Category: Conveyancing

Many of the high street firms today suffer from the ruling powers of the lenders. As the local solicitors find it increasingly hard to obtain membership on to the lenders panels, many solicitors across the nation feel hard done by and argue that the lenders are “cherry picking” so to speak on who they would like on their panels.

Although this may seem unfair from the solicitor’s point of view, the other side of the coin is that the lenders are becoming ever more anxious and feel the necessary need to protect them from mortgage fraud and other illegal activities. Due to this worry the lenders are keeping their panels of approved solicitors to a minimum.

Is there any consistency that the lender has in their panel systems?

This alternatively means that the hard part is not yet complete, as even those firms who are currently on the panels are subject to even more conditions. These conditions can vary from having more than three or more partners in the practice or it could be that the lender decides that no work has been placed with them in a set time period, which leads to the lender removing the solicitors firm from their panel.

The solicitor’s main concern is that of their clients. If the client would like to use a certain firm they would first have to now check if that particular firm is on the lenders panel. If the solicitor firm is subsequently not this could lead to major financial blow to the high street firm’s conveyancing department. As more clients would vanish from the firm and be placed with those firms who are on the panels.

The law society has now offered a more practical solution to this increasing problem local solicitors are finding. They have now introduced the Conveyancing Quality Scheme (CQS).

But is this scheme to little too late for the local high street firms?

Once obtained the Conveyancing Quality Scheme shows a firm’s ability to show efficiency in the firm in the conveyancing department. It can be argued that surely an established well known local firm who have been incorporated for many years with an exceptional clientèle should not have to prove their worth by a certificate and fee. Exceptional, good and adequate conveyancing can be acquired by those firms are not on this scheme. This scheme which has been implemented by the law society is an action against the lenders and is seen as a long term solution.

However as more firms have now incorporated the Conveyancing Quality Scheme a question must be raised, will the lenders still cherry pick?

Vinesh Patel, Paralegal

vpatel@astonbond.co.uk

During the 2013 Budget report George Osborne introduced a new initiative to assist first time buyers and current home owners with their next property purchase. The new “Help to Buy” scheme was launched in April 2013 and gives current home owners and first buyers an alternative route to purchasing their next or first property. While a conventional mortgage is required this new scheme will provide an equity loan of 20% providing you are able to provide a cash deposit of 5%; this scheme is in place for properties up to the value of £600,000. Within this in-depth look at the new scheme which has seen over 7,000 home owners and first time buyers take advantage of its generosity.

How it works?

The overall concept of the “Help to Buy” scheme is fairly simple. However, for a first time buyer it can be slightly daunting. When entering this “Help to Buy: Equity Loaning” scheme there are three financial elements; a cash deposit, equity loan and mortgage.

For example, if you were to purchase a house worth £200,000 under this scheme you would require a cash deposit of £10,000 (5%). Then the government would provide an equity loan of £40,000 (20%) providing you are able to provide a mortgage worth £150,000 (75%). The mortgage is a conventional one of that which would likely be from a bank of some form; the government have no connection with the mortgage if you enter this scheme.

After you have owned the home for a five year period equity loan fees will be charged per year.  In the first year you will have a fee of 1.75% of the initial loan value and for the continuing years the fee will increase matching the Retail Prices Index. These fees can be paid through monthly payments through your bank. No fees are charged for the payment process.

If you were to make payment in a large sum this is an option. The scheme offers you the ability to pay back lump sums of the equity loan of 10%, 20% or the full amount; this only applies if the initial loan is worth at least 10% of the property value.

Once the property is purchased by yourself it is in your name and it is possible for you to sell the property on; however, for you to sell the property on to another party the full equity loan must be paid. The loan can be paid back after the selling of the property; or at the end of the mortgage period.

The Benefits

According to the government this scheme has one aim; to make it easier for first time buyers and home owners stuck in their current living condition to be able to purchase a new house. And it does indeed do this. The scheme was launched in April and since then over 7,000 home owners and first time buyers have taken advantage of the scheme. The initial 20% loan offers great relief for many, and while you do have to pay it back it has less pressure than a full mortgage would. With this equity loan it is also thought to increase your chances of receiving a mortgage for the further 75% as banks will not only be providing less but also see that 25% has already been paid towards the house (including the 5% deposit).

The Disadvantages

As with all loans there is one huge disadvantage; it’s a loan.  The money always has to be paid back. While you will be clear of any fees for the first 5 years they will begin in time and it is always vital that any person taking advantage of this scheme has financial stability for the foreseeable future; or at least till the full loan would have been paid out.

The increase in fees per year may also put further strain on some individuals who have taken advantage of this scheme. However, if you are financially stable throughout the payment period then the scheme should continue to be friendly.

One other element of this scheme that is vital to understand is that the government has no part in the conventional mortgage taken out (75%) as this is an agreement between yourself and the bank or loaner.

Who is eligible?  

