Seneca Reid Mortgage Newsletter Summer 2015

Fixed rate mortgages: What you need to know

Despite the Bank of England Base Rate remaining unchanged for the past six years, fresh predictions from commentators and economists about when it might rise have continued unabated.

With rates at their lowest level in history, it seems that when they do eventually change, its likely to be in an upward direction.

But when it comes to arranging your mortgage, you shouldnt let predictions about the future of interest rates dominate your decision-making. Fixed rate mortgages can offer protection from rate rises for an agreed period but there are several considerations youll need to think about before making your decision.

Predictable repayments but you wont benefit from rate cutsWhen choosing a mortgage, one of the main decisions to make is whether to go for a tracker or a fixed rate mortgage.

With a tracker mortgage, your monthly payment fluctuates in line with a rate thats equal to, higher, or lower than a chosen Base Rate (usually the Bank of England Base Rate). The rate charged on the mortgage tracks that rate, usually for a set period of two to three years.

Tracker rates might be more appealing if you have a fixed budget and can tolerate a higher mortgage payment when rates rise, as you'll benefit from a reduced monthly mortgage payment if rates go down.

With a fixed rate mortgage, the rate (and therefore your repayments) will stay the same for an agreed period. A fixed rate mortgage makes budgeting much easier because your payments will not change - even if interest rates go up. However, it also means you wont benefit if rates go down.

Longer fixed terms will be more expensiveIf you choose a fixed rate mortgage, youll need to decide how long you want your fixed rate to last. Two-year fixed rate mortgages typically offer the lowest initial interest rate. If you want to fix your interest rate for longer, you will probably pay more for that longer-term security. The term you choose will depend on your current circumstances and future expectations.

A change in circumstances could cost youDo you have any known changes on the horizon that will have an impact on your mortgage?

With a fixed rate mortgage, there is usually an early repayment charge if you repay all - or a certain percentage - of the mortgage during the fixed-rate period. If for example, you know that in 18 months time your employment contract is up for renewal and you may be asked to relocate, youd probably want to avoid being tied into a longer deal.

If you have no known changes and want to benefit from a longer period of security, then a longer-term fixed rate of five years may appeal. It might cost more initially, but youll benefit from knowing that your repayments will stay the same for that length of time.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

A fee of 350 payable on engaging our services. We will also receive commission from the lender.

Seneca Reid Limited [email protected] 01279 874480

CO

PE

N1

04

7 E

xp

. 1

7/0

6/2

01

6

Dont be drawn into trying to second guess what will happen

with interest rates over the coming years. We can help you

come to the right decision for your next mortgage.

Issue 12 Summer 2015

Your latest newsletter from Seneca Reid Limited

Viewpoint

Offset mortgages explainedOffset mortgages may be familiar in name but do you really understand their features and benefits? Heres a quick guide.

Why might you choose an Offset mortgage?Taking out an Offset mortgage enables you to use your savings to reduce your mortgage balance and therefore the interest you pay on it. For example, if you borrowed 200,000, but had 50,000 in savings, you would only be paying interest on 150,000.

Offset mortgages can be more expensive compared to a standard deal, but they can help to reduce your monthly payments, whilst still giving you access to your savings.

Advantages As you pay less interest, Offset mortgages can help reduce your monthly repayments, or enable you to repay your loan early. You maintain access to your money, should you need it. Deals can be quite flexible, allowing you to offset savings and current accounts against your mortgage.

Disadvantages Money held in Offset accounts won't earn you interest. If you don't have much saved, you won't save much on the mortgage, meaning it may be better choosing an alternative deal with a lower interest rate. Offset mortgages are usually more expensive than standard deals.

When is it worthwhile?If you have a mortgage rate that is higher than your savings rate (after tax), you may find yourself betteroff by offsetting even if you dont have a high savings balance.

In addition, you have the added security of being able to access your savings at any time (unlike making overpayments on a traditional mortgage). An Offset mortgage may be even more appealing if youre a higher rate tax payer. As there is no interest paid on the money in an Offset savings account, there is no tax liability.

Offset mortgages can offer real financial benefits if you have a mortgage and some savings. By seeking professional advice, you will gain a clearer picture about whether its the right choice for you.

What is an Offset mortgage?Usually linked with one bank account (but sometimes more), an Offset Mortgage allows the money in your savings account to be counted as temporary overpayments towards our mortgage. However, your savings remain accessible so you can still get to them if you need to.

