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Archive for the ‘Letters’ Category
Wednesday, September 7th, 2011
Q My fiance and I are planning to buy our first home. As he recently inherited a large sum of money he will pay the bulk of the deposit (about £80,000), while I have savings of £10,000 to contribute. We think we will need a mortgage of £50,000. He is about to start a degree as a mature student so I will cover the repayments (I am currently on a salary of £20,000 and in line for a promotion).
Although we plan to be together until death do us part, we would also like to be certain that, should we need to, we can divide our assets easily and fairly. Is there any way of monitoring the effect of interest and inflation on the proportion of the house we have each paid for? FR
A You don’t really need to monitor interest and inflation. If you were to go your separate ways the fairest way of splitting the sale proceeds would be in relation to your contribution to the house. So, assuming you buy a house for £140,000 (ie your two deposits of £80,000 and £10,000 plus the £50,000 mortgage) your fiance’s contribution would buy him a 57% share of the property. Your contribution – made up of your deposit plus the mortgage – would buy you a share of 43%, out of which you would need to repay the loan. However, for that to continue to be a fair split you would need to continue to cover the mortgage repayments without a contribution from him.
If you do not plan to marry soon, you may want to ask your solicitor to draw up a document outlining how much each party will be entitled to should you separate and sell the house – but if you do marry soon you dont need to worry.
Posted in Features, guardian.co.uk, House News, House prices, Letters, Money, Mortgages, Property | Comments Closed
Wednesday, September 7th, 2011
Q My husband and I are both freelancers working steadily in the arts in Scotland. Last year my taxable profits were about £10,000, his about £16,000. This year we both hope to earn more.
We received cash gifts as wedding presents and, combined with savings, now have about £10,000. We hope to put this in a first-time buyer account offering 5% interest, which will contribute a further £100 a month. Depending on our work situation we may also be able to deposit larger sums and would hope to save a further £10,000-£15,000 over the next two years.
Living in Glasgow we would ideally like to start by buying a property in the region of £120,000. I have calculated that we could afford to pay about £600 a month for our mortgage, perhaps more if our income increases.
Neither of us has been in debt and we have no outstanding loans. My husband has a credit card but I have only ever used a debit card. We can show our tax statements and can have an accountant prepare our accounts.
But I am concerned about a number of things. Will we be able to get a mortgage as self-employed people? Can we get a mortgage of £100,000 given what we earn? And will our lack of borrowing negatively affect our credit rating? Any advice would be welcome. LR
A You don’t need to worry about self-employment working against you when applying for a mortgage. Provided you have at least three years’ tax statements showing your earnings, you shouldn’t have a problem and you don’t need to go to the expense of having an accountant draw up accounts.
But it is harder to say whether you will be able to get a mortgage of £100,000 as you would need to find a lender willing to lend four times your joint income of £26,000, and there are not many of those around – although they do exist. However, you may have better luck with lenders who look instead at ability to pay when assessing mortgage applications. And with these lenders a lack of other credit commitments is a bonus rather than a disadvantage.
Finally, if you can afford to pay £600 a month you will need to find a lender charging 5.25% or less (assuming a 25-year repayment mortgage). In the current market, that should be quite easy.
Posted in Features, First-time buyers, guardian.co.uk, House News, Letters, Money, Mortgage rates, Mortgages, Property | Comments Closed
Thursday, September 1st, 2011
The National Housing Federation has stated that it expects home ownership in England to fall to mid-80s levels, slumping to just 63.8% over the next decade (Minister vows to get UK building again as home ownership slumps, 31 August). But to address a critical shortage of homes the government has previously made the rather fanciful announcement that it aims to create 170,000 new affordable homes by 2015. In 2010-11 just 105,000 homes were built in England – the lowest level since the 1920s.
I’ve just had to abandon a major scheme that would have provided over 750 new homes, 25% of which would have been affordable, in an area of Essex that sorely needs them. This was because the amount of money the social landlords were initially able to pay for more than 180 homes was drastically cut as they in turn had their funding cut. This made the development untenable as I simply couldn’t afford to build 180-plus homes at a loss.
If the government is serious about increasing housing provision, it needs to recognise that cutting funding to social landlords is not going to help achieve that aim. Social landlords, in turn, need to start concentrating only on helping the poorest households, not mid-high income earners. Currently the rules are so arbitrary that for some affordable housing schemes you can earn as much as £60,000 and qualify for assistance. Others aren’t even means-tested, so you can earn £100,000 but still qualify for a handsome discount as long as you live or work locally.
