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Mortgage Advice – Mortgage rates set for huge increase.

Its the spookiest month of the year so how about a bone chilling story?

Ok so maybe that was a bit of strong opening headline but it got your attention and that is what I am hear to do I guess.

As you are probably all to aware food prices are on the rise as are energy bills but not to be the bearer of bad news but it is possible that mortgage payments might be about to rise as well.

At this very moment the Bank of England base rate is at an all time low of 0.1% after it was slashed in march of last year to help limit the damage from the pandemic. As you will know if the BoE base rate goes up as does mortgage rates.

Many experts are predicting that the UK could be heading for the biggest increase in mortgage costs since 2008!

The first increase is due to begin in December with a slight increase of 0.15% which would take the base rate to around 0.25%. But many experts are predicting that it could go up 0.5% of an increasing meaning if you have a £200,000 mortgage it would increase by £50 a month.

It may not seem like much but coupled with increasing food and energy costs this could result in quite the increase in a families monthly budget.

Currently their is some fantastic mortgage deals out there that we have access to. As the mortgage is most peoples biggest expense now would be the time to get locked into a fixed term deal for at least two years to allow you to budget and rid out this storm.

Get in touch to find out the best deal with have available

0131 285 0136
07875664336
darren@acumenfinance.co.uk

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Mortgages for self employed people – Should I take it all in Salary or Salary/Dividends

When you are self employed and looking for a mortgage should you take everything in a salary or salary plus dividends?

The real answer is it does not really matter!

There seems to be this myth out there that lenders will base all lending decisions off your salary if you are self employed.

Which technically is not true. All the lenders decision on affordability etc will be taken from your tax calculations so it will be based on salary and dividends.

Really what it comes down to is what is the most tax efficient way for you and your business. Which is why I recommend that every self employed person get a accountant well in advance of applying for a mortgage as it will help you plan your tax efficiently.

One often overlooked point by a lot of self employed people is remaining profit left in the business after you have taken a salary. Most lenders will want to see a comfortable cushion of profit still left in the business even after all salary and expenses paid.

The reason behind this being that the lender wants assurance that should the business suffer a downturn it will still be able to meet its expenses and salary which means you will still be able to pay your mortgage. Again another reason I suggest anyone that is self employed should get an accountant from day one.

So do not go giving yourself a huge salary for your ego and leaving nothing in the business cause I guarantee you that this is a big red flag to a lot of mortgage lenders.

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Will mortgage rates rise in 2022?

The pandemic was not great on a lot of sectors of the financial services industry with interest rates dropping to a low as 0.1% which lead to low mortgage rates. Which was excellent new for those people who found themselves looking to buy.

It is also a good time to for those looking to lock in a fixed term mortgage or remortgage.

However houses prices have rising by nearly 60% in some parts of the country which some people believe could lead to raise in mortgages rates in 2022.

You only need to look at US to see this were it is already happening they are currently seeing a 3% or more rise in interest rates.

Will this happen in the UK in 2022?

Its a good question!

Currently mortgage rates in the UK are very low fuelled by a base rate of only 0.1% which has meant some mortgage rates like that offered by Halifax are as low as 0.8% (if you happen to have a 40% deposit might I add).

But personally I feel with household bills and the price of food rising coupled with inflations being at around 3.2% it has to have a knock on effect to mortgages rates leading me to believe that mortgage rates will rise in 2022!

So if you coming to the end of fixed term now would be the time to remortgage and not delay in doing so because all the evidence you need is currently being played out in America as to just how drastically your rate could jump up.

I would even say that even if you are still in a fixed term it maybe well taking the hit with an ERC as the potential savings you will make should interest rates rise would be massive.

I believe slowly interest rates will start to rise in 2022 as consumer confidence rises which in turn push up mortgage rates.

Now is the time to get another 5 year fixed rate deal locked in.

0131 285 0136
07875664336
darren@acumenfinance.co.uk

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Mortgage Rates Update

This week has seen the biggest decline in mortgage rates in a single month since May 2020.

There is also more choice now for first time buyers those people looking for 90% to 95% loan to value have a lot more choice than the same time last year so it looks like now could be the time for first time buyers to make the move.

The increased competition for mortgage lenders has also meant that rates have now dropped below 1%. So those of you looking to buy a property or looking to remortgage with big deposits and a clean credit history can no benefit from these rates below 1%.

There are currently 72 two year fixed and 29 five year fixed rate mortgages below 1%!!!

If you are looking to buy or remortgage now could be the time with a many two and five year fixed rate mortgages below 1%.

Give us a call on 0131 285 0136 or 07875664336

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Are students lets a good investment for buy to let investors?

One question I often get asked from property investors is student accommodation a good investment?

There is 143 universities in the UK spanning the length and breadth of the UK.

Which has made the UK the second most popular destination for students studying overseas beaten only by the USA which has more than 5,500 universities.

As a result of the UK have so many universities it has created and sustained a lot of secondary industries like the private rental sector (PRS) which gives a lot of students there first taste of freedom and life in the real world.

Which has made the student letting market very popular with private and institutional investors. Below are some of the characteristics of the student letting market and some of the threats to it.

