Helping you get on the property ladder without the Bank of Mum and Dad
It appears that the “Bank of Mum and Dad” is becoming an increasingly popular avenue among first time buyers for property funding. Research suggests that the Bank of Mum and Dad will lend over £6.5 billion in 2017 to help their children get on the property ladder, a £1.5 billion increase from last year. As a result, the Bank of Mum and Dad is now the 9th largest mortgage lender in the UK!
So, where has this all stemmed from? A key factor affecting this trend is intergenerational inequality, with young adults subject to limited opportunities in comparison to the baby boomers with regards to affordable housing and defined benefit pensions. Research shows on average, parents will lend around £21,600 this year with Millennials being the biggest recipients with 79% of the funding going to people under 30.
However, statistics suggest that in fact, lending from parents is doing more harm than good, nor is it sustainable or equitable for both parents and the young people. It’s understandable that parents want to help get their children on the property ladder, but it’s also one of the causes of our broken housing market.
At Walker Laird, we offer the opportunity for first time buyers to meet with us and chat through the whole process of home buying, including arranging your mortgage. We can put you in touch with a mortgage advisor who will be able to search the market for the mortgage that best suits your needs. To make things easier, the mortgage advisor will offer to meet you in your own home in the evening if you prefer. It doesn’t end there, we will help you negotiate prices with the estate agents, help you submit your offer and help you seal the deal.
We understand that purchasing your first home is costly enough. This is why our initial advice is free of charge and you’ll only pay a fee if your offer is accepted as we start to deal with the conveyancing process.
Sound good?
Further Information
Please get in touch for more information Paisley: 0141 887 5271 and Renfrew: 0141 886 5678.
Inheritance Tax – Residence Nil Rate Band
A new Inheritance Tax allowance comes into force on 6th April 2017. This will apply to property left to direct descendants. The Residence Nil Rate Band, as the new relief is called, means that from this year, a new tax free allowance will apply to a property left by a deceased person to a descendent. If there is more than one property in the estate, the executor can decide which property is to be allocated for this purpose.
This allowance starts at £100,000 and will rise in £25,000 blocks over the next 4 years until, in the tax year 2020/21, it will stand at £175,000. If the property is held in joint names of a married couple or civil partners, each of the parties enjoys this relief - and it’s transferrable from one to the other on death if it’s not been used up.
Here are the basic rules. The Residence Nil Rate Band will apply if the:
- individual dies on or after 6 April 2017
- individual owns a home, or a share of one, so that it’s included in their estate
- individual’s direct descendants such as children or grandchildren inherit the home, or a share of it, and
- The value of the estate isn’t more than £2 million
Direct descendants include, the children, grandchildren and further lineal descendants of the deceased. They also include the spouse or civil partner of a direct descendant. Also included are step children, adopted children, fostered children and children of whom the deceased was guardian. You can find an outline of what are considered to be descendants on the HMRC website. You can click here to view this information.
Direct descendants don’t include nephews, nieces, siblings and other relatives who aren’t included in the list above.
The Residence Nil Rate Band is in addition to the current Inheritance Tax (Nil Rate Band) threshold of £325,000. This is also transferrable between spouses or civil partners if it is not exhausted on death.
The total Inheritance Tax allowances available to married couples and civil partners from the tax year 2020/21, will be £1 million – and after that the allowances will increase in line with inflation (as measured by the Consumer Price Index).
There are a number of helpful case studies on the HMRC website ranging from the most simple and straight forward to the very complicated. You can view those case studies by clicking here.
Interestingly, if one spouse or civil partner dies before April 2017(whether or not they owned a share of the property or had already passed a share to children), the survivor will be able to use both of their family home allowances when he or she dies.
If you have a Will, you need to make sure it’s up to date so that you can take advantage of this tax-free allowance. If you don’t have a Will, you need to make one now to ensure you can decide who will benefit from this allowance.
Inheritance Tax planning is a complex process and we recommend this be undertaken by an expert in this field.
Get In Touch
Contact us on 0141 887 5271 (Paisley) or 0141 886 5678 (Renfrew).
Helping your children get on the property ladder
The bank of mum and dad is a cliché that’s well worked in today’s economic times, not least when it comes to helping children to get a leg up onto the property ladder. Rising property prices and lenders restricting the level of borrowing has meant that younger people have found it increasingly difficult to bridge the gap between the amount they are able to borrow and the price they have to pay for the property.