Only by ending the inequity of a system that fails to address the needs of the poorest households, and freeing the housing sector from the myriad of red tape, taxes and levies that stifle development, will this country be able to get anywhere near delivering the number of new homes, both private and affordable, that it so urgently needs.
Bob Weston
Chairman and chief executive, Weston Homes
•?A well-aimed piece of PR spin from the National Housing Federation has managed to prompt a series of responses in your paper, mostly supporting the aim of the PR, that is to say support for a rapid increase in housebuilding. However, both the reported “facts” and the response need questioning.
1) The decline in home ownership was a projection based on the premise of higher price rises than is likely, given the need for “readjustment” in the housing market to historic links with earnings.
2) The current high rates of private ownership were only possible due to unsustainable reckless lending and borrowing.
3) One big attraction of home ownership is the free money many people have gained through rising prices. When prices are stagnant or falling, the high costs of home ownership may not be so attractive to young people who want to move around.
4) If enough houses were to be built to substantially reduce prices, many will be bought up by rich people and budding mass landlords, and many existing mortgage holders would experience high degrees of negative equity, exacerbated by the rise in interest rates that must happen sometime in the future.
5) As with other goods, it is not so much how many houses we have but how we share them out that is really important. It is the gross inequality in our society, more than anything, that is creating this problem.
Chris Savory
Bridport, Dorset
•?Allegra Stratton (Inside politics: Coalition fears it is unravelling right-to-buy revolution, 1 September) highlights the government’s unease at the burgeoning housing crisis and the low rate of housebuilding. In London, the affordable housing budget has been cut by two-thirds. Boris Johnson isn’t offering any new ideas to help private tenants suffering from record high rents. Nor has Boris offered anything new to reverse the rise in homelessness he had previously predicted. In 2008, Boris promised “a network of Community Land Trusts”, but not a single trust has been set up in London. The mayor needs to lobby for better protection for private tenants, and a realistic housing budget that can provide the low-cost social homes we need. In the meantime, he needs to put all his money and land into keeping rents as low as possible.
Jenny Jones AM
Green candidate for London mayor
•?The mayor of London, Boris Johnson, has long advocated community-led development and the benefits this can bring for building stronger communities.
Contrary to the suggestion in your article, the mayor has already determined that the community should hold the entire freehold of the St Clement’s site in Tower Hamlets in trust. He has also made clear that a community board should oversee management of the homes. This would make St Clement’s the country’s first urban CLT. The site is currently being procured on this basis, and the decision will be subject to the usual procurement rules. But it is clear that whoever is the successful bidder we intend St Clement’s to be held in trust, with the management overseen by the community.
Richard Blakeway
London mayor’s adviser for housing
•?Given the latest evidence that the UK welfare and housing system is failing to break the association between unemployment, poverty and homelessness (Homelessness could spread to middle class, study warns, 31 August), the time is now ripe for a Great Debate – one as “radical” and imaginative as the 1942 Beveridge report – on how to manage social and economic affairs in ways that meet the wellbeing of the many rather than the few. We could do with a quality broadsheet leading such a debate. Any suggestions?
Charlie Cooper
Lecturer in social policy, University of Hull
•?Not only is the current level of home owership even lower than the official figures indicate, but it is also declining at a much faster rate than forecast.
This is because up to three million homes included in the figure for home ownership are in fact leasehold, and leaseholders do not own their homes but merely have the right to live there until the lease expires. In order to stay in their homes leaseholders will have to pay large sums of money to the freeholder for an extension of the lease.
At the same time around half of all newly built homes are now flats, the majority of which are sold on a leasehold basis, reducing still further the proportion of households who will genuinely own their homes.
Nigel Wilkins
Chair, Campaign for the Abolition of Residential Leasehold
•?The key to the housing “problem” is the number of homes, not the proportion of owner-occupiers. There is inevitably a significant proportion of the population who at any given time would be better suited to renting than buying their homes. There is pressure to “get on to the housing ladder” for financial reasons; pressure that if you do not start early enough you will lose out financially. As a result the economy is driven by the housing market to an unfortunate extent. The key issue should be adequate housing to buy or rent. One simple – but probably politically unacceptable – measure would be to try to separate the concepts of a house as a “home” and as an “investment” by removing capital gains tax exemption from the principal private residence. The sky did not fall in when tax relief on mortgage interest was removed.