Rental Yields – Data has shown that landlords who include student lets in their portfolios have consistently achieved higher yields compared to those that don’t.

Data suggest that the best yields are located in smaller university towns and cities. For landlords where student population to be below 25,000 appears to offer the best investment opportunities.

For example Swansea where Swansea University is home to 20,375 students and average rental income is around £22,140 and a yield of around 9.56%!

Demand – The demand for PRS student accommodation has grown considerably over the past three decades. Just under 570,000 student opted for privately rented dwelling for there full time accommodation.

Allow student numbers can be affected by macro environment like changes to government policy. The demand for student accommodation is projected to continue in an upward trend.

Some of the threats to student accommodation for property investors:

COVID 19 – The pandemic could see many students choosing to study remotely which would mean they can remain at home while studying. However a recent study suggests this is not a popular choice among students who would much rather to study onsite.

Institutional investors – As highlighted a lot of big names are looking to move into the letting space and buy up a lot of property. Which could mean there is not as many properties to go around for investors. None the less the demand for housing is no where near being fulfilled and as mentioned above the number of students choosing higher education is increasing every year.

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How are self employed mortgages calculated?

So one question we get quite a lot is how are self employed mortgages calculated?

Quite simply put it is not as straight forward as a mortgage for someone that is employed (I think I just heard collective sigh of all the self employed people reading this).

It can be more difficult to persuade mortgage lenders to allow you to borrow the amount you are after. However one thing that works in self employed persons favour is that every lender is has a different policy when is comes to how the approach self employed mortgages which is great news as it means even if get a no at one lender it could as easily be a yes with another lender (That is one of the many reasons why you need a good mortgage advisor as we get you that yes quicker *wink wink*)

So in this guide I thought I would breakdown a few different tops :

  1. How much can you borrow on self employed mortgage?
  2. Should I use a self employed mortgage calculator?
  3. Sole Trader mortgage affordability
  4. Company Director mortgage affordability
  5. Contract mortgage affordability

Lets get started!

So how much can I borrow if I am self employed?

There is no real set in stone method that every lenders uses to calculate this. If you are employed or self employed and meet the mortgage lenders criteria, you can normally borrow about 4.5 times your annual income.

The 4.5 times your annual income is usually the max most mortgage lenders will let you borrow however do not think all is lost there is some mortgage lenders that will allow you to borrow up to 5 times your annual income. There is even some mortgage lenders out there in the big world that will allow you to borrow 6 times your annual income but again it comes down to knowing who these lenders are and there criteria. If only there was some kind of specialist mortgage advisor that has this know already and could do this for you? I wonder where you could find them?

So as you may have guessed I am saying getting a mortgage advisor who specialises in working with self employed people is the best thing to do as they will be assess your income correctly and know which lender is the best fit. Some lenders for example will want you to have records for over a specific time frame like 3 years where as other lenders only require 12 months.

Should I use a self employed mortgage calculator?

Quite honestly it is probably best to just avoid using any calculators if you are self employed because as I mentioned above when it comes to self employed mortgages every lender has different criteria. So because you use a calculator on one site it does not mean that it matches the criteria of another lender.

The real solution to this probably is to speak to an advisor like me who specialises in working with self employed people to enable them to get a mortgage.

Sole trader mortgage affordability

So for a lender to be able to comfortable with giving people self employed mortgages they first need to establish a persons annual income. So they way most lender will do this is via a well documented history of trading is required.

Most lenders require three years trading history before they will consider the applicants income stable enough to lend on some are happy with two years, and thankfully other will accept sole trader and partnerships on a mortgage with 1 years self employed income.

However it is essential to have an accountant! something that a lot of self employed people take for granted – as when it comes to apply for a mortgage as a self employed person you need your self assessment tax  year overview and SA302 documents – as these documents outline the annual turnover, expenses and net income.

I know I can hear all the self employed people saying but an accountant is another expense I need to cover! If your accountant is any good he should be saving you more money than he is charging so get over it your a business owner stump up the cash for a good accountant.

Please explain company director mortgage affordability?

So just when you started to get your head around all of this I go in throw in company director mortgage affordability where everything is all turned upside down. That may have been a slight exaggeration – there is a few slight different to company director mortgages but lucky for you I am hear to explain.

So the most obvious different to a company director mortgage than a self employed mortgages is that most company directors tend to be registered as PAYE employees of the business which then pays out the individual tax free allowances as a salary and then any additional income is then paid as a dividend from the profits.

So the simply truth when it comes to lenders and company director mortgages is that most lenders will only consider salary plus dividends however there is some that will also consider an applicants share of of net profits of money that is left in the business. Which again comes down to why you should use the services of a mortgage advisor as most mortgage advisors will know already which of these self employed mortgages lenders will look at share of net profits left in the business thereby saving you a lot of time and hassle.

It is not uncommon for company directors to have a private pension contributed to by the company before tax is paid, which could be taken as a salary should the company director choose to do so and the happy news is that there is self employed mortgages lenders that are willing to consider a pension contribution as a potential income and add this into the calculations to the borrowers income – your friendly neighbourhood mortgage advisor should know exactly which lenders will do this and which ones to approach.