To be eligible for this scheme you must be a first time buyer or current home owner wishing to purchase a new home up to the value of £600,000. You must also be able to both pay an initial deposit for the property of 5% and also have a mortgage secured with 75% of the home’s value. However, in order to take advantage of the “Help to Buy” scheme you are not allowed to be purchasing the property with the intent to rent the property out at any point in the future.

How to enter the scheme?

In order to take advantage of this scheme you must contact a Help to Buy agent within your area; a list of which can be found on the Gov.uk website. At this point they will then provide further information about the scheme in your case and will also check your eligibility for this scheme. You should also note that this scheme is different in England and Scotland and different schemes are available within the How to Buy scheme.

Gazundering – where a property is sold subject to contract and the buyer makes a new offer before contracts are exchanged to re-negotiate the price downwards at the last moment.

Gazumping – where a property is sold subject to contract and the seller who has already accepted one offer from a buyer, then goes on to accept a higher offer pushing out the first buyer who has spent money on surveys, legal costs and searches they cannot recoup.

Lock-Out Agreement – an agreement between a buyer and a seller granting the buyer exclusive rights to the sale of property for a certain period of time at a certain price.  However, this may involve a payment for the lock out agreement which the buyer may lose if they do not proceed to purchase before the end of the period.

Contract Race – Where a seller has received and accepted two or more offers on a property and will sell the property to the party who is ready to exchange contracts first.  Rules are set by the Law Society, governing such ‘races’.  One party can expend money on legal costs, searches and surveys without winning the race with no redress against the seller.

01753 486777

Although you may think that you need a local solicitor, i.e. because you need to pop-in to hand over important documentation, the truth is that these days with the power of the internet and our ability to carry out Money Laundering checks online, you can avoid the need for important documents such as Passports and Driving Licences being sent to us via the post. All paperwork can be sent by e-mail, enabling the process to progress as quickly as possible and obviously eliminating the worry of missing post and the inevitable delay that this causes solicitors.

Whilst Aston Bond is known as a leading firm of solicitors in Slough, we often act for clients much further afield than Slough!

What is a buyer with a low deposit to do?

• Buy a second hand property and obtain a 90% mortgage or possibly even a 95% mortgage (if you can get one at a rate of approximately 6%) and hope that property prices do not fall; or
• Buy a new build property from those few property developers who have joined the Government’s NewBuy scheme with a competitively priced mortgage and obtain a 95% mortgage from those lenders who have joined the scheme, such as Barclays, Natwest or Nationwide.

Lenders will lend at market rate as the Government will guarantee lenders from potential losses. The maximum mortgage is £500,000. However, new builds usually carry a premium for being new and as there is less ability to improve and increase the value of the property, the potential to fall into negative equity is much higher. Lenders are protected from losses but the same cannot be said for purchasers. If property prices fall, negative equity is a severe risk and a 5% fall could wipe out a borrower’s investment and the lender could pursue a borrower for the negative equity owed. Nothing related to property is guaranteed to increase in value and buyers, particularly first time buyers, must carefully consider the risks when their deposit is less than 10%, both in terms of higher mortgage rates and in pursuing a new build where the lenders are guaranteed against losses and the property developers are anxious to sell as it makes their properties more attractive.

The legal maxim which covers all property purchases is “Caveat Emptor” (Latin for “let the buyer beware”) and buyers with less than 10% deposit must bear this in mind. Particularly, since stamp duty is now payable at 1% on properties between £125,000 and £250,000 by first time buyers – that is, in addition to the purchase price and any deposit paid.

We are glad to note that we had many satisfied clients by close of business on 23^rd March 2012, when we met the deadline to complete matters where First Time Buyers could take advantage of the stamp duty exemption.

We are always up-to-date with the latest schemes and exemptions and will explain these to you in plain English.

01753 486777

Most people have the perception that all property transactions drag-on and that it is all about the conveyancers sending out letters and responding in the same fashion. All of which adds weeks to a transaction. We believe that by simply emailing clients and solicitors throughout the process, the whole transaction can be reduced by weeks. For example:

We recently completed a purchase (with a mortgage) within 4 weeks and this was simply because all contact was via email and phone calls.

We also recently received instructions on a sale of a property, mid morning, and were able to email the property information to the client within-the-hour. By the afternoon, the buyer’s solicitors were in possession of a draft contract and copies of the seller’s title.  The next morning, the completed forms were returned and the buyer’s solicitors were in receipt of a complete contract package.

01753 486777

If you are buying a new build, you should be aware of the new and exciting scheme called the NewBuy scheme which is being supported by the Government.

This new scheme will allow purchasers to buy a new build home with a 95% mortgage, this will of course be a great help to struggling first time buyers who are unable to find the extra 10% or even 15% deposit.

This scheme is available through various builders and is not only open to first time buyers but also existing home owners.

There is a great need for new houses to assist with our ever growing population and we feel this scheme is just what the market needs.

01753 486 777