Brits abroad: expat landlords

How many Brits are living abroad is up for debate depending on which source you listen to. But one thing we do know for sure is that there are a lot of expats living right the way across the globe.

For working people, you may be lured away by an exciting new opportunity whereas for those of you at the end of your career, the desire to up sticks may be driven by the want for a change of pace and lifestyle in retirement.

Whatever the reason, you global adventurers often choose to keep a foothold in the UK property market – whether that’s renting out their former UK residence or purchasing a property to let. But, if you’re thinking of becoming an expat landlord there are a number of things you must consider:

The right mortgage
If you plan to move abroad and rent out your former home in the UK, it’s essential that you speak to your existing mortgage adviser and check if this is allowed under the conditions of your mortgage.

Your lender may specify a time limit for your return if you wish to retain your current mortgage, apply additional fees, a higher interest rate or request that you convert the mortgage to a consumer or regulated buy-to-let mortgage product. Landlords who are already abroad and want to buy additional property will need to look for an expat buy-to-let mortgage from the outset.

Landlord insurance
Although there is no legal requirement for landlords to take out insurance, your lender may require you to take out specialist insurance before you can let out your property. Make sure to speak with your mortgage adviser for further advice.

Managing your property
Dealing with tenants and maintenance issues can be a time-consuming and stressful process, let alone trying to deal with these problems from another continent in a different time zone. This is why it is important to ask yourself whether you’d be in a position to manage your property from abroad or would it be easier to use the services of a suitably qualified lettings agent?

Currency and foreign exchange
For you potential expat landlords you’ll need to consider foreign exchange rates and the potential risk of those rates changing if you plan to use the rental income to cover your living expenses. Rent will be paid into a UK bank in pounds sterling so it has the potential to be impacted by foreign exchange rates.

During 2018, for example, landlords who converted pounds to US dollars at the lowest point suffered a 12% reduction in spending power compared to those who converted at the annual high.

While this is just a brief overview of some of the things you might need to consider there are a number of other things to think about too. This is why seeking professional advice before becoming an expat landlord is important.

If you’re thinking about joining the many brits abroad and becoming an expat landlord contact one of our advisers today.

More lenders are offering 95% loan-to-value mortgages

Since the financial crisis in 2008 lenders have been reluctant to offer high loan-to-value mortgages which has resulted in many of us being unable to afford our dream homes or take our first step onto the property ladder.

Without the help of high loan-to-value mortgages some will have spent years saving for a deposit, are still living with parents, or are stuck in the rental cycle. The dream of owning our own homes seems somewhat in the distance.

But are times changing?
The number of mortgage providers that include a maximum 95 per cent loan-to-value product in their range now stands at 60*, up from 53 a year ago and 13 more than five years ago, according to Moneyfacts. This is great news for potential first-time buyers and home movers.

A decade ago a borrower with a five per cent deposit had just three products from three mortgage providers to choose from. Today, you have a choice of a massive 405 products, including 67 variable deals, from a huge total of 60 providers*.

More than four fifths of mortgages available at a maximum 95% loan-to-value are fixed rate mortgages, accounting for 338 products of the 405 available.

These deals enable you borrowers to have the certainty of knowing what your monthly repayment amount will be. This is perhaps of particular importance to those you who are taking their first steps onto the property ladder.

With the number of high loan-to-value options now available it’s important to seek professional advice. Your adviser will be able to find the right mortgage for you, or your loved one’s specific circumstances should they want to take that first step onto the property ladder, which can be invaluable.

If you, or someone you know, would like to take advantage of the high loan-to-value mortgages available, please contact your adviser today.

* Number of products correct as of 16/04/2019

UK life insurance is the cheapest in the world

In the UK we’re largely underprepared for the worst-case scenario. If the worst were to happen to you, without suitable protection, it could leave your family under a lot of financial pressure and despite life cover being the most popular type of protection the majority of us still aren’t covered!

According to Legal and General only 15 million adults have a life insurance policy which is just under a quarter of the UK population. This figure is quite scary, especially considering the price of life insurance in Britain is the cheapest in the world according to CIExpert.

Reducing Premiums
Surprisingly, premiums have actually reduced over time and it may be cheaper to cover yourself now than 10, and even 18 years ago.

For a £123,000 decreasing term plan on a 32-year-old non-smoking male and a 28-year-old smoking female in 2001 the cheapest premium available was £42.47 per month with Norwich Union, who are now Aviva. Today the standard Aviva plan would cost you £41.81. The reduction for a standard Zurich plan is far wider too – £58.21 per month down substantially to £39.93.

A November 2012 plan reflects a similar trend. A £92,000 decreasing term plan for a 24-year-old female non-smoker cost £26.67 pm with Zurich, which today would want £25.24 pm. L&G, which charged £34.58 pm, has reduced to £26.17 pm. But the price is always dependant on your individual circumstances.

Whether this downward trend is set to continue or not, now seems like the perfect time to protect you and your loved ones in case the worst were to happen.

If you would like to discuss your protection needs, or just explore your options, contact one of our advisers today.

 

Government tightens up electrical safety rules for landlords

The government has sparked up a new idea so that everyone can feel safe and secure in their homes. The idea gives landlords greater responsibility to ensure that their rental properties are fit to live in for their tenants.

The new rule, that was announced in January, means that landlords must ensure mandatory electrical inspections are carried out in their private rental accommodation by competent and qualified inspectors, as part of the government’s commitment to drive up standards in the sector. Failing to comply could result in tough financial penalties.

There will be a transitional period in the first two years, whereby the new rule will only affect new private tenancies in the first year and then extend to all existing private tenancies in the second year.

