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Wednesday, 20 March 2013 09:43

Shared Ownership Home

Buying a Shared Ownership Home


Not everyone can afford to buy a home on the open market. Recognising that most people want to become home-owners, the Government supports a number of schemes that provide people with a lower-cost way of buying a home. The main ones are set out below, and there is a much wider range of information and leaflets about low-cost home-ownership available on the Department of Communities and Local Government website. If you are a "key worker" you may also qualify for help to buy a home under special schemes.

The "right to buy"


If you rent your home from a social landlord such as a local authority or housing association, you may be able to buy your home from them. Some schemes offer discounts on the price of the property. The "right to buy" is the most widely known scheme for buying your home from the council, and it offers discounts which can be quite large. Ask your landlord whether you qualify to buy your home.

Shared-ownership


For some people, shared ownership is a suitable option to consider. Shared ownership is a "half-way house" between buying and renting. You buy a chunk of the property - say 50% - with a normal mortgage from a lender. You then pay rent on the other chunk to a social landlord such as a housing association and you have the facility to buy another chunk at a later date - for example, when your earnings have risen thereby allowing you to qualify for a larger mortgage. There isn't always a big difference between the cost of shared ownership and the cost of full ownership, but it is definitely worth checking out this option if you would find it difficult to get a large enough mortgage to buy a home in the normal way. Shared ownership schemes are normally run through housing associations, who will have their own mechanisms for deciding who can qualify for them.

Homebuy


"Homebuy" is another form of part-ownership. Unlike shared ownership, on which the householder pays rent on the proportion of the home they do not own, no rent is payable under Homebuy. Instead, you get a mortgage for 75% of the value of the property (sometimes 50% in Wales), but the remaining amount is held by a housing association, which reclaims its share when the property is eventually sold. This brings down the cost significantly, compared with full ownership. Like shared ownership, it gives you the opportunity to "staircase" and buy extra chunks of the property, if and when you can afford to do this. But availability of Homebuy is very limited, although the Government hopes to expand the scheme significantly in the future.

Extracted from the Council of Mortgage Lenders website (June 2011)

Wednesday, 20 March 2013 09:43

Buying A Property to Rent (Buy to Let)


This can be a popular mortgage option for those wishing to invest in residential rental property. Although the perception is that buy to let mortgages are expensive, this isn't necessarily correct. There are many lenders who offer competitive rates, which in many cases are generally similar to the rates offered on a standard mortgage.
Landlords also have a choice between interest only and repayment mortgages. Buy to let mortgages do differ in several ways from standard mortgages. When lenders are considering approving a buy to let loan, they generally base their decision on the likely rental income from the property and not necessarily the applicants' income. A prospective landlord needs to be aware that the rental income typically needed is 125% of the mortgage repayment, although this can vary from as little as 100% rental income up to 130%.
With our expertise in this market, we can help you find the best product to suit your requirements. With our extensive access to thousands of mortgages and our knowledge of lender's requirements, we can find you the right buy-to-let mortgage.

The financial Services Authority does not regulate some aspects of Buy to Let Mortgages
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

Wednesday, 20 March 2013 09:43

Re-mortgaging Your Property

Many of us are looking for a better mortgage deal, or would like to release some of the equity in our home but the process is often not as easy as it first appears.
So what do you need to know before you seriously consider remortgaging?

Where to start?

The first step is to contact us and we can advise you on the best remortgaging options.

We will work with you to check the terms and conditions of your existing mortgage. These will tell if you are tied-in to your mortgage deal or if there are any early repayment charges. You can then decide if it is worth switching to a different rate or stay put until the penalties have expired.

How do I apply?

We will of course guide you through the whole remortgaging process, which will include:

• An early repayment statement will be needed from your existing lender telling you how much you owe.
• An application form from your new lender will need to be completed, along with details of your income and proof of your identity
• Your new lender values your home
• Subject to all the paperwork being satisfactory, the lender will issue a mortgage offer which will contain the amount of the mortgage and the terms that they will offer you
• Solicitors will need to be instructed at this point to arrange the legal documentation, leading through to completion of the loan

How long does it take?

The whole process should take about a month to complete however this may vary from customer to customer.

Once you have received a completion statement from your solicitor or new lender, the process has finished and your new mortgage is in place.
You may have to pay an early repayment change to your existing lender if you remortgage

Wednesday, 20 March 2013 09:43

First Time buyer

First Time Buyer

You may find buying your first home a little bit daunting. With the challenge of finding your first property, choosing the right mortgage, selecting the best solicitor and making sure the whole process runs smoothly, you may find the information below useful to help you achieve the first rung of the property ladder.

