Get on with your AIP to get moving in a property upturn

Similar to the temporary IT labour market, the mortgage market usually slows down about now as summer holidays for agents, advisers, buyers and sellers get in the way -- but not this August.

In fact, whereas once the Spring was traditionally when the property market upturn happens, it is clear that September is shaping up to be the new April, writes CMME.

So if you are a contractor who has spent the summer considering moving to a new property, or if you would like to exploit low mortgage rates and invest in buy-to-let, the ideal time to make the jump is upon you.

And don’t just take my word for it. Speaking to The Sunday Times this month, Pete Young, the head of estate agency John D Wood said: “Next month will be busy, with not only increased demand but also increased supply.

“If you are thinking of moving, it is best to get your property on the market in time to benefit from the widest exposure before the Christmas lull.”

Housing market forecasts

Despite a subtle cooling in the market in June, the Halifax Price Index still shows sales rocketing by as much as 10.2% in the past 12 months to July. Meanwhile, the respected industry magazine Mortgage Solutions this month quoted a rise in the average house price to £186,322. This signifies an increase of as much as 3.6% in the three months to July.

From these statistics the general outlook is still buoyant. Be aware though that some commentators are suggesting the market is set to dip, particularly in London where sellers are cashing in on the inflated prices to move to cheaper counties. This is increasing the supply of properties on the market so buyers have far more choice.

Stand out from the crowd

If you make the decision to sell, it is vital that you try to do everything you can to improve your chances of selling your property, and to move on to your next home during the so called ‘September bounce’.

Remember, the market is fiercely competitive so it is essential to stand out from the crowd as a buyer because you will now be having to worry about a sale and fresh purchase at the same time. From all the contractors we’ve helped and advised in the past, it’s clear that the key to a successful offer on a property is being able to prove that you are a serious buyer. The most important weapon in your armoury to do that, and to beat rival buyers with, is an Agreement In Principle (AIP) from your chosen lender.

AIP - Top Tips for contractors

This certificate shows estate agents that you are ‘good for the money’ and is crucial to your chances of success if you are buying in a competitive market, like London and the South East. We have drawn up the following tips for ContractorUK readers to help make the process of securing an AIP stress-free.

  • Have knowledge of your credit history and be aware of all of your credit commitments as you will need to give details of these when you apply for your AIP
  • Have an idea of the loan size you require and what your maximum purchase price is. You will also need to state what deposit you can put toward your house purchase
  • You will need to have your contract and/or accountants details to hand for you and your partner or anyone else that you are purchasing the property with
  • You will also need to know what your outgoings are e.g. mortgage or rental costs, utilities, food, travel etc. so that your adviser can check your affordability against your chosen lender’s criteria for lending.
  • Typically, many couples marry in the spring/early summer and then the focus is on buying a new home. If this is you, ensure that both you and your partner have made the appropriate name change to: passports, driving licences and any other documents that can be used as a proof of address.
  • Ensure that your name is on the electoral roll at your current property. Often, contractors are still registered at their parent’s property and choose to vote by post, rather than changing the details. However this can have a negative impact on your credit score, so double-check it’s your name on the electoral roll at your property.

Once you have collated all of the above, your mortgage adviser will be ready to talk you through all of the options available and then be able to offer a mortgage product that suits your unique needs. By providing as much information as possible at the outset, your AIP can be put together promptly, so that as soon as you approach estate agents you can prove that you have a deposit and that you have the lender’s approval to make the purchase. This will put you in a strong position over and above other purchasers in this fiercely competitive market.

Today’s ‘best-buy’ contractor mortgage rates

A specialist contractor mortgage adviser can base your mortgage affordability on your contract rate alone, whereas if you were to approach a lender direct, on your own, they may demand to see more than two years of your company’s accounts.

For those with a 25% deposit, contractor-friendly lender Furness Building Society offers a discounted variable rate for two years at 1.70% with a £999 arrangement fee. If you don’t like the idea of running the gauntlet on interest rates, Halifax offers contractors with a 25% deposit a two-year fixed rate at 2.29% with a £1,499 arrangement fee. It also offers contractors who can muster up a 40% deposit the opportunity to benefit from a five-year fixed rate at 3.39% with a £999 arrangement fee.

But don’t delay

If you want to take advantage of the September bounce, now is the time to get the finances and paperwork in order. Then, it may just be a case of giving the walls a lick of paint to freshen up the rooms, de-cluttering and perhaps tending to any garden or outside space. Once those last refinements are  made, you will then be in a position to start marketing your property and moving on to your next home. Good luck and remember; jump in step with next month’s bounce!

For more information on contractor mortgages please click here

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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