CO

PE

N92

6 E

xp. 1

7.12

.201

5

To discuss your mortgage

needs, please get in touch.




CO

PE

N9

26

Exp

. 1

7/1

2/2

01

5

UK interest rates have been at the record low of 0.5% since March 2009.

Although recent growth in the economy has led many to suggest that rates will rise again, the continuing low inflation level, which turned negative in April for the first time on record, gives little reason to raise the cost of borrowing.

Indeed, the Bank of England has hinted interest rates wont rise until Spring 2016.

A great time for borrowersThe low interest rates have helped banks and building societies keep pricing down on mortgages.

Data from the Bank of England shows the average two-year fixed rate for a borrower with a 25% deposit is now 1.99%.

The average five-year fixed rate mortgage for someone with a 25% deposit stands at 2.98%.

Right now is a great time to take out a mortgage. But, while banks and building societies are keen to win your business, you should be aware of the fees which may make the overall price more expensive.

Proving affordabilityWhile it may be cheaper than ever to get a mortgage, borrowing has become harder since new rules were brought in by the Financial Conduct Authority (FCA) during April 2014. The new rules require lenders to look more closely at outgoings as well as earnings.

You are likely to be asked to provide pay slips and bank statements. Regular payments such as haircuts, holidays and childcare could be asked about on your application.

Rethink your savings plansIt may be a great time for borrowers, but the rock-bottom interest rates mean savers are not getting such a good deal. It's therefore more important than ever to make sure you put your money in the right type of account with the best rate.

One option is to use your yearly ISA Allowance. A cash ISA is simply a savings account where you don't pay tax on the interest. As of 6 April this year, savers can put up to 15,240 into their ISA and if you opt for an easy-access ISA you can take the money out whenever you like.

Low rates, why wait?




CO

PE

N1

04

8 E

xp

. 3

1/1

2/2

01

5

If youre looking for a new home, want to

remortgage your existing property or nd out

more about saving for the future, please contact

us for some friendly, professional advice.

If you have a pet, youll know how expensive vet bills can be.

And, like 6.6 million other pet owners in the UK, you may have bought an insurance policy to prevent Fidos latest mishap, or Mr Tibbs unexpected op, causing you serious financial hardship in the future.

But surprisingly, it seems many of us dont apply the same care and consideration to ourselves.

Its estimated that around 7 million people lack insurance that would help their loved ones avoid financial hardship in the event of their own unexpected death.

How life insurance can make a differenceManaging unexpected vets bills without appropriate insurance can be a real struggle, but its nothing compared to the risks that under-insured homeowners and their families might face. The following real-life examples illustrate how dying without life insurance can have a catastrophic effect on those left behind.

Why your pet may be better insured than you

Example: Mrs Brown

Mr Smith and Mrs Brown were business partners who jointly owned a Buy to Let property. They had purchased it with a 70,000 Buy to Let mortgage.

Mr Smith was diagnosed with cancer and died shortly afterwards. He had no life cover. Solicitors arranged the estate, transferring the property to Mrs Brown and arranging for Mr Smiths widow to receive half of the rent from the property.

The solicitors informed the mortgage lender of the transfer of property. The mortgage lenders said the death of Mr Smith represented a Material Change to the mortgage contract and as a result demanded the full loan amount be paid immediately.

Mrs Brown had to remortgage the property to pay off the 70,000 mortgage. She also had to cover additional administrative and legal costs.

Example: Mr and Mrs Jones

Mr and Mrs Jones were married, and living together, with a residential mortgage. The property was solely in Mr Jones name.

Mr Jones was killed in an accident. Although he had no life cover, he had left a detailed Will. His two children from a previous marriage disputed the Will, meaning the estate was left unsettled for several years. The mortgage lender became aware there was no life cover in place and therefore no immediate way to pay off the mortgage. They then started proceedings to repossess the property.

Mrs Jones was forced to remortgage in order to pay the lender. She also had to cover additional administrative and legal costs and stamp duty.

Have you insured what matters most? If the unexpected happens, the right insurance can make all the difference. Appropriate protection, such as life or critical illness cover (written in trust) can help you, your business partners or your loved ones avoid financial difficulty at an already traumatic time.

If you are among the 7 million UK homeowners that dont have any

life insurance in place, or simply want to review your existing cover,

please talk to us.

CO

PE

N1

04

3 E

xp

. 1

7/0

6/2

01

6


Would you lose your home if you lost your income?