Being able to use pension contributions as a form of income is particularly helpful to borrows who are looking to apply for the biggest mortgages possible based on self employed income. So instead of changing your plans and potentially missing out on your dream home – speak to an advisor that specialises in self employed mortgages to get you the best deal.

Finally can I use my contractor income for a mortgage?

First off if you made it this far I salute you!

Getting a mortgage as a contractor can be tricky. Mostly due to the self employed mortgages lenders having a lot of different criteria on what exactly defines a contractor which as you probably have gathered dictates how much of a mortgage a contractor can get.

As a contractor you are either a employed person working on a fixed or short term contract or you are a self employed person that works through a main company.

Every self employed mortgages lender is very different and will a different policies on who they will and unfortunately will not lend to and sadly it is usually based on how long you have been contracting for, also how long you have been working in that industry for as well as a host of other reason like if you have had a recent contract renewed or how long is left on your contract.

So as you can see there is a lot of different factors to weigh up when it comes to a contractors mortgage. But do not despair all you contractors out there (That rhymed). There is specialist lenders who in there in the big self employed mortgages world that consider applications from contractors – so again as has been the main point of this entire monologue is that speak to an advisor who knows exactly who will look at these contractor mortgages.

Thanks for reading all of information on self employed mortgages and I hope it has been helpful – the main point to all of this is simply it is really important to get advice from a specialist in self employed mortgages as it will save you time, stress and potentially a lot of money in the long run.

If you are looking to get in touch you can get me on :

darren@acumenfinance.co.uk

0131 358 8231

07538 950773

Or fill out the contact form on the website

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What is the biggest mistakes company directors make when trying to get a mortgage?

So are you will have no doubt seen we consider ourselves specialists in getting mortgages for company directors.

Through the many mortgages we have done for company directors we have started to see a distinct pattern in some of the mistakes that company directors make when looking to get a mortgage. So we thought we would outline them today and see if we could help out any one looking at mortgage for company directors.

  1. When liabilities outweigh assets – what this boils down to is when we look at your companies accounts I want to see is that you own or your company is worth more than its liabilities.
  2. Believing your directors loan is a form of income! – This is one we run into on a regular basis and believe me we get it as a director you want to invest money into your business to make it grow. However when you start to take that money back out it is pretty much a loan which any lender will not view as a provable form of income.
  3. Trying to get a mortgage without 12 months of accounts – this is an easy one if you don’t have at least 12 months of accounts don’t even bother trying to get a mortgage for company directors. It is a waste of our time and more importantly your time.
  4. Stop living in your overdraft – We get it as a company director you work long hours to grow your business and every so often you like to indulge which might mean dipping into the overdraft. But when you look at it from a lenders point of view if you are dipping into your overdraft a lot how are you know going to afford this mortgage payment.
  5. Going directly to the bank – Know this one might seem a bit bias as we specialise in mortgages for company directors. Banks can be very linear in there thinking and as a company director you will be aware that everybody’s business is different which is often not easy for banks to understand. So why not let a specialist mortgage advisor who has sourced thousands of mortgages for company directors do it for you as we have developed the relationships with the lenders that know and understand company directors.

Hope this has been helpful – if you are looking for mortgage you can give us a call on 0131 358 8231 or email darren@acumenfinance.co.uk

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What is invoice factoring and how can it help business cash flow?

When it comes to invoice factoring it can be broken down into two forms :

  1. Invoice Financing

2. Invoice Discounting

So what is invoice finance and how does it work?

In its simplest form you continue to provide your product/service to your customers and then send out invoices and you then pass these invoice details over to a invoice finance provider. Are you still with me?

This invoice finance provider will then pay you an agreed upon percentage quite often as quickly as 24 hours after receiving the invoices. Then depending on the agreement either you chase for payments from your customers or the provider can do that for you. You then receive the remainder of the invoice amount once the invoice is paid minus any service fees.

Know you do not have to use invoice financing for every invoice you send out it is possible to arrange invoice financing for a single invoice if you so choose (this can also go under its other name of spot factoring). Normally this is used for companies that send out a few invoices but for large amounts.

So what are the benefits of invoice financing?

  • It is far more flexible than a business loan or overdraft
  • A decision to lend is often far quicker
  • The level of funding grows as the company turnover grows

Know to get into some of the facts and figures of invoice financing. The typical costs associated with invoice finance are services charges and discount charges.

Service Charge – it is a bit of all encompassing terms for everything the provider does to give you this facility so think along the lines of management, collections and admin costs. The rates tend to go from around 0.75% to 2.5%

Discount Charges – are very similar to the interest payments you make on a loan and normally they are between 1% and 3% over base rate. The discount charge will be calculated daily following the release of the money (essentially the longer your customer takes to pay the more you are charged).

Invoice financing can be a great way for small businesses to turn there invoices into cash which allows them to grow faster than they would have been able to if they had to wait for all customers to pay there invoices. At this point in time over 44,000 companies are turning their unpaid invoices into instant cash.

If this is something you would like to discuss why not get in touch via email using the address below :

darren@acumenfinance.co.uk