First time buyer and dreading the extra cost of Stamp Duty? Never fear…it’s now being scrapped!

First time buyer and dreading the extra cost of Stamp Duty? Never fear…it’s now being scrapped!

In England, Wales and Northern Ireland (and with immediate effect) those buying properties worth up to £300,000 will no longer have to find the extra money to pay for pesky stamp duty. You heard us right…ZERO stamp duty on any home worth less than £300,000! Great news, isn’t it?

According to Money Saving Expert, The Treasury estimates that the move will take 80% of First Time Buyers out of having to pay the tax, saving thousands in the process. Hoping to buy in pricy London? The rule extends to £500,000 – giving you a potential saving of around £5,500!

It seems like Christmas has come early this year!

Are you currently saving to buy? Does the new rule affect you? We’d love to hear your thoughts in the comments below!

 

 

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Understanding Stamp Duty

You hardly need reminding that it’s tough to to be a first time buyer. But one problem – and it just happens to be Britain’s oldest tax – has become easier.house

This is of course Stamp duty, originating in the 17th century and imposed to cover the cost of registering a change in ownership at a government office called the Land Registry.

This process requires a stamped certificate from Her Majesty’s Revenue and Customs – the tax man to you and me – but HMRC will provide this only when the duty is paid.

So how is it easier?

Well, stamp duty used to be charged on a ‘slab’ basis. So buying a home for £250,000 meant you paid the old charge of one per cent duty on the full price, making it £2,500.

But if you bought, say, a £260,000 home you would have been in the old three per cent category applied across the whole price – so the duty would become a whopping £7,800.

This slab system was considered unfair and a disincentive for buyers. Therefore stamp duty in England, Wales and Northern Ireland is today levied like income tax.

Up to £125,000 it’s zero, and over £125,000 to £250,000 it’s two per cent. Then from over £250,000 to £925,000 it is five per cent.

On that £260,000 home you therefore today pay no duty up to £125,000, then two per cent above £125,000 to £250,000, and then five per cent above £250,000 to £260,000.

It adds up to just £3,000 and in this example saves you £4,800.

There are a few exceptions to stamp duty – but don’t raise your hopes.

There’s no duty at all on zero-carbon homes (but these are rare) while some Right To Buy properties, where tenants purchase their council home, have reduced duty. In Scotland, stamp duty doesn’t exist but there is Land and Building Transaction Tax which is roughly similar and means that north of the border, our £260,000 home would cost £2,600 in LBTT.

Across the rest of Britain buyers of almost all homes sold for above £125,000 have no choice but to pay stamp duty within 30 days of moving in.

In reality, it happens quicker because it’s handled by your conveyancer – that’s the expert you will have instructed to handle legal elements of the purchase.

Sometimes a mortgage lender may offer to add the stamp duty to the loan for the house. It sounds tempting but try to resist: saving for stamp duty may be tough but it will cost less than adding it to a mortgage on which you repay not just the loan itself but interest as well.

One final thing – it’s always buyers who pay stamp duty. That’s not really unfair because as you move up the ladder and sell up, so someone will pay duty to buy from you.

 As the saying goes ‘What goes around, comes around.’

Image Credit: Geograph

graham norwood

Author Bio

This article was provided exclusively to First Home News by Graham Norwood, a successful journalist who specialises in writing about residential property. Read Graham’s blog at Property News Hound or follow him on Twitter.

 

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How to make yourself more attractive to lenders

How to make yourself more attractive to lenders

Getting your first mortgage is an exciting yet daunting journey; many people discover that the road to home ownership is more like climbing a mountain than taking a gentle stroll. With obstacles such as large deposits and rising house prices (to name but a few), we’ve compiled some handy advice on how to make yourself, and your situation, more attractive to lenders.

Check your credit
Your credit report is your financial history; the better your score, the more likely your lender will be to give you a mortgage. Improve your chances by checking your credit rating before you apply. Have you missed any payments in the past? Have you gone into your overdraft recently?

Another issue you need to be aware of is your partner’s or ex-partner’s credit score as this can greatly impact your mortgage application.