Paul Russell
Winchester
•?The National Housing Federation talks of the “chronic under-supply of housing” in the context of unprecedented developmental pressure on green spaces. However, markets are composed of supply and demand. England is the most densely populated country in Europe. Given that the UK is experiencing its highest rate of population growth for 50 years, with an estimated 10 million more citizens over the next 15 years, should we not also be talking about – and addressing – our chronic over-supply of people?
Simon Ross
Chief executive, Population Matters
Posted in Boris Johnson, Business, Communities, Construction industry, Homelessness, House News, House prices, Housing, Housing market, Letters, Liberal-Conservative coalition, London, London politics, Money, Politics, Property, Public sector cuts, Public services policy, Real estate, Society, The Guardian, UK news | Comments Closed
Wednesday, August 31st, 2011
Q My mother died 12 years ago, leaving her cottage to me and my brother. I inherited no money. The will stated that her second husband – my stepfather – could live in the house rent-free for as long as he lived, which was until quite recently. During that time I paid my share of maintenance costs for repairs, and my stepfather paid the bills.
I have now sold my half of the cottage to my brother. I have a valuation from the probate of £60,000 for the whole of the property (which seems very low), and I sold for £80,000. I am worried that my capital gains tax (CGT) liability may therefore be calculated on figures of £80,000 minus £30,000 minus my £10,600 allowance, ie my gain will be approximately £40,000. At a tax rate of 18% or 28% this seems to be an awful lot to have to pay on an asset that I had no choice about owning, no access to, and no opportunity to sell at any other time. Can you please advise what are the rules in this complicated situation? BP
A The fact your mother’s will stated that your stepfather had the right to live in the cottage until his death suggests that an interest-in-possession trust was set up. This would have given your stepfather the right to use the property in his lifetime, and you and your brother an absolute entitlement to the property on your stepfather’s death. Assuming that such a trust was created, the CGT position may be better than you think.
When your mother died the cottage became the trust’s asset, not yours. It became you and your brother’s asset only on the death of your stepfather, which would have brought the trust to an end. And there is usually no CGT to pay when beneficiaries (in this case you and your brother) acquire an asset on the death of the life tenant (your stepfather).
When calculating your own CGT bill your gain would be the amount your brother paid you for your share minus the market (not probate) value of your share at the date of your stepfather’s death (rather than your mother’s). As the market value of your share at the time of your stepfather’s death is likely to be nearer to what your brother paid you for it, your gain may well fall into the tax-free allowance of £10,600, or at least not exceed it by too much.
Posted in Capital gains tax, Features, guardian.co.uk, House News, Letters, Money, Property, Tax | Comments Closed
Wednesday, August 31st, 2011
Q My husband and I have an interest-only mortgage of £114,000 at 0.95% above base rate, so our payments have gone down quite a bit since rates went down. We have extra cash as a result of this – about £500 a month when we tighten our belts – but don’t know whether we should save this in a high interest account or make overpayments on the mortgage.
Interest earned on savings is pretty low at the moment, and we can’t seem to figure out which would be better. Mortgage calculators don’t seem to balance the two, and I have searched everywhere on the net but can’t seem to find the answer. We have no other debt apart from the mortgage. CT
A As you have an interest-only mortgage, none of your monthly repayments are currently going towards repaying the mortgage loan. So, when your mortgage comes to an end you will still owe £114,000. I suggest you ask your lender to change the terms of your mortgage from interest-only to repayment, so that when it comes to the end of its term you will have paid the loan off in full.
If you still find you have extra cash after paying your mortgage, you will usually be better off making overpayments rather than putting it in a savings account, but it depends on your tax position.
If you pay tax at 20% you would need to find a savings account paying more than 1.81% in interest to make saving rather than overpaying a better deal. If you pay tax at 40%, the savings account would have to pay more than 2.42%, while it would have to pay more than 2.9% if your tax rate is 50%.
Posted in Features, guardian.co.uk, House News, Letters, Money, Mortgage rates, Mortgages, Property, Savings, Savings rates | Comments Closed
Wednesday, August 24th, 2011
Q I bought my first home nearly three years ago through a first-time-buyer scheme – I got a mortgage for 60% of the value of the property and had a loan for the remaining 40% to be repaid upon sale. There is a lot of help and information on buying your first home, but little on buying your next, and because of this I am avoiding moving on.
Some of the details I don’t know about are how the mortgage would work on my next home. If, for example, I bought my flat for £100,000 and sold it for the same amount and therefore had no extra money, would I be able to buy a property for £60,000 even though I don’t have a deposit? And what happens if I move to a new area and don’t want to buy immediately because I don’t know the place well – can I effectively “pause” a mortgage until I’m ready to buy?
