The housing market during the pandemic
The coronavirus pandemic has posed many challenges to the prime property sector, yet, a high level of confidence in real estate market fundamentals remains, largely due to Government initiatives which are stimulating housing transactions. All new homeowners can benefit from stamp duty land tax deductions, no matter how much their property is worth. Homeowners purchasing property worth less than £500,000 are entirely exempt from paying any stamp duty tax until April 1st. SDLT (stamp duty land tax) is calculated based on the value of the home. For property purchases over the £500,000 threshold, you will pay a percentage of the total value minus the £500,000. You can refer to the Government’s stamp duty and land tax page here for more information.
How much is stamp duty land tax?
The table below demonstrates the rate you pay depending on the price of the property.
USE TABLE BELOW
To help make sense of the price brackets, if you bought a property for £690,000 for example, the stamp duty land tax payable would be:
- 0% on the first £500,000, and
- 5% on the remaining £190,000
- In total, you would pay £9,500
- Calculations based on main residence purchase only, SDLT rates are higher for additional homes.
Make a contingency plan
The average property deal takes around 12 weeks to complete, and if buyers want to take advantage of the stamp duty holiday, they may consider using a bridging loan to help get a transaction over the line. With lockdown looming over us and restrictions showing no sign of easing, conveyancing, lending and search services have become overwhelmed by a flurry of transactions. According to the Property Industry Eye “Almost a third of buyers will pull out if they miss the SDLT (Stamp duty land tax) deadline.” Therefore, a contingency plan should be brought forward sooner rather than later.
Tailored solutions to fund property transactions
Reduced risk appetite from lenders due to the economic uncertainty, as well as operational constraints in meeting the current high demand for mortgages means that bridging loans are more in demand than ever before. According to the mortgage introducer, bridging loan volumes in Q3 2020 increased by a staggering 46%. Speed of transactions is one of the key benefits of using bridging loans to finance assets, transactions can be pushed through in up to two weeks, compared with 8-12 weeks for mortgage loans. Obtaining property funding can often be a make-or-break scenario. “We have received an influx of enquiries from buyers looking for a bridging loan because of concerns about missing the deadline.” reports Paul Welch, CEO of Large Mortgage Loans. “A bridging loan offers more flexibility over traditional underwriting due to the fact that there are fewer requirements for onboarding and opening a bank account.” For particularly unusual cases, high-net-worth clients or those with associated higher risk, the flexible arrangement is attractive. Paul explains “If you have a low income but a large property asset and other assets, then a bridging lender would be more comfortable lending a sum secured across all of the assets. With a traditional lender, the usual affordability metrics wouldn’t allow you to do that.” Large Mortgage Loans have an in-depth understanding of how to present individual cases to lenders.
Average loan-to-value (LTV)
The question is, has the pandemic affected the loan to value lending model? “You might find lenders reducing their loan to value thresholds in a traditional lending model, which would mean the borrowing percentage on property would be impacted. largemortgageloands.com works with a myriad of lenders and private banks to negotiate the best possible loan terms. We can provide bridging loans from £150,000 on most property assets. With added security we can help you secure a loan of up to 100% of the purchase price.” reports Paul.
Financing aside, Paul’s advice for real estate purchases is on getting good professional advisors. “It’s important to appoint a trusted, high quality estate agent, tax advisor, and professional mortgage adviser to ensure that you have the best possible solution.”
Do you need faster access to capital? Large Mortgage Loans specialises in arranging large bridging loans to help you secure your dream property in a much shorter time frame. Contact one of our property finances advisors now to push a loan through before April 1st.
Please note that the Financial Conduct Authority does not regulate certain aspects of bridging loans and/or finance.
Your home or property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.