Many parents and grandparents who have the financial wherewithal to help need to consider very carefully how to go about providing any sort of assistance to their children or grandchildren.
The option of helping with the deposit without any expectation of this being repaid is straightforward – it’s a simple gift from one to the other.
However, if the plan is to provide a home for the child, then there are potential difficulties that need to be addressed before embarking on such a scheme.
If the title to the property is to be taken in the name of the child, then the child can subsequently do what he or she wants with that property. The child can borrow money and use the property as security or sell the property and keep the proceeds of that sale.
If the child were to run into financial trouble and be pursued by creditors to the point he or she becomes bankrupt, that is likely to lead to the property being sold to meet the debts the child has run up.
Should the child be married and the marriage fail, it is likely that there will be a claim by the spouse for a share in the value of the property.
You should also be aware that if the child is under the age of 16, even though they take the title in their own name, the purchase will be considered as a purchase of an additional dwelling and the rules relating to the Additional Dwelling Supplement will apply. The Additional Dwelling Supplement is a tax of 3% of the purchase price of the property (if the property is purchased for more than £40,000) that is charged when someone buys a property in addition to their current main residence - and is payable in addition to any Land & Buildings Transaction Tax (in England and Wales, Stamp Duty) that may already apply.
Parents and grandparents must think through the options very carefully before embarking on any such scheme.
So, what are the options to secure the position for the parents and grandparents?
There is always the option of buying the property either with or without a loan and then allowing the child to live in it. This would mean that the property would always belong to the parents or grandparents and when it is eventually disposed of, it is likely that Capital Gains Tax will need to be paid on any gain achieved on that sale. If the parents or grandparents already own their own home, there is also the added cost of the Additional Dwelling Supplement.
If the parent holding title to the property were to die, then the property will form part of the estate – and there may be other siblings who are entitled to share in the estate and that might mean that the property must be sold to satisfy that entitlement. Even this method of helping has its problems!
As an option, to try to at least secure the money invested in the property, the parent or grandparent might decide to secure their interest by taking a Standard Security over the property. If this is done, it’s usually backed up by an Agreement setting out in what circumstances any money secured should be repaid. That’s fine as far as it goes because even if there is a problem and the property has to be disposed of, then the money paid to buy it (and potentially any notional interest payable on that money as might be provided for in an agreement) would need to be repaid – but the parent or grandparent might not be able to share in any profit on the sale. If the property is in the child’s name, then the same problems can arise regarding bankruptcy or divorce as mentioned above, but of course, the security would go some way to protect the money invested!
One option that has been getting more attention in recent times is the creation of a trust. The basic methodology is that a trust is created with the parents or grandparents as trustees and the child as a beneficiary. The property is then purchased by the trust with money put into the trust by the parents and/or grandparents. The trust then becomes the owner of the property. The child can live in the property and be sheltered from the vagaries of divorce, separation or bankruptcy as none of these events could have an effect on the ownership of the property – it’s owned by the trust!
The trust can sell the property and buy another property and allow the child to live in it and it can ultimately transfer the property to the child or dispose of it and pass the free proceeds of that sale to the child.
There are also taxation implications that will need to be addressed. The Additional Dwelling Supplement we discussed above will apply to a purchase of this nature if the parents or grandparents who created the trust own their own homes. On disposal,
Capital Gains Tax may apply. It is beyond the scope of this article to enter into a detailed discussion of when Capital Gains Tax will apply so for further information on that we would direct you to the Government website dealing with this topic. You can access that by clicking here. One important point to note is that the money paid into the trust to enable the trust to purchase the property, no longer forms part of the parent’s estate and, as such, is sheltered from Inheritance Tax. Again, to ensure that this is done correctly, you need to take proper legal advice on this.
Contact Us
If you find yourself in such a situation or are currently considering your options, we’d be happy to speak to you about this. Please call us on 0141 887 5271 (Paisley) or 0141 886 5678 (Renfrew).
A great year for our Estate Agency and the local property market!
While there have been challenges for both buyers and sellers this year, the property market in Renfrewshire has experienced considerable improvements and we are delighted to announce that our Estate Agency has secured over £20 million worth of property sales on behalf of our clients, in 2016.
The volume of residential sales in Renfrewshire increased in 2016. The latest Registers of Scotland house price report shows a 19% increase in quarter 2 sales this financial year in the local area, compared to quarter 2 last year. For the same period, the average property value in Renfrewshire increased by 3%. Clearly despite uncertainty surrounding Brexit and more recently the US presidential election, the local market has shown resilience.