The first step is to contact us and we will advise you on the mortgage options available to you. It doesn't matter if you haven't found a property just yet, we can provide you with some facts and figures that will help you select the property within your price range.
In the meantime we've outlined below some background information on mortgages for first time buyers that we hope you'll find useful.

How much can you borrow?

The amount of mortgage you can get depends on your income. Some lenders use a multiple of your income others look at how much you can afford based on your income and outgoings. As a rough guide, a typical multiple is four times your income. This figure could be higher or lower depending upon your individual circumstances and different lenders' criteria. Lenders who look at what you can afford base this on the number of people and any loans or debts that you have outstanding. Some lenders offer very good deals for first time buyers, so it always worth asking us to research the market on your behalf.

What other costs do you need to be aware of?

It is also worth remembering the additional costs, on top of your deposit and mortgage that you will be expected to pay.

For example, you will have to pay stamp duty, which is (currently) 2% of the purchase price for properties between £125,001 and £250,000, then 5% of the purchase price for properties between £250,001 and £925,000, 10% on properties between £925,001 and £1.5 million and then 12% on the remaining amount above £1.5 million. For properties up to £125,000 you do not have to pay stamp duty.
Plus you will have to pay for the survey and the valuation of the property, and solicitor's fees.
You may also have fees to pay to the lender for your mortgage. These could be an arrangement fee and/or booking fee. Contact us to find out how much these fees may be.


Wednesday, 20 March 2013 09:43

Mortgages

Whether you are a first time buyer, moving house, looking at saving money on your current mortgage or have credit problems, we are here to help you.  Contact us for a chat with no obligation.

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Wednesday, 20 March 2013 09:43

Types of Pension

Brief explanations of the different types of UK pensions are given below.

Basic state pension

Although an entitlement for most people, the amount received from the basic state pension will depend on the amount of national insurance contributions paid.

Full state pension allowance

For the year 2011/2012, the full pension allowance for a single person who has made sufficient contributions is £102.25 per week.

A married individual's state pension allowance is currently £61.20 per week if using their partner's national insurance contribution record. The married couple's pension allowance will be £163.45 per week in total (£102.25 plus £61.20).

If both partners have worked throughout their lives and have made sufficient national insurance payments individually, the separate single pension entitlements will apply. This means the total combined state pension allowance for a married couple or civil partnership rises from £161.45 to £204.50 per week.

Weekly state pension allowances (2011/2012)

Single person state pension allowance

£102.25

Married partner's state pension allowance

£61.20

Married couple's state pension allowance

£163.45

Both partners with full individual entitlement

£204.50

State Second Pension

On 6 April 2002, the State Second Pension (S2P), introduced by the Child Support, Pensions and Social Security Act 2000 replaced the State Earnings Related Pension Scheme (SERPS).

Not available for self-employed individuals, SERPS was set up in 1975 by the Social Security Pension Act 1975 and began in 1978. It is independent of basic state pension entitlement and it is based on a proportion of earnings during your working life.

S2P will initially start as an earnings-related scheme similar to SERPS but with three different accrual rates and the build up will vary for each tax year depending on the individual's earnings.

It is predicted however that at some point in the future, this will change to a flat-rate scheme to accrue uniformly over 40 years.
Personal and Stakeholder pensions
Personal pensions, introduced on 1 July 1988, originally aimed to give people who were not part of a company pension scheme their own portable pension, designed on a money purchase basis although since April 2001 certain individuals who are members of company pension schemes can also take out personal pensions.

Legislation for personal pensions and stakeholder pensions are identical (only the charges and product terms are set for stakeholder).


Annual pension allowance

Annual pension contributions have a new limit attracting full tax relief. This limit is the greater of £3,600 and 100% of salary, subject to the annual allowance (£255,000 in the 2010/2011 tax year). Any contribution over the annual allowance will be subject to a tax charge.

Lifetime allowance

As well as an annual pension allowance charge, there is a possible lifetime allowance charge if total pension funds exceed the lifetime allowance when pension benefits are taken. The lifetime allowance for 2010/2011 is £1.8 million. Recent government proposals will see these allowances frozen until the end of tax year 2015/16.

