British first-time buyers struggle with mortgage jargon

Buying your first home. What an exciting time in your life! It’s the start of a new chapter, but it doesn’t come without its struggles. Getting a mortgage can be hard enough, but add in the technical jargon and it can become the first-time buyers Mount Everest. 

Data released by Aldermore highlights the fact that many first-time buyers don’t understand mortgage terminology, and could be missing out on schemes that are designed to help them.

But what terms do people struggle with and what do they actually mean?
Slightly over half of respondents weren’t aware of the ‘Help to Buy equity loan’ – this is where the government lends you up to 20% of the cost of your newly built home, interest free for the first five years, so you’ll only need a 5% deposit and a 75% mortgage to make up the rest!

Just under half didn’t understand what a ‘lifetime ISA’ was and slightly over one third didn’t know what a ‘Help-to-Buy ISA’ was. These ISAs allow first-time buyers to get a 25% government bonus on their savings for a first home, each with different rules which is why seeking professional advice is worthwhile.

35% of respondents also didn’t understand ‘shared ownership’ – where first-time buyers own a share on their home and pay rent at a reduced rate on the remaining share.

These figures suggest that many first-time-buyers could be missing out on various benefits and pathways that these schemes can provide for those wishing to enter the property market, which is why obtaining professional advice can be invaluable.

Your adviser will be able to help you understand these terms and explain the benefits of the different schemes.

If you or your loved ones want to discuss the options available to you, or talk through any of the schemes in more detail, contact us today.

Are Holiday Homes a Good Investment?

If you’re looking to generate a second income, buying a holiday home could be the perfect investment option for you. Not only will you own a holiday cottage for yourself and your family to escape to, you could make a healthy profit by renting it out to others.

If you’ve never managed a property before, you’re probably unsure on the practicalities of it all and how much money you could earn. Here we answer some common holiday home investment questions and offer advice on how you can maximise your income.

Why do so many homeowners choose to let out their homes?

The UK is becoming an increasingly popular place to holiday. Recent Visit Britain statistics show that spend on UK staycations was over £23 billion in 2017, which was 3% more than the previous year. Here at Sykes, we saw bookings increase by 24% in 2017 and this trend looks set to continue.

With changing tax rules on buy-to-let properties putting investors off the long-term let market, short-term holiday lets are becoming an increasingly attractive option.

If the thought of running a holiday let business feels like too much like hard work, you don’t have to do it all yourself. Many reputable holiday letting companies have teams of experts on hand and will provide assistance with everything from the advertising and marketing of your property to managing guest changeovers and any general maintenance that may be required.

What are the best options for raising capital for a holiday let?

Many people choose to use a mortgage to help with the purchase of a holiday let. Holiday let mortgages differ from standard residential mortgages or that of a long-term rental property.

Some holiday let owners raise the necessary funds by releasing capital from either their current mortgage or their pension. Currently, you can release up to 25% of your pension tax-free once you’re over 55.

If you’re unsure on the best option for you or would just like some advice, contact one of our property specialists who will help or point you in the right direction.

What types of mortgages are available for holiday lets?

When you buy a holiday let, you’ll need a specific mortgage aimed at those offering short-term lets to holidaymakers. There are fewer providers offering this type of mortgage than those that offer standard mortgages and there can often be restrictions on, such as the maximum loan-to-value (LTV) a provider will offer.

There are also some tax benefits with holiday let mortgages. For example, you can currently offset the interest on your mortgage against the rental income you make. So, if your property made £12,000 in one year and the interest on your mortgage for that year was £9,000, you would only be liable to pay tax on the £3,000, according to your own tax rate.

What Return on Investment (ROI) could you expect from a holiday let?

If you’re wondering how good of an investment holiday lets can be, we’ve crunched the numbers based on our actual booking data to help you find the answer.

On average, our owners earn around £18,000 annually through bookings, but what you could earn will depend on a variety of factors, such as your property’s location, what type of guests you accommodate, property features, number of rooms and your pricing strategy.

Best locations for a holiday let business

If you’re open to choosing a property based on its earning potential rather than having your heart set on a specific location, here are some top tips to help.

In our in-depth review of the UK holiday let market, the Sykes Staycation Index 2018, we found that coastal properties and those in National Parks earn 10% more than other properties in the same region, and that some regions earned more than others.

Our data from 2017 revealed that Dorset was the top-earning location in the UK, with four-bedroom properties making an average of £43,000 in gross income a year, while the Lake District came second, with four-bedroom properties earning an average of £28,000 annually.

If you’re always on the lookout for the latest trends, there are some destinations in the UK that are becoming increasingly popular. Our data suggests that some of the fastest growing regions at the moment are on the South Coast, in the Midlands and in southern Scotland.

When you’re choosing the location of your holiday let, think carefully about who you are trying to attract – for example, do you want to attract families in Cornwall or outdoor lovers in the Lakes? However, if you’re planning on visiting your holiday home with family and friends too, don’t forget to factor in your journey time to the property as well. Likewise, if you plan on managing changeovers and maintenance to reduce costs, you’ll need to be able to travel to and from the property easily.

The rise in UK staycationers

Figures from Visit Britain in its Great Britain Tourism Survey show that 2017 was a great year for the staycation market. The number of overnight trips taken in the UK in 2017 was 120.7 million and overall spend was up by 3%.

In its Travel Trends Report 2018, ABTA also revealed that 72% of British holidaymakers took a break in the UK in 2017 with the UK predicted to be the most popular holiday destination with Brits in 2018.

How to maximise your income

When you’ve bought your holiday home, there are ways to boost the income you get from it. For example, we noticed some clear trends in 2017 that could help you generate more revenue.

Our customers are clearly looking for a little luxury as properties with hot tubs, on average, earn 51% more than those that don’t. And holidaymakers want to stay connected while they are away – last year we saw properties with Wi-Fi earning up to 20% more than those without it.

Home comforts are also attractive to travellers in the UK. For example, Brits love their pets and offering pet-friendly facilities could boost your earnings by up to 10% a year, while installing a welcoming log burner could increase your income by a similar amount.

Britain’s later life lending boom!

The number of over-65 homeowners has increased by 52% over the last 20 years as homeowners are ageing at a faster rate than the UK population.

According to the latest report from the Intermediary Mortgage Lenders Association, the need to serve a growing population of older homeowners is producing a new generation of mortgage products.

The report has showed that homeowners over 55 now hold a staggering 69% of the UK’s housing equity and the increase in later life lending products is starting to reflect this.

Some of these new products, which offer features such as no maximum age limit or repayment on an interest only basis, are leading to a ‘softening’ of the traditional divide between later life and mainstream financial products.

With the ageing population and a number of later life lending options becoming available, it will come as no surprise to you that lifetime mortgage lending has increased by 29% every year since 2014.

If you think you could benefit from Britain’s later life lending boom, or to simply discuss what options are available to you, contact one of our advisers today.