Buying a new home is probably one of lifes biggest and most exciting events. Its also a big financial commitment one that could be with you for 25 years or more.

Your ability to maintain your mortgage payments relies on a constant income, so how would you continue to make your mortgage repayments if your income was reduced or stopped?

Why gamble on your future? You are far more likely to suffer a serious illness than see your numbers come up.

Winning national lottery jackpot: 1 in 14 million chance1

Thinking about the bad things that could happen death, serious illness, injury isnt pleasant, especially when we feel fit and healthy.

But by confronting the reality that it could happen to you, and putting plans in place to deal with it, you can give yourself extra peace of mind today and make sure you and your family are financially protected if the unthinkable ever happens.

A report by Macmillian Cancer Support showed that 4 in 5 people with cancer are affected financially.4

There are a range of products available that can provide a lump sum or a regular income on death, or diagnosis of a critical illness, and they could cost less than you think.

Choosing the right plan is important especially if you already have some cover in place. This can be reviewed and we can determine if the cover is still appropriate. Please get in touch so that we can assess your circumstances and the cover options available to you.

1http://www.theguardian.com/uk-news/2014/nov/17/national-lottery-numbers-20-years- katie-price-win-jackpot2http://www.worldstrokecampaign.org/learn/the-facts-behind-1-in-6.html3http://www.cancerresearchuk.org/cancer-info/cancerstats/incidence/risk/statistics-on-the-risk-of-developing-cancer4Macmillan Cancer Support Cancer hidden price tag report (2012)

Having a stroke: 1 in 6 chance2

Getting diagnosed with cancer: 1 in 2 chance if born after 19603


CO

PE

N9

67

Exp

. 0

1/0

4/2

01

6

10 tips to help you sell your home

1 6

2 7

38

4 9

510

Its often said that moving home is one of lifes most stressful events - but the hard work starts well before the day of the move.

Careful planning and preparation can make a difference when it comes to impressing potential buyers. If youre planning on selling your home, here are 10 top tips that might help you sell your property faster.

GardensSpend some time tidying up any outside areas. Clear drives and pathways, mow the lawn, clean any garden furniture and make sure any outdoor lighting works. The approach to your property will be your first chance to wow or worry your potential buyers.

Front doorFirst impressions count, so make sure the front door is clean and the glass is sparkling. If your front door is wooden, you may want to give it a fresh coat of paint but remember to cover up or remove any metalwork before you start.

Clear some spaceCreating a sense of space is a real winner so make sure you have a good clear out. You could even think about moving some of your larger items into storage for a period before you put your property on the market. Watch out for over-stuffed wardrobes - buyers often check the amount of storage space.

Clean, clean, cleanClean everything until it sparkles. Pay special attention to the kitchen and bathroom: get rid of any limescale, clean tile grouting and hang fresh towels. Hiring professional cleaners could be money well spent.

Odd jobsMake sure youre up to date with your to-do list of small jobs around the house that youve been meaning to get around to. Replace any broken light bulbs, fix the bathroom locks, replace washers on any leaky taps and oil squeaky hinges.

Freshen upA fresh lick of paint in a light neutral colour creates a perfect blank canvas and makes your home seem lighter and bigger. If you have any marks on painted walls that you cant wipe off, dig out the paint and freshen it up.

KitchenThe kitchen is the most valuable room in a house so make sure its spotless. De-clutter surfaces of appliances, jars, pots and chopping boards and replace any tired old tea towels.

AromaClear drains, wash bins and open windows throughout the house. If youre a smoker, make sure you do it outside in the days leading up to a viewing. Strategically place plants or freshly-cut flowers and, if you can bake fresh bread, cakes or brownies, do so just before a viewing. Where this is not possible, try brewing some fresh coffee.

PetsIf you have pets, consider leaving them with a friend for any viewings. Make sure you have one last vacuum to remove any pet hair, especially if you have a cat, as many people are allergic to their fur.

Go outAgents know their job so let them show your property. They will be best placed to answer tricky questions, highlight the great features of your home and know what to downplay.

By following some or all of these tips, youll be sure to present your property in its best possible light.

If youre thinking about moving on or

remortgaging, we can help you nd the

right mortgage deal.

CO

PE

N1

04

4 E

xp

17

/06

/20

16




How to avoid a DIY disasterWith the warmer weather upon us, you may be tempted to embark on some DIY or home improvement projects this summer.

