Topic 15 - Other Factors that Affect the Lending Decision Flashcards
Work that requires planning consent:
- Work on an existing property outside the scope of permitted development
- Work on an existing property within a conservation area
- Building a new property
- Converting an existing building e.g. a barn
- Dividing a single property into separate homes
- Work that would contravene original planning consents
Building work subject to regulation:
- Erection of a new building
- Extension of an existing building
- Cavity wall insulation
- Adding or removing internal walls
- Loft conversion
- The underpinning of a building’s foundations
What are main environmental factors causing concern?
- Radon gas
- Overhead electrical power lines
- Motorways
- Train-lines
Higher lending charges:
When LTV exceeds a certain level, the lender may charge a higher lending charge.
Some lenders use the charge to buy a mortgage indemnity guarantee (MIG) policy
Subrogation:
The right of an insurer to pursue a third party that caused an insurance loss to the insured person. In the context of a mortgage, the insurer will sue the borrower. The lender could also sue the borrower for the excess.
MIGs can be subject to this in 6 years. The lender can chase the borrower for the 20% excess and the insurer chases the borrower for the other 80% they paid out to the lender
What mortgage fees may be payable?
- Reservation fee
- Arrangement fee
- High lending charge
- Lender’s reference fee
- Adviser fee
- Mortgage packager fee
What legal fees may be payable?
- Local Land Charges Registry
- Land Registry search
- Environmental search
- Drainage search
- Bankruptcy searches
- Land Registration fees
- Indemnity fees
SDLT rates:
First £125,000 (Nil)
£125,000 - £250,000 (2%)
£250,000 - £925,000 (5%)
£925,000 - £1.5m (10%)
First-time buyer SDLT exemption
First £300,000 (Nil)
£300,000 - £500,000 (5%)
The exemption does not apply if the property exceeds £500,000
SDLT for joint buyers:
In order to benefit from the first-time buyer exemption, both must meet the definition of a first-time buyer.
This includes property anywhere in the world.
Buy-to-let and second home purchases for £40,000 or more are subject to how much additional SDLT over and above the standard rate?
3%.
3% on first £125,000.
£125,000 - £250,000 is 5% and so on.
SDLT on a multiple property purchase:
Determined by the average value of each property so for 4 properties for £800,000, each would be charged at £200,000 each.
What is the major interest threshold for SDLT
40000
Or there share in a house is less than 40000
They would not pay the SDLT surcharge.
What are special rules that might come into play when buying a second home with regards to SDLT
If an individual buys a property before selling their first they pay the surcharge but can claim it back if they sell in 36 months
If they sell their main home at the same time as keeping a BTL property no SDLT will be payable if they buy the new family home in 36 months
What unique circumstances with married couples can mean they do not pay SDLT
If a court orders, as part of a divorce settlement, that one party may remain in the former marital home until a specified event, such as remarriage or sale, but both parties can remain as joint owners. The surcharge will not apply if the person who left the property buys another main residence.
In circumstances where a separation is likely to be permanent, SDLT will not be payable if one party buys a new home before the family home has been sold or transferred. This ‘relief’ is not automatic, and each case is considered in light of the circumstances, but there must either be a Court Order, a separation agreement or a permanent desire to separate.
In situations where a spouse or civil partner transfers or sells their interest in a property to their spouse/civil partner, as long as there is only one buyer and seller, and they are married and living together on the date of the transfer