The lifetime allowance charge is applied to the excess over the allowance. This can apply in two different ways or both depending on how the excess is taken. The individual charges are;

• 25% if taken as income, and
• 55% if taken as a lump sum

It is unlikely that there will be much difference because, if someone takes the excess as income, he will be charged income tax on top of this tax charge, more than likely at 40%.


Pension benefits
You can take pension benefits between ages 50 and 75. Normally these will be in the form of 25% of the fund as tax free cash, and the rest applied to produce an annual pension, although other alternatives are now available.


Level and bases of, and reliefs from taxation are subject to change.


Occupational pension schemes

Employers can set up an occupational pension scheme for their employees. An occupational pension scheme can be offered to both public and private employees.

Public sector occupational pension scheme
Public sector schemes typically offer pension accrual of 1/80th of final remuneration for each year of service up to a maximum of 40 years plus a tax free lump sum of up to 1.5 x final remuneration.

Private sector occupational pension scheme
Private sector schemes can be either final salary schemes known as defined benefit schemes or money purchase schemes known as defined contribution schemes.

Executive pension scheme

Many directors of small to medium sized family businesses make use of an executive pension scheme. Executive pension plans are similar to occupational pension schemes in that they are subject to occupational pension scheme rules.


Types of occupational pension scheme


Final salary schemes

Final salary occupational pensions schemes offer a guaranteed pension amount, usually based on salary and time served with an employer.

Typically accrual rates of 1/80th or 1/60th of pensionable salary for each year of pensionable service are found.

E.g. Fred Smith retires on a salary of £10,000pa after 20 years in a 1/60ths scheme. His pension is 20/60 x £10,000 = £3,333.

Money purchase scheme

With a Money Purchase occupational pension plan, the pension contributions are invested and the final pension is based on the investment performance of the fund. There is no guarantee.

Individual Contributions

Individuals can contribute as much as they want although there are limits on the amount of contributions that will receive the full benefits of tax relief.

Any contribution that is not paid by the employer is classed as a member contribution even if a third party has made the contribution. Tax relief is given according to the member's situation; i.e. make sure that tax relief at source applies if the member is a non- or starting rate taxpayer. An example of this is a grandparent paying a pension contribution for his/her grandchild.

Employer Contributions

Just like individual contributions, employer contributions are also unlimited. Full tax relief will be available without limit subject to the local inspector of taxes. However, there will be a tax charge on the member where total contributions are above the annual allowance.

Eligibility

Any member of a registered occupational pension scheme can make contributions to it. However, to be eligible to gain tax relief, the contribution must be made by an active scheme member who is also a relevant UK individual. To qualify as a relevant UK individual, the scheme member must meet one of the following criteria:

  • Have relevant UK earnings chargeable to income tax
  • for that tax year
  • Is resident in the UK at some point in that tax year
  • Was resident in the UK at some point during the five
  • tax years immediately before the tax year in question
  • and was also resident in the UK when he/she joined
  • the pension scheme
  • Has general earnings from overseas Crown
  • employment subject to UK tax
  • Is the spouse of an individual who has, for the tax year, general earnings from overseas Crown employment subject to UK tax

Pension Allowances

Annual Pension Allowance

Since A-Day, annual pension contributions have a new limit attracting full tax relief. This limit is the greater of £3,600 and 100% of salary, subject to the annual allowance (£255,000 in the 2010/2011 tax year). Any contribution over the annual allowance will be subject to a tax charge. We will explain this in further detail later in this bulletin.

Lifetime Pension Allowance

As well as an annual allowance charge, there is a possible lifetime allowance charge if total pension funds exceed the lifetime allowance at when pension benefits are taken. The lifetime allowance for the 2010/2011 tax year is £1,800,000.

The lifetime allowance charge is applied to the excess over the allowance. This can apply in two different ways or both depending on how the excess is taken. The individual charges are;

  • 25% if taken as income, and
  • 55% if taken as a lump sum

it is unlikely that there will be much difference because, if someone takes the excess as income, he will be charged income tax on top of this tax charge, more than likely at 40%.

Additional Voluntary Contributions (AVCs)

It is now compulsory for companies to offer employees the opportunity to invest additional contributions into their occupational scheme where there is one, in order to boost retirement benefits.

Under existing revenue limits and since A- Day, if you are a member of an occupational pension scheme you can invest up to 100% of your total remuneration or up to a £255,000 in total.

Tax Reliefs & Contribution Limits

To receive full benefits of tax relief , pension contributions have to remain within a certain limit. Currently the limit is the greater of £3,600 and 100% of salary, subject to the annual allowance (£255,000 in the 2010/2011 tax year). Any additional contribution over the annual allowance will be subject to a tax charge.

