Planning permission when buying a property

 

 

Planning permission when buying a property

When buying a property any major alterations that affect a property structure will usually need planning permission and building regs , it is always worth asking the vendor when viewing the property if there looks like there has been a new structure added  to the exterior of the building or any major alteration to the internal structure of the house or flat if planning permission and building regulations were satisfied .

Some of the points to look for are as below

• Loft conversion or roof terrace in a conservation area
• Two-storey rear or side extension
• Construction of a permanent outbuilding, e.g. an office or garage
• Solar panels
• Gates and higher boundary walls
• Internal work on a listed building
• Properties that have 2 kitchens or look to be used as flats at some point.

As when it comes to the legal work done by the conveyancer if you go ahead and buy the property will uncover any problems if planning permission or buildings regulation certificates are not available and could stop the process being able to complete .

What do sellers need to reveal ?

The principle of Caveat emptor (“buyer beware ") applies when buying any property in England and Wales. This means it is the buyer’s responsibility, with help from the solicitor, to understand what they are buying so basically bought as seen, this is why conveyancer’s are necessary to mean your purchase is safe and the title will be clean after completion. If you are buying with a mortgage then this is re enforced by the lender that everything is investigated before completion and any issues are dealt with before the lender will release any funds. The issues are usually found by local authority searches and the surveyor that the lender sends out to inspect the property.

If when your conveyancer starts the conveyancing process, they will identify anything that might need planning permission and building regulations and they will send what they call enquiries to the other side for clarification, if then it is established that both or either planning permission and buildings regulation are needed, your conveyancer will request to see them before the conveyancing process can proceed any further.

Bad news

In some cases, one or more of the following may become clear:

• The work likely needs, but does not have, planning permission
• Planning permission has been refused
• The work has not been signed off by a building inspector
• Building regulations have been breached by the seller
• The work is otherwise not compliant with applicable regulations

These issues may not always be deal-breakers, but you should carefully consider the risks of buying a property affected by these defects.

 

If this arise the buyer can

Apply for retrospective consent

The new owner can apply to the local authority for retrospective consent. Where the work is fully compliant and does not breach any conservation area or listed building-related restrictions, the council may grant this consent.

In some cases, an inspector may be unable to confirm whether the work is fully compliant with regulations (because the work is finished, plastered over, etc). The inspector may instead confirm that they will take no further enforcement action.

An indemnity policy

There is a risk that the council could refuse retrospective consent. As a result, the new owner may instead opt to take out an indemnity policy. The policy will insure against the cost of work or losses should the council take enforcement action.

If the council has already refused consent, the buyer may also find it impossible to take out a policy.

A solicitor should be able to advise as to which the best route is.

Count court judgements, defaults explained and effect on mortgage applications

 

Count court judgements, defaults explained and effect on mortgage applications

When a lender assesses an application, one of the main factors they look at second to only income and affordability is credit status and risk. Credit reports are good for gauging how a potential applicant might behave on how they will pay the mortgage ongoing. Clients that apply who have kept a spotless credit record will endeavour to protect their spotless credit report by making sure payments are made on time every month, so this used with assessment  off income and affordability to underwrite the case so that the lending is as secure as possible .

From analysis of credit report’s over the years since they have existed its has been found that  clients that have poor credit ( that has not been caused by s sudden major event in their life) have got used to paying their credit poorly and might do so for any  new credit taken out in the future .

 For this reason many lenders especially standard high street lender will turn down applications with adverse credit showing on the applicant’s credit report. This has given rise to the formation of niche lenders that will lend to clients with varying degrees of adverse credit and this is usually reflected in the interest rate depending on how severe the adverse credit is, it will also have an effect on how much the lender will lend towards the property, the heavier the adverse the more deposit will be needed to secure the mortgage.

Lenders take the view that the more money the applicant has in the property that is from their own funds, the more chance they will pay the mortgage as they will have more of their own money at risk if the property was ever repossessed. A higher interest rate will cover the cost of any bad debt that is estimated to accrue from lending to applicants with adverse credit.

County court judgments

A County Court judgment (CCJ) is a court order which tells you to pay money you owe to a debt. It’s one of the actions your creditors can take as part of the debt collection process.

If you receive a county court claim form you have just over two weeks to respond. It’s very important to respond in the timeframe given, as if you don’t, the court could order you to pay the debt back at a rate you can’t afford. This could lead to further enforcement action.

You can only receive a CCJ in England or Wales.

Lenders will look at the date the CCJ was registered and how large it is, another factor will be if the CCJ is still outstanding or has been satisfied. If satisfied this will go in the applicants favour with select amounts of lenders.

A default

A default is usually registered on your credit report when a payment has reached a total of 8 payments missed, the company you owe the money to will issue a letter for default and register this on your credit report as a default, showing date registered and amount of the default. If you pay off the default it will show in the credit report as satisfied and date satisfied , lenders will base decisions on how new the default is, size of default and if it has been satisfied or not .

All adverse credit will come of your credit report after six years from the date it was registered.

 

 

 

Firstly lenders will base in the first instance the amount they will lend on the market rental figure that is usually established by the lender employed surveyor. But there are a lot of other factors that are looked at also depending on the specific lender.

Some lenders have a minimum income requirement; this is commonly set at £25,000 per applicant and is mandatory no matter how many existing buy to let the client has. This is often proven by 3 payslips P60 and bank statements showing the salary credit going into the account for employed applicants and for self employed, they will usually require 2 or 3 years SA302’S and tax overviews.