Properties with an existing electrical installation condition report (EICR) will not be required to replace it for five years from its start date. And for new, fully rewired properties, an Electrical Installation Certificate can be presented in place of an EICR, provided the date of the next inspection mentioned on the certificate has not elapsed.

New guidance which sets out the minimum level of competence and qualifications necessary for those carrying out the inspections is to be published. It will provide clear accountability at each stage of the inspection process without excessive cost and time burdens on landlords.

Alongside the new guidance, existing “competent person scheme operators” will be invited to set up an electrical inspection and testing scheme which inspectors and testers can choose to join.

Councils will also have the authority to impose fines of up to £30,000 on rogue landlords who rent out poor quality properties from 1st June 2019.

If you want to discuss your options contact one of our advisers today.

Five tax rules landlords need to know

Landlord tax rules have seen some significant changes over the last few years. From stamp duty to capital gains tax, there are a number of different rules and reliefs that apply at every stage of the property life cycle.

As landlords it’s incredibly important to keep on top of your tax issues, so here we take a look at some of the major aspects of landlord tax and make sure that you’re up to date.

Stamp duty on second properties
From April 2016, stamp duty land tax (SDLT) on second properties, including rental properties, was increased to include an additional 3% surcharge over and above standard rates.

Anyone purchasing a rental property now pays 3% SDLT for the first £125,000; 5% instead of 2% on the portion between £125,001 and £250,000, and 8% on any amount above £250,001 – increasing the amount of up-front cash landlords need to buy a new property.

Tax on rental income
Until recently, landlords could deduct all finance costs from their rental income and profits were taxed at their marginal rate. However, starting from April 2017 and phased in over a four-year period, tax relief for finance costs is being restricted to a basic rate tax credit.

How these rules will impact you as a landlord will depend on your individual circumstances. However, there are a range of strategies to mitigate the affects of these changes, from resizing your portfolio to moving properties into a limited company – this is where seeking professional advice can be so invaluable.

Wear and tear allowance
Landlords with furnished properties can take advantage of a ‘wear and tear’ allowance to reflect the fact that furnishings need to be replaced regularly. Until recently, the allowance was set at 10% of gross rent but, following a change to the rules, landlords can only deduct the cost of new items against their rental income now.

Insurance premium tax
Landlords can expect to pay 12% insurance premium tax on any insurance they arrange associated with their rental property. While there is no legal requirement for landlords to take out insurance, mortgage lenders usually require specialist building insurance to cover the costs of rebuilding or repairing the structure of the rental property if it is damaged or destroyed by events like fire, storm, flood or vandalism.

Capital gains tax
Landlords are subject to capital gains tax on property sales. The size of the gain is usually the difference between the amount paid for the property and the amount achieved when the property is sold. Landlords can deduct costs associated with buying, selling and improving their property to reduce the gain so it’s important to keep receipts for all these items.

This article is only a brief overview of some taxes that may be applicable to landlords and should not be considered as an exact guide. Before investing in property or looking to restructure an existing portfolio, individuals should always seek expert advice from a qualified tax specialist. If you’re a landlord and would like to discuss your buying options, contact us today.

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.

First-time buyers reach 10 year high

In recent times it appears to be harder than ever to get that first step onto the property ladder. In the last 30 years house prices have increased a staggering 554%, so it may come as a surprise that first-time buyer mortgage figures have hit their highest level in a decade, according to data by Yorkshire Building Society.

The building society collected its data until October 2018, with November and December projected within the analysis.

The firm estimates that 367,038 first-time buyers secured mortgages in 2018, up drastically from the financial crisis in 2008 where just 192,300 first-time buyers were able to get their foot on the property ladder.

The data also revealed that in most regions in the UK, first-time buyer numbers have risen progressively over the last 10 years, despite property prices growing faster than wages. First-time buyers now represent a whopping 50% of all homes bought with a mortgage.

This steady increase could be in part thanks to government initiatives such the removal or reduction of stamp duty for first time buyers depending on their circumstances, the Help-to-Buy equity loan scheme and Help-to-Buy Isas that can boost your savings by £3,000, as well as an increased appetite from lenders to offer 95% loan-to-value mortgages and lower rates.

The strong competition amongst the lenders makes it important to seek specialist advice to ensure you get the best deal for yourself, and they can also help you decide which of the government’s help-to-buy schemes could benefit you.

If you or your loved ones are thinking about getting onto the property ladder or want to discuss your buying options, contact on of our advisers today.

Tenants deposit cap confirmed

Landlords and tenants can have difficult relationships. Landlord’s are primarily responsible for ensuring that their rental properties are fit to live in, whilst tenants may have their own expectations for the property and what their monthly rent is expected to cover.

The dynamic of this relationship has recently changed too as the government has confirmed that deposits on a rented home will be limited to five weeks rent as opposed to six. The move has been announced as part of the Tenant Fees Bill and is a further step by Communities Secretary, James Brokenshire, towards lowering fees for tenants.

The deposits are used to cover the risk of damage or unpaid rent but what does this really mean for tenants and landlords alike?

For tenants this is seemingly good news. The upfront cost of moving into a new rented property will be lower which should allow more people to start renting.

However, with less financial security less likely to cover unpaid rent and damages, landlords could be more cautious about who they are letting their properties out to. This could make it more difficult for those with pets or poor credit ratings to find a suitable home, so there are benefits and negatives for both groups.

Other amendments to the Tenants Fees Bill include protecting tenants from unfair fees by limiting the type of default fees that can be charged by landlords and property agents. This change means that during the tenancy landlords and agents will only be able to charge fees to replace lost keys or for late rent.

Landlords will still be able to claim back costs for damage through the tenancy deposit at the end of the tenancy. If you want to discuss your options contact one of our advisers today.