You can discuss your credit score with your bank or you can use popular websites such as Credit Expert, which will give you a free credit report if you sign up for a trial.

Register to vote
If you’re not already on the electoral role, get on it! Lenders often check it to ensure that you are being truthful about where you currently live and their decisions can be greatly impacted if you have yet to register. To sign on to the electoral role, or for more information, simply go to Gov UK.

How is your income?
How much you earn is extremely crucial to lenders as they use multiples of your total income (and joint income) to decide on the maximum that they will lend. It isn’t just about having a higher salary; you also need to ensure that you keep all important documents such as benefits letters or payslips (lenders usually ask for at least three to six months’ worth), as these will be analysed during the decision making process. Self-employed? You will need to provide three years’ worth of accounts instead. Have a lower income? There are plenty of schemes that may help you get on the ladder such as the new Help to Buy ISAs.

Stick with your work
Have you had several jobs for the past few years, or are you dreaming or a new career? While going through the mortgage process it’s best to put those plans on hold and stick with your current job (even if you hate it!). Not only do lenders need a regular amount of payslips, it is important for them to see that you are consistent with your income.

Clear your debts
Essentially, with a mortgage, you are about to commit to one of the largest debts of your life. Therefore, it is sensible to try and lose any outstanding debts that you may have. Lenders use any current debts, along with income and outgoings, to provide you with the maximum total that they can offer you. Although this might mean your dream of home ownership has to be pushed back a year or two, it will definitely benefit you in the long term.

 

Have you found that you have struggled to be accepted for a mortgage?  Let us know any other tips you found were useful for making the process a lot easier.

Image CreditWikimedia

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Five mistakes First Home Buyers make and how to avoid them

The day you buy your first home will most probably be one of the biggest (and most expensive!) achievements in your life, and is usually finalised after years of careful planning and saving.  However, after enduring rental prices and magnolia walls for most of your adult life, it’s easy to feel the urge to rush into certain decisions.  We have found out five top mistakes that first time buyers make – with some helpful tips on how to avoid them!

Overspending

Don’t get your heart set on yohouseur dream property before you know exactly how much you can afford.  There are several online calculators from websites like Money Supermarket and BBC Homes that can help give you financial guidance.  Also question your current financial situation – can you easily afford your rent each month?  Would any potential changes in your new mortgage greatly impact your bank account?

Relying on just the cosmetics

Does the property you have just viewed look too good to be true?  Ensure that it actually is your dream home by taking a second look around.  Avoid cost inducing issues, such as damp, water or electrical issues that can be hidden around the house by getting a survey completed by a qualified surveyor.  Also, check around your neighbourhood and don’t be afraid to ask people questions.  After all you don’t want to buy an attractive house in an area that you may eventually hate!

Taking advice from your estate agent

You may find that your estate agent will try to give you mortgage advice, however you may discover that they don’t provide you with the full range of choices.  Also, you may be charged.  Websites such as Money Saving Expert have extremely helpful mortgage comparison tables which can give you all the information that you need.

Pay twice!

If you are currently renting, don’t forget that you usually have to serve at least a months’ notice before you can leave the property.  Make sure you time things right and don’t lose money by having to pay for both rent and mortgage during the transition stages.

Underestimating the costs

Saving up the deposit may seem like the most daunting task when buying your first home, but remember to also save for the extra costs associated with buying.  Have you considered stamp duty, solicitors’ fee’s, removal costs, storage costs, estate agents fee’s and so on?  Create a spreadsheet of everything you have to pay for so you can avoid any nasty surprises!

Are you currently facing difficulties in the house buying process?  Or are you already in your dream home and made a few rookie errors along the way?

Image Credits: Wikimedia

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Five ways the budget affects the first time buyer
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Five ways the budget affects the first time buyer

The last budget has now passed before the 2015 general election and this is the time to gain support for what is promised to be an exciting few weeks in the world of politics. But what does this budget mean for the first time buyer? Below are five reasons why the budget is looking after those looking to get on the property ladder.

  1. Save £200 and the government will put in £50

Under new legislation from Wednesday’s budget, those who are looking to buy their first property now have the added advantage of a £50 government contribution for every £200 saved. The savings will have to be put into an ISA account, with persons aged 16 and over able to join.

