings. Any reputable company will do this. The quote will usually be based on expected number of hours needed to complete the move, as well as extras, such as special containers needed, carpet laying, un/packing etc.
Check to see if the quote is inclusive of VAT and includes some form of insurance covering damage to goods during transit. Expect to be charged anything from £300 upwards. Consider including a tip if you are satisfied when the removal is completed.

The DIY Route

If you are taking the DIY route, there are various things to consider. Firstly, make sure your insurance covers you for goods damaged during transit. The likelihood that something will be knocked, dropped or broken is fairly high considering the quantity of belongings that most people own. Check out HouseWeb's Packing Tips to get you off to a good start.Ring around for a good quote on a van rental. Your driving license will be good for vans up to a laden weight of 7.5 tonnes. Check whether unlimited milage is included. It is false economy it you have to do ten trips in a van, when a removal company can do it in one, besides the fact that you will benefit from the experience of people who do it for a living.

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