I know ordinarily a person could let their home out until they were ready to buy, but I’m fairly sure it wouldn’t be allowed with my mortgage and loan. Some help here would be really appreciated. AH
A It sounds as if you bought your home with the former government’s Homebuy Direct scheme. If that is the case then you are correct, you wouldn’t be allowed to let your home until you had paid the equity loan off in full.
As far as moving goes, when you sell your house a National Homebuy agent has to approve the sale. When the property is sold, the money paid by your buyer is used first to pay off your mortgage and then the equity loan. Anything left over is yours to use as a deposit for your next home (or anything else you want to spend it on). And even if you sold your flat for the same amount you paid for it, there should be something leftover for you to put towards your next home because your mortgage will have gone down.
Because the mortgage is paid off on the sale of your flat, you don’t automatically have £60,000 in mortgage to pay for your next property. You’ll have to apply for a new mortgage and how much you can borrow will be based on a combination of your income, the price of the property you want to buy and how much you can put down as a deposit. You can typically borrow around three to four times your income and you will need a deposit of at least 5% of the value of your next home, otherwise you are unlikely to find a lender willing to grant you a mortgage.
If you move to a new area and are not yet ready to buy, it is not possible to pause the mortgage as you suggest because once you’ve sold your flat you won’t actually have a mortgage to pause. When you are ready to buy in the new area you will have to find a property and then apply for a new mortgage on it.
Posted in Features, First-time buyers, guardian.co.uk, House News, Letters, Money, Mortgages, Property | Comments Closed
Wednesday, August 24th, 2011
Q I would be grateful for advice regarding my elderly aunt’s estate: I am her attorney and sole beneficiary in her will. She moved in with us several months ago and has expressed a wish to give her house to me now. I was wondering about the tax implications of this transfer of ownership, both for her and myself, and whether this would be different if the house is kept or sold. Also, is it possible to transfer ownership without incurring solicitor costs? DW
A To answer your last question first: yes, it is possible to transfer ownership of a property without paying a solicitor, by using the forms provided by the Land Registry. But there would still be a cost involved as you would have to pay Land Registry fees of between £50 and £920 depending on the value of the house.
As for tax implications, there would be no stamp duty land tax to pay as gifts of property do not attract this tax. However, there may be a potential inheritance tax bill if your aunt were to die within seven years of making the gift. This would also be the case if your aunt sold the house and gave you cash instead of giving you the physical property. But giving you cash could save you a tax bill, because if your aunt gave you the house and you subsequently sold it, you might have to pay capital gains tax if you sold it for more than it was worth when you were given it.
Posted in Capital gains tax, Features, guardian.co.uk, House News, Inheritance tax, Letters, Money, Property, Stamp duty, Tax | Comments Closed
Wednesday, August 17th, 2011
Q I’ve just had an offer accepted on a two-bed ex-council flat in central Hackney. I was happy with the property until the riots last week, which took place 100 yards from the building.
Now I am having serious doubts as to whether this is a good idea. The estate agent has naturally told me not to worry about it as it’s a one-off incident and that the value of the property will definitely appreciate over time.
I’m buying at the bottom of the market – the property is in a six-floor council block, built in the 1950s, and the vendor has accepted £189,000. In relation to amenities and transport links, it’s perfect for me. The flat and building are in good condition and 50% of the flats are privately owned. The current resident (a tenant) has lived there for seven years with her young family and has told me she has never had any problems and will be sorry to leave.
I’m spooked and don’t know where to turn for advice. Aside from the rioting incident, I am also concerned that this is not an opportune time to buy. AL
A I can appreciate why you feel spooked, but I’m not convinced the riots are a reason to pull out of the purchase. I think what you need to focus on is whether the riots have changed anything that attracted you to the flat in the first place, and led you to put in an offer for it. If you still like the flat, the building it is in hasn’t been damaged, and the amenities and transport links are still there, it would seem reasonable to continue buying it. And your estate agent is probably right in saying the riots were a one-off incident.
But I’m afraid I can’t say whether this is a good time to buy, although it’s as good a time as any if you have decided that you want a home of your own and you plan to stay for the next few years. How much a property is worth is pretty irrelevant while you are using it as your home and only really matters when you come to sell.