Due to buy to lets being un-regulated mortgage lenders have to be careful with their criteria, 99% of lenders require you to own 1 other property at the time of making the application and after the application has completed, this is to try and stop applicants trying to buy a property that is outside their current income and affordability limit as a buy to let and then living in the property after completion. It is possible to remortgage your home property on a buy to let basis if you want to move to another property to live in, 99% of lenders will insist that you complete the new purchase simultaneously with the let to buy remortgage, this is also to stop applicants remortgaging home property beyond what their income will allow them to remortgage it under income and affordability limits.

There are a handful of specialist lenders that will base the entire application without any minimum income requirements  but will insist you are an experienced landlord with at least 6 months landlord experience , this will mean you would have to have a property in your name you own and have rented out for at least 6 months . The lender will still require proof of income if you have an income this is often proven by 3 payslips P60 and bank statements showing the salary credit going into the account for employed applicants and for self employed, they will usually require 2 or 3 years SA302’S and tax overviews. The good thing is even if you earn nothing or a very small amount the lender will look at your application based on rental income.

Rental income calculator is now mostly dependant on being a lower rate tax payer or higher rate tax payer in the UK, this mostly equates to 125% of market rental income for lower rate tax payers and 145% for higher rate tax payers.

How to work out what you can borrow using these 2 common rental ratios.

125% lower rate tax payer.

Currently being used is a reversionary rate of 5% by lenders that they base the calculation on, but you would need to check with the lender what rate they are using currently for this.

Lower rate tax payer

Firstly you would need to work out the mortgage you think you will need £300,000 purchase price  minus standard 25% deposit for buy to lets =£225,000 mortgage needed then you multiply this by 5%=£11250 then you need to divide this by 12 to give you a monthly amount =£937.50 then you times this by the current lenders lower rate tax payer ratio 125% for this example =£1171.88 this is what the market rent needs to be , if it’s the same or higher than this you are good to go for the required mortgage amount , if it is lower you will need to put more deposit towards the purchase price to be able to buy the property .

For higher rate tax payers

Firstly you would need to work out the mortgage you think you will need £300,000 purchase price  minus standard 25% deposit for buy to lets =£225,000 mortgage needed then you multiply this by 5%=£11250 then you need to divide this by 12 to give you a monthly amount =£937.50 then you times this by the current lenders lower rate tax payer ratio 145% for this example =£1359.38  this is what the market rent needs to be , if it’s the same or higher than this you are good to go for the required mortgage amount , if it is lower you will need to put more deposit towards the purchase price to be able to buy the property .

You can see if you are a higher rate tax payer, you would need more rental income from property than as a lower rate tax payer.

Money Laundering and deposit for Mortgages

 

 

Where can my mortgage deposit come from?

“Where has your deposit come from?”. This question will and should always be asked by a mortgage advisor. This isn’t because we’re trying to be intrusive; it’s simply to start preparing your application. Advisors also have a duty to establish your deposit has come from a legitimate source. Every lender and solicitor will ask about your deposit source, so it’s important that mortgage brokers understand this from the outset.

Anti-money laundering regulation requires solicitors, lenders and advisors to ensure that mortgage deposits have not come from any illegal activity. It’s also important for lenders to assess your entire financial profile. Understanding how you’ve accumulated a mortgage deposit helps lenders to do this.

As all lenders vary in what they will and won’t accept, mortgage deposits are no different. Some lenders will accept gifted deposits with little fuss, whereas other lenders won’t. This is another reason why it’s vital for your mortgage advisor to understand your deposit source.

Knowing where your deposit has come from enables advisors to place your application with the right lender. It would be pointless in placing an application with a lender who simply doesn’t accept your deposit source.

Personal savings

Personal savings are the most common form of mortgage deposits in the UK. As deposits are saved in bank accounts, lenders can often calculate the increase in savings over a certain period of time. This helps lenders in assessing the legality of your income source. You will need to provide evidence of any income, such as bank statements, payslips or accounts if you’re self-employed.

Lenders will be satisfied if your mortgage deposit has come from your own personal savings. Even the strictest of lenders shouldn’t have any issues. On occasion, very strict lenders may probe further into your savings and how they’ve accumulated. This can involve requesting additional payslips, accounts or older bank statements.

Inheritance

Deposits from inheritance are typically accepted without any major issues. As long as there is a clear paper trail outlining that you’re the executor of the inheritance. Solicitor documents may also be requested from lenders to assess the inheritance in detail.

Gifted deposits

A gifted deposit is simply a deposit or part of a deposit that has been gifted to you. Gifted deposits are generally fine to use, however they do need to meet lender criteria. The majority of lenders will only accept gifts from documented family members. Even if your gift has come from stepfamily, it’s usually accepted.

If your gift has come from a friend or other source, then the majority of lenders won’t accept your mortgage application. That said, there are still a few lenders that may accept gifted deposits from non-family members.

Gifts from third parties are very hard to use as mortgage deposits. This is because of money laundering regulations and to minimise fraud. It isn’t impossible, but it is very difficult.

If you’re using a gifted mortgage deposit, then you will undergo comprehensive checks. Again, this is to minimise the risk of fraud and money laundering. On occasion, the individual gifting you the deposit may also undergo checks.