In 2016, we have not only seen more buyers in the local market, but also more sales being agreed and in shorter periods of times, with Walker Laird selling over 100 properties in Renfrew alone. This year has also brought more favourable conditions for sellers, with growing demand and a steady supply of new properties. In 2016 we witnessed the frequent return of closing dates – an impressive 44 times at Walker Laird this year.
Competition amongst buyers has been particularly obvious when marketing family houses, as we found that some buyers were prepared to pay a premium price for the right property. One property for example, went to a closing date with 12 offers in place, the highest of which was 28% above asking price.
The demand for good family size accommodation looks set to continue, so if you want to know how much your home is worth in today’s market or get advice about moving in 2017, we would be delighted to provide you with an up to date and free valuation. Buyers trying to identify their ideal home should also get in touch and speak to us about using our matching service.
We can offer competitive fee structures for sellers coming to the market early in the new year, which is the ideal time to take advantage of that early rush and pick up of activity after Christmas. We can also offer a full deferral of the up-front costs.
Get In Touch
Call 886 5678 and speak to one of our experienced team.
Understanding Changes To Land and Buildings Transaction Tax
Amongst the many life decisions you will make, buying a house is one of the biggest and therefore one, which requires much time and consideration. With that said, we feel that not only is it important that you have all the information you require but also that, that information is reliable and up-to-date.
Changes to legislation are particularly relevant when buying a house as they may have a rather significant impact on your buying decisions. One of the most recent changes homebuyers may have experienced or may be interested in is that of the legislation surrounding stamp duty.
With changes first introduced in April of last year, stamp duty has now been replaced in Scotland, by Land and Buildings Transaction Tax, which is calculated according to the specific price bracket that the property you’re buying falls into.
New Rates
Changes such as these are important to consider when setting budget, as you may now be saving a significant amount of money, due to the new rates (listed below).
Up to £145,000 – 0%
£145,001 - £250,000 – 2%
£250,001 - £325,000 – 5%
£325,001 - £750,000 – 10%
£750,001 + - 12%
Further to this, new rates will be introduced as of April 1st 2016, which will involve a 3% surcharge for those buying additional residential properties, for purchase prices exceeding £40,000. This change in legislation applies to those, who for example, are interested in buy to let properties. The new rates are as below:
Up to £40,000 – 0%
£40,001 - £145,000 – 3%
£145,001 - £250,000 – 5%
£250,001 - £325,000 – 8%
£325,001 - £750,000 – 13%
£750,001 + - £15%
If you have any questions about Land and Buildings Transaction Tax or any other legislation regarding the purchase of a property, please contact our Conveyancing department on 0141 887 5271.
Some decisions are better taken sooner rather than later...
It’s understandable that when making certain big decisions, people often stall or put it off altogether. Often a lack of information, or an information overload, can make the experience particularly daunting. However, we should consider the importance of making these decisions, and what’s more, making them at the right time.
Power Of Attorney
One such decision which is often overlooked is putting in place Power of Attorney. It’s likely that you’ve heard this term being used before, whether that be in a passing conversation or even on TV, but we would stress the importance of making this decision with regards to your personal welfare, finances and property.
For those of you who may not know much about this, a Power of Attorney is a written document that appoints a person(s) of your choice as your Attorney, who therefore has the authority to make decisions on your behalf, should you not be able to do so.
There is a common assumption that it is not as important to grant Power of Attorney until you are older, however we feel you should consider doing so at the earliest opportunity. Many people have their Will drawn up around the time they buy their first property, or when they start a family, this would also be an ideal time to grant your Power of Attorney.
Interestingly, you may prioritise drawing up a Will, in the interest of passing on your assets, but in reality, Power of Attorney is much more important as you never know when you may become incapacitated and unable to manage your day-to-day life, including your own welfare and finances. Should this happen, your Attorney would be able to make certain decisions (as established by yourself) on your behalf.
However, you will not be able to grant Power of Attorney after an accident has occurred and applying to do so at this time is an extremely laborious and potentially expensive exercise through the courts. All of this is avoidable if you have chosen your Attorney beforehand.
Not only are there potentially extensive costs, but this process is not quick or easy and therefore could take months to have someone officially granted Power of Attorney, all happening at a time you really need someone you trust looking after your interests.
Responsibilities of Attorneys vary, as they can manage day-to-day finances such as bills or larger decisions such as investments. Nevertheless, we suggest granting Power of Attorney to one or more person, as soon as possible to ensure that your affairs continued to be managed as you, would manage them.