Posted in Features, guardian.co.uk, House News, Letters, Money, Property | Comments Closed
Wednesday, August 17th, 2011
Q My mother is 64 and still working full time in London. She owns a property with no mortgage, which she bought in 2001. When she retires next year she wants to live on the Kent coast, and recently found somewhere she wants to buy. She wants to purchase this property and then move in upon retiring, when she will sell the London property to clear the additional mortgage on the Kent property and be left with a lump sum she can use to live on as she has very low pension provision.
Would this arrangement leave her vulnerable to paying capital gains tax (CGT) on her current home? Which would be the best mortgage for her? And what is the best way of minimising the tax she pays on this, as it would be illogical for her to pay huge capital gains when she is merely moving home, albeit with a year’s gap between move dates. JP
A Your mother shouldn’t face a CGT bill when selling the London home, provided she sells it within three years of moving out of it. Assuming the property in London has been her home, and she has lived in it for all the time she has owned it, she will qualify for what HM Revenue & Customs (HMRC) calls private residence relief, which makes the gains on the sale of a home tax free. There could, however, be a CGT bill if she has let the property at any time. More information is available in Help Sheet 283 on the HMRC website.
As far as getting a mortgage goes, your mother would be better off raising the money to buy the house in Kent by taking out a mortgage on her London home. If she took out a mortgage on the house in Kent she would need to have a cash deposit to put towards the purchase. By mortgaging the London home she should be able to raise the full amount she needs to buy the house in Kent, because I am assuming the London property is worth more than the house she wants to buy. If this is the case, the loan-to-value ratio will be quite low, which means your mother should have access to better mortgage deals.
Her age may deter some lenders, but if she makes it clear she plans to pay the mortgage off when she retires she should be able to get a mortgage. As she intends to pay it off rather quickly, she should steer clear of deals which make a charge for early repayment.
Posted in Capital gains tax, Features, guardian.co.uk, House News, Letters, Money, Mortgages, Property | Comments Closed
Friday, August 12th, 2011
We want to change estate agents but the cost of pulling out almost matches its sale fee
My Mum has Alzheimer’s and my family has a power of attorney. She has recently moved into care and we need to sell the house and invest the money to help pay for her care fees. The house has been on the market since early March with very few viewings and no offers. We have even followed the estate agent’s advice and dropped the price from £350,000 to £320,000 and now to £300,000.
We are considering changing estate agent, or even auctioning the property, but I have looked at the terms of the contract my brother signed and there does not seem to be any limiting period. If we sell to anyone else, with or without their help, we are fully liable for its 1% fee.
If we pull out without selling, for whatever reason, we are liable for a range of charges including £50 cancellation fee; £350 for the photographs and glossy brochure; £35 for each insertion in a newspaper (probably one a week); £20 per viewing (about five in total); £100 per internet listing (the contract suggests there could be 14 of them); and a £20 sale board. I estimate this could already be in excess of £2,000. If the situation continues it will be in their interest not to sell it.
Meanwhile, time ticks by, we are still not getting income from the value of the house, and mum’s care continues to cost almost £700 per week. AS, Hebden Bridge, West Yorkshire
You are still worried so have asked for the agent to remain anonymous, which we respect. The agent confirmed that your contract is open-ended and that charges accrue indefinitely. However, you were mistaken that the £100 for the internet listing could be charged 14 times – you will only be charged once, removing £1,560 from your bill (including the VAT that would have been due) – a significant difference, leaving you with a bill for under £500. The agent said its fees are also low, at 1%, which is designed to balance out its hefty withdrawal fees.
You have also asked for a statement of costs so far, and have checked the price local papers charge to run house sale advertisements – finding that the estate agent’s fee is broadly in line.
We checked with a reputable estate agent, who agreed that there should not be separate internet listings, as the likes of Rightmove charge agents a single flat fee per month to list as many properties as they like, although more can be paid for premium listings. Most agents who do glossy details get them for a few hundred pounds.
The property ombudsman says that if sellers decide not to continue with the sale, they may have to pay some charges to cover costs already incurred – and this depends on the original contract between the seller and the estate agent. If anyone does dispute this amount, they can contact Citizens Advice. But if they have agreed to the terms of the contract, it is highly likely they will have to pay – unless those terms are grossly unfair, at which point they might win if the case was taken to the courts.
We welcome letters but cannot answer individually. Email us at consumer.champions@guardian.co.uk or write to Brignall & King, Money, The Guardian, 90 York Way, London N1 9GU. Please include a daytime phone number
Posted in Consumer affairs, Consumer rights, Features, House News, Letters, Money, Property, The Guardian | Comments Closed
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