  1. Up to £3000 to earn

George Osborne announced that the aspiring first time buyer can be in receipt of up to £3000 providing that they save £12,000. This is a massive help to those that really struggle to save for a deposit. The scheme essentially saves you a quarter of the time that it would of otherwise taken to save for a deposit.

  1. It’s tax free

The ISA account that you will be paying into is also tax free! The savings must of course go towards a deposit, but with the added advantage of not paying tax then you’re able to get to the chance to own your own home even quicker.

  1. The scheme can run alongside help-to-buy

Those of you who have signed up for the help-to-buy or the mortgage guarantee scheme need not fear as this proposal can run alongside the initiative. You will need £1000 to start the scheme and can be used for homes costing up to £450,000 in London and £250,000 outside of the capital.

  1. Anyone can join

The good news is that anyone who does not own a property can join the scheme and open an account. This essentially means that couples wanting to buy their first home can claim up to £6,000 when buying together. Therefore if two people are buying as a couple, they could own their own property twice as quickly as you otherwise could have without the scheme.

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Money tips for beginners
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Money tips for beginners

If you’re taking the first steps in the home buying process, finance is one area in which you’ll be needing some guidance. When it comes to money management, we’re no experts – that’s what your bank or financial advisor is for; however what we are capable of doing is pointing you in the right direction – we know just how confusing it can be to get reliable facts and figures. As a first time home buyer, there’s probably no current aspect of your life as important as money. We know that the home buying process is a costly one, and even once you finally secure your dream place, you’re likely to still have jobs to do that will place you under further financial strain. If you’re struggling to wrap your head around finances and just want some tips on keeping your money safe, we’ve got you covered with some basic advice.

Online banking

In the modern day, we all live a hectic life. Gone are the days when you’d need to take a trip to your local branch to check your balance. Nowadays, for the most part, customers like to be able to control their finances at the touch of a button. Most banks now offer services online, however some are easier to navigate than others. Before you jump into your decision, check out the online banking services offered by banks, along with their smartphone apps – as that’s likely to be the quickest way you’ll have of keeping on top of finances.

If you prefer to conduct your banking over the counter at your local branch, then you need to make sure you have regular access. It’s all well and good selecting a bank and opening a current account online, but if you encounter problems and need to speak to someone face to face, you need to make sure you aren’t required to trek miles out of your way.

Check out your bank account features

If you’re just after a standard current account with no frills, then you’ve got hundreds of options to chose from; however many accounts offer at the very least, bonuses and perks to assist your financial situation. It could be something as simple as an interest free overdraft (which not all accounts have) to something more lucrative, like cash back on supermarket and petrol station purchases. If you’re coming off the back of a big house purchase, money won’t be flowing as freely as you’d hope, so an interest free overdraft, just to be utilised whilst money is tight could be a godsend. Shop around and view the overdrafts on offer at different banks and see which best suits your needs

Get the best deal

In an age where there are more different account options than ever before, many banks are now looking to lure you in with deals. Make sure you check out what offers0 you can get before opening an account. Things like cashback accounts now offer to pay you money back on purchases such as groceries and petrol, and other banks even offer you cash to switch to one of their accounts. Make sure you shop around, and take advantage of the deals on offer.

Graduate benefits

If you’re still a student, or are a recent graduate, then there are special accounts still available for you which offer things like overdrafts and freebies. The Young Persons Railcard has always been a popular sweetener for banks when it comes to luring in custom, and things like restaurant discount cards and gadget insurance are also available at banks, as a means of saving you money.

Compare your options

Once you’ve weighed up options and garnered what benefits and drawbacks all the different accounts have, head to a comparison site to compare your options for one last time.

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The Starter Home Scheme
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The Starter Home Scheme

A new scheme, aimed at enticing first-time buyers onto the property ladder has kicked-off this week, with potential new homeowners being being offered a 20% discount on their new home.

The Starter Home initiative will see 200,000 new homes built for first-time buyers under the age of 40, with a 20% discount being made possible by offering developers the chance to build on cheaper brownfield commercial land and waiving taxes.