Constructing Schools in Ghana
Giving something back to communities is something that at Walker Laird is very passionate about. Two of our staff Graham Paisley and Luke Eaton, of our Paisley office, went over and above in helping those in need by giving up their time to fly to Ghana and help build all new facilities at a new school this summer.
This level of dedication has impressed the whole team at Walker Laird, and we wanted to share their story from their time in Africa and just how their work will go to help children over there.
Inspired from a previous trip to Uganda two years ago, also to help construct important buildings, Luke was wanting to return to the continent and assist once again. For Graham, this sounded like a brilliant opportunity to give something back and signed up alongside Luke to go out to the village of Kaleo in Ghana for 17 days, both there as part of a team of nine to help build a teacher's dormitory at a new school.
Once they were both signed up, they worked hard at fundraising the money they needed to go over for the trip. After some hard work putting on dedicated fundraiser evenings, raffles and sponsored walks, they both met their target and were ready to embark on this trip.
They arrived in Accra, the capital city of Ghana, which both described as being as “a bit more upmarket”. From here they then had a 17 hour bus journey to the small town of Kaleo, where they would be spending the rest of their time to help construct the dormitory.
Arriving on the Sunday, they met with the builders on the Monday to go over the full project and understand exactly what work needed to be done. Graham and Luke’s team of nine were joined by another group, also from Scotland, who were building classrooms. During their time their, they all worked hard to construct these much needed areas for the school.
Supporting Education
In this school most of the kids who would be attending were not actually from Kaleo, but from outside. This is simply due to the fact that it still costs money for a child to attend. So over the 17 days they were there, Graham and Luke were able to get to know some of the local children and residents, including the village chief, who could be found enjoying a refreshing beer in the 40°C heat!
Since they returned, they both said that they would “go back in a heartbeat”, and have plans to return in a few years and volunteer once more. The experience has been an extremely positive one for Graham and Luke, and everyone here at Walker Laird are happy to have two such giving members of the team.
If you would like to find out more about how you can get involved with helping communities abroad, why not check out the charity Graham and Luke supported on their trip - Connected. Check out more of their pictures from the gallery below!
Our Easy Guide To Conveyancing
When it comes to buying or selling a house, a key part of the process involves conveyancing. For most people they understand the basics of what is required to buy a house and how to market it, but the conveyancing process still remains somewhat of a mystery, after all, it isn’t a word that comes up too often in day to day conversation is it?
So to help we have created a quick guide to help you understand the conveyancing process, helping to clear exactly what it is, what stages are part of it, how long it takes and help answer some of the most commonly asked questions around it.
Conveyancing...What is it?
In a nutshell, conveyancing is the legal process which takes place after the main details of buying or selling your house has been agreed. This usually involves a contract being created which confirms ownership of the property being transferred from one person to another, done by way of missives (an exchange of letters between the buyer's and seller’s solicitors).
The conveyancing process will also involve your solicitor carrying out additional searches on the property itself and the parties involved in the purchase. These searches are done to make sure the buyer gets and knows what they paid for and to make sure there will be no additional costs incurred after purchasing the home.
What are the stages?
Once an offer has been accepted, both parties solicitors will then work to negotiate the terms of the contract by completing what is known as “missives”. This entails a number of important tasks, including agreeing a date of entry as well as what (or any) additional items to be left in the property (this is commonly things such as blinds, kitchen equipment etc).
The next stage is to “conclude missives”, which simply means that the contract of sale and purchase of the property has been agreed between the buyer and seller. By this point you will have your entry date, funds secured and insurances arranged for the transfer.
Moving forward to the date of entry both the buyer and seller’s solicitors will arrange the successful transfer of the funds. Once complete and correct funds have been received, the new owner will be able to pick up their keys to their new home from either the seller themselves, the seller’s solicitor or the estate agent, leaving them free to begin moving in!
How long does this take?
There is no set timescale for the conveyancing stage, but on average it can take six to eight weeks. This can very easily be longer or shorter depending on the circumstances, everyone will be different. There are a number of factors to consider in a house purchase or sale that can vary the timescale, for example agreeing the initial terms of the sale or securing your mortgage from your chosen lender.
We have a vastly experienced conveyancing team here at Walker Laird who will help you every step of the way, regardless of your circumstances. If you have any questions about conveyancing or would like us to help you during this stage then please give us a call on 0141 887 5271.
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