And, with a seemingly-endless supply of online hints, tips and walk-through guides available at the click of a button, you may feel more confident about tackling tasks that you may previously have left to an expert.

But before you get started, its worth bearing in mind that British property owners pay out a massive 4.4 billion to repair the damage done by DIY. If you are diving into a project, do remember to take care, ensure you have the tools and knowledge for the job youre undertaking - and check your insurance cover before you begin.

Check your policy for Accidental Damage coverDespite our best intentions, accidents do happen. Having the correct home insurance in place before you begin a DIY project will mean your policy will pay out to repair any damage or replace any broken or damaged items.

You may think that a standard home insurance policy would cover all of this. But without Accidental Damage cover (which only comes as an additional cover with some policies), the results of a stray drill, spilled paint or blown electrics may not be covered. Standard home insurance also tends to provide only limited cover for accidental damage to things like windows and bathroom fittings.

Full Accidental Damage covers for scenarios such as:

Buildings Repair of a burst pipe caused

by drilling through the wall to put up a shelf

Putting your electrics back in working order after a botched rewiring job

Repairing your ceiling after a foot has gone through the loft floor

Contents Replacing your carpet after spilling

a tin of paint

Covering the cost of valuable ornaments damaged by the failure of TV wall mountings

Replacing garden furniture damaged by falling tree branches

As with every type of insurance cover, there are exclusions and excesses that will apply, so it is important that you check your cover meets your needs and expectations.

Know when to call in the professionalsBe honest with yourself about the limits of your knowledge when it comes to the task at hand. Do you understand it well enough to do it safely? Would you benefit from some proper training or guidance first, which you may be able to pick up for free from the local DIY store?

Or, should you simply leave it to the professionals? Some jobs, like those listed below, have a higher risk of going wrong along with more costly consequences:

Electrical work Plumbing Structural renovations Roof repair

A surprising one in ten DIY attempts in the UK needs attention from a professional, after the initial attempt fails, so you might actually save yourself time, money and hassle by hiring a qualified tradesman from the outset.

CO

PE

N1

05

2 E

xp

. 1

7/0

6/1

6


Taking out a life insurance policy gives you valuable peace of mind: you know youve protected your family against financial hardship, should the worst happen.

But how can you make sure your policy will pay out quickly, to those wholl need it most, should you die? The answer might be to write your policy in trust.

What is a trust? A trust is a legal document that allows you to specify what will happen to your money after your death. If your life insurance policy is written in trust, any payout will go to the trustees youve chosen, who will then ensure the funds are distributed to the people youd like to benefit from the policy (the beneficiaries).

Why is a trust so important?Putting your life insurance policy in trust gives you control over who the beneficiaries are, helps them avoid Inheritance Tax penalties and helps ensure they receive the money quickly.

ControlEvery year, many people die without having put their life insurance policy in trust. As a consequence, the payouts become subject to the delays caused by the processing of a Will and, where there is no Will, the complex laws of intestacy come into play. This could mean the benefits of the policy will form part of your estate, and may not go to the people of your choosing. With your life insurance in trust, you can specify who you want the beneficiaries to be. This is especially important if you are not married or in a civil partnership.

Inheritance Tax A life insurance policy that has been written in trust does not form part of your legal estate and is not subject to Inheritance Tax. This allows the entire policy payout to pass to the people you intended to benefit from it. Even if your partner is the named beneficiary of your policy (and therefore the claims payout would be exempt from Inheritance Tax under the current rules), it can still be worth putting your cover in trust to speed up the policy payout.

Faster payment Using a trust should help ensure that your life insurance payout is passed to the people of your choice more quickly without waiting for lengthy legal processes, such as probate. This can be a welcome relief for those left behind during what is likely to be a very stressful time.

Setting up a trust Trusts are usually simple to set up, but its important to select the right type of trust and complete the documentation carefully.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

The Financial Conduct Authority does not regulate Trust Advice.

The matter of trusts

Seneca Reid Limited

Thremhall House,

Thremhall Park, Start Hill,

Bishop's Stortford,

Hertfordshire,

CM22 7WE.

01279 874480

[email protected]

www.senecareid.co.uk

If you're thinking of putting a life policy in trust, please talk to

us rst. We can tell you if its the right choice for you, which

type of trust is most appropriate for your circumstances - and

help you put the trust in place.

CO

PE

N1

05

1 E

xp

. 1

7/0

6/2

01

6

Documents

Seneca Reid Mortgage Newsletter Summer 2015