The scheme however, doesn’t apply to all house ranges, with the price of homes available under the Starter Home scheme being likely to be capped at £450,000 in London and £250,000 around the rest of the country.

The scheme will allow aspiring homeowners to register for the scheme from the beginning of next year and will operate as part of a new host of measures introduced by the Government to help people onto the property ladder. The scheme will operate alongside existing implementations, such as the Help to Buy scheme, which offers help to house shoppers who can only afford a small deposit.

Speaking about the scheme, Prime Minister David Cameron stated: “Hardworking young people want to plan for the future and enjoy the security of being able to own their own home. I want to help them to do just that. Under this scheme, first-time buyers will be offered the chance of a 20 per cent discount, unlocking home ownership for a generation. This is all part of our long-term economic plan to secure a better future for Britain, making sure we are backing those who work hard and get on in life.”

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Stamping down on stamp duty
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Stamping down on stamp duty

As you enter the house buying process, you’ll no doubt be tightly managing your finances. With a number of costs and taxes to account for, you could be forgiven for losing track. One recent alteration to the fees you’ll pay when purchasing a new house relates to stamp duty.   In 1997, Gordon Brown revised the stamp duty system in response to rising housing prices as a source of government revenue. Over 15 years later and for much of the same reason, in December 2014, the 1997 system has been revised to become fairer by progressive taxation. So if you are thinking about buying your first home or just an overview of how the new system works, then look no further.

Breakdown:

The good news is that £4,500 is the amount saved on an average price home but how will this system impact on you?

Untitled

As you can see from the image above, for any property up to £125,000 you won’t have to pay a thing; this is very much the same as the previous system. Under the old system you would have been liable to pay 1% on homes between £125,000 – £250,000, whereas the new system 2% is the threshold. However, the current system is a progressive tax where you will only pay a percentage based on the amount you are over any given threshold. This in turn means you’ll be financially better off under this system than the last.

In addition, under the new rate you’ll pay 5% on any property up to £925,000 progressively. The old system would have meant that you’d have paid 3% between £250,000 – £500,000 and & 4% for anything over £500,000. This ensures that anyone buying a home under the £937,000 mark will pay less or the same, treasury figures show.

Paying stamp duty and possible exemption:

Although the system is now a progressive system and is therefore fairer, there are still some ways that you can either reduce paying the tax or not pay it at all.

Paying stamp duty:

It is important to pay stamp duty or a £100 fee could be incurred. Your solicitor usually takes care of this but should you choose to do it yourself, then you need to complete the form and send it off. It is your responsibility to ensure that all documents are completed within the 30 days on completion of a deal.

Think about the band system:

The first thing to do, regardless of the system or not, is to ensure you get the best possible price for the house. This may be the difference from being put in one band to another. For example, if the house was on the market for over £125,000 and you as the buyer was able to get a deal for just under that figure then you wouldn’t be liable to pay anything at all.

Transferring of property:

If you transfer the deeds of your home to someone else, they will not have to pay the stamp duty on the market value of the property. This therefore means you could be eligible to pay less stamp duty if you pass the house over as a gift or leave it in your will.

 

CC image sourced via Google Image free to use search.

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Top 7 blogs for financial advice
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Top 7 blogs for financial advice

Buying your first home is exciting, but  can be equally as nerve wracking. It is a major decision which requires a lot of research, planning and most importantly; financial budgeting. Once you have raised afunds for your deposit, you may be left struggling financially; however by finding ways to make a little extra money, starting to manage your living expenses more effectively and spending your money more wisely you will soon find a more stable financial footing. Here is our guide to the best blogs on the internet if you’re these helpful hints and tips than from some of the best and most influential finance blogs.