Levels and bases of, and reliefs from taxation are subject to change.

Free Standing Additional Voluntary Contributions (FSAVCs)

Free standing additional voluntary contribution schemes (FSAVCs) were introduced in 1987.

These are run by a pension provider rather than the trustees of the employee's pension scheme. The big advantage tends to be the wider choice of investment available.

FSAVCs tax relief and contribution limits 

To receive full benefits of tax relief , pension contributions have to remain within a certain limit. Currently the limit is the greater of £3,600 and 100% of salary, subject to the annual allowance (£255,000 in the 2010/2011 tax year). Any contribution over the annual allowance will be subject to a tax charge.

Level and bases of, and reliefs from taxation are subject to change.

SIPP Pension plans

For many people a SIPP pension has become an attractive and Tax efficient method for long term saving.

Pension reform has widened the investment options available to the individual and has relaxed the rules which govern the purchase and sale of assets into a pension plan.

SIPP Pension Benefits

Another major change introduced from April 2006 is in the way individuals can take benefits or draw upon assets within a pension. When an individual wishes to retire, there is greater flexibility and choice when it comes to deriving an income.

Individuals now have the option of pension drawdown as well as the purchasing of an annuity - this gives greater control over the initial level of income derived and income flexibility during retirement.

A SIPP will allow regular and lump sum cash payments, and you will also be able to transfer other pension arrangements into the scheme. If you are employed, your employer can also pay into the plan. In addition SIPPS will allow investments from a wide range of sources including Commercial Property, shares and unit trusts.

Annual Allowance

Since A-Day, annual pension contributions have a new limit attracting full tax relief. This limit is the greater of £3,600 and 100% of salary, subject to the annual allowance (£255,000 in the 2010/2011 tax year). Any contribution over the annual allowance will be subject to a tax charge. We will explain this in further detail later in this bulletin.

Lifetime Allowance

As well as an annual allowance charge, there is a possible lifetime allowance charge if total pension funds exceed the lifetime allowance at when pension benefits are taken. The lifetime allowance is currently £1.8 million (2010/2011 tax year).

State Earnings Related Pension Scheme (SERPS)

The State Second Pension (S2P) replaced SERPS with effect from 6 April 2002. Only those who have been employed between 1978 and April 2002 are entitled to SERPS subject to their National Insurance contribution record. Those who have always been self-employed are not.

Wednesday, 20 March 2013 09:43

Pensions Explained

A pension provides income to live on in retirement. There are state benefit schemes offering limited financial support for your old age, and a number of other private schemes enabling you to build a larger fund for the future. To avoid a paltry income in retirement it is in everybody's best interest to save more for it.

State benefits are included in the State 2nd Pension, replacing the basic state pension (SERPS) from 2002. There are a number of other types of pension scheme including occupational pensions, personal pensions and stakeholder pensions.

Where the pension is an occupational scheme. it may be possible to make additional contributions in the form of AVCs, FSAVCs or stakeholder pension contributions.

Self invested personal pension schemes (SIPPs) allow investments from a wide range of sources including Commercial Property, shares and unit trusts.

Wednesday, 20 March 2013 09:43

Pensions

A personal pension is simply a way of saving money for your future retirement.

Pensions have one very important advantage - they're incentivised by the taxman. In fact, the taxman is very generous when it comes to personal pensions, adding to your pension every time you pay money in.
Every £80 you pay in is topped up to £100, giving your savings an immediate boost of 25%. And higher rate taxpayers can get even more.
Plus, on top of the tax relief you receive each time you pay into your pension, the money you've saved grows virtually tax free over the years*.
Please remember future governments may increase or decrease the amount of tax relief you get.

*There's a tax on dividend income from UK shares which pension funds aren't able to reclaim. Please note, this information is based on our current understanding of taxation law and HM Revenue & Customs practice in the UK. The amount of tax relief you receive depends on your personal circumstances and may change.


*Please note we have updated our email address and trading style to LenRose Wealth Management but still under Active Financial Partners Ltd and part of the Harwood Wealth Management Group PLC.

The guidance and/or advice contained within this website is subject to the UK regulatory regime and is therefore primarily targeted at customers in the UK.


Jonathan Hales

Independant Financial Advisor

This email address is being protected from spambots. You need JavaScript enabled to view it.

T: 01795 477744

M: 07886 516087