  1. Couple Money (@elle_cm) centres on finding ways to build your finances together as a couple, and aims to educate couples on ways to live on one income whilst having fun with the other! Check out their posts on how to pay off your debt faster, how to build your savings and ways to earn more in the meantime.
  2. Magical Penny (@magicalpenny)  is a personal finance blog which strives to “help you to grow your pennies through conscious spending, automatic saving, and simple, low cost investing”. His posts range from turning your hobby into a money maker, varying house prices, energy comparison shopping and helpful tips when getting a mortgage. It’s definitely a helpful one for a first time home buyer.
  3. Young Adult Money (@davidcarlson1 ) encourages the balance of earning more and spending less, something which can seem like an impossible task. Again this is one to help those of you in your 20s and 30s, with the blog covering topics as diverse as real estate, making more money, cutting expenses and even travel. This blog should be the go to guide for all financial savvy young adults.
  4. Help me to save (@karenbryan) is a blog devoted to helping you spend less, save money and enjoy life. Not only is there advice offered on money saving tips, but posts also focus on providing helpful ideas for making money and ways of managing your living expenses more effectively.
  5. Master the Art of Saving (@MasterTAOSaving) is a blog written for those who want financial tips written in an everyday conversational style. Created by Jen Perkins, the site states outright that it is not a professional financial service, but is a source for easy to read tips and advice. Although it is American, it has a readership that far exceeds that nation, and the tips and advice can easily be applied to UK home owners looking for financial tips.
  6. Young and Thrifty (@youngandthrifty) Kyle and Justin created Young and Thrifty when they left University after having beaten student financial issues. Having then been faced with new financial challenges as young adults such as making investments and getting a mortgage, they have turned to blogging to offer tips from their experience. They now cover all bases on the key issues for first time buyers such as investing, banking, taxes, real estate, and ways to monitor your day-to-day spending habits.
  7. Phillip Taylor Money (@PTMoney) is all about finding ways to build wealth, spend money wisely and make extra income. This blog will help you to discover the best rates when it comes to credit cards, bank accounts and even mortgages. Phillip gives his top tips on saving money, spending wisely and making extra money a read to stay financially secure and savvy.

Have we missed off your go-to blog when you’re looking for sound financial advice? If so, make sure you drop us a comment below.

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The home buying process explained
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The home buying process explained

If you’re looking to purchase your first home, it’s a daunting time. The home buying process can be complicated, so heading into it with no prior knowledge is scary. In order to relieve the worry, we’re here to provide a definite guide to the process, perfect for those taking the plunge for the first time.

Prepare yourself

Buying your first home is a huge life decision, so it’s important that you don’t head into the process without having done plenty of research for yourself. Getting yourself that background knowledge will really help, and make the process of home buying much more straight forward. As with most things, having a greater understanding will allow you to make a more informed decision further down the line.

Get the right mortgage

One of the most important factors when buying a home is to ensure you get a mortgage that suits your financial and living situation. Again, this will involve copious amounts of research and homework. If you’re unsure what types of mortgage are out there, it’s worth looking into, and getting the facts straight in your head before going out into the market.

Make your offer

Once you’ve got your mortgage lined up, viewed homes and are now ready to proceed, it’s time to put in an offer on what you want to be your new home. If you’re a first time buyer, you’ll have less constraints, as you won’t have an existing home up for sale slowing you down. Usually, you’ll put your offer in through your estate agent, as they will help your deal go through as smoothly as possible

Sort your paperwork

Next up, you’ll need to get your solicitor to handle the paperwork surrounding your impending move. It’s important that the finer details of your move are scrutinised ahead of signing your papers, so having a trusted solicitor on your side is an important addition.

Carry out a survey

Another crucial step is to ensure that you arrange for a survey of your new property to be carried out, to make sure that your new home has been thoroughly checked over and is valued at the price you’re paying. There are a number of different surveys and reports which can be carried out, from the cheaper condition report to the most comprehensive option of a structural survey.

Exchange contracts

Once your solicitor and surveyor are happy, it’s time to sign the contract and move ahead with the purchase. It’s at this point you’ll have to start the expenditure, as you’ll usually have to lay down 10% of the total price as a deposit. It’s important to know that once you put down the deposit, you’re committed to the sale, meaning that if circumstances change any you need to pull out of the deal, you’ll likely lose your deposit.

Complete the deal

Upon completion, the property finally becomes yours. It’s time for you to get your keys and the deed to your first home. The completion of your purchase means you’ll now have bills to pay; the 90% of your home which you’re yet to pay for is transferred from your mortgage lender to your legal representative, and then on to the seller’s representative.

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