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Negative Equity

Negative equity describes a scenario whereby the value of the outstanding mortgage on a property is worth more than the current market value of that property. This usually happens when property prices dip. The situation makes it far harder to sell your property, since you would owe more than the amount you would receive if you sold it.

For example, let’s assume you bought your property for £250,000 with a mortgage of £225,000. Property prices fall over time and your property is now worth around £200,000. If your mortgage remains above that level, for example at £220,000, you would be in negative equity. If you sold your property, you would need to repay the bank the remaining mortgage of £220,000. Since you would only receive £200,000 from your house sale, you would need to find the £20,000 difference from elsewhere to pay back the amount you still owe. Hence why many people in negative equity end up remaining where they are in the hope property prices will rise again.

You will also find it very tricky to move onto a different loan if your existing deal runs out. Few lenders would be happy to allow you to switch loans when you are in negative equity. This means you could end up with higher monthly payments that would complicate the situation further. There is a possibility you could get a negative equity mortgage (a loan specifically designed for this situation), but they are rarities on today’s market. The best way to escape is to make additional mortgage payments if you can. These would clear more of your debt faster and return you to positive equity sooner. Rising house prices would also help if the market changes once more.

 



NHBC

NHBC stands for the National House Building Council. The NHBC was created in 1936 and leads the market in providing a warranty scheme for new properties. This provides cover against all major structural defects for the first 10 years of the property’s life.

NHBC is an independent body. They work hard to ensure the standards for new builds are as high as possible. They have created the Buildmark warranty and insurance product to make sure buyers of new properties are fully protected against potential building defects.

They also have a builder register which includes the names of all builders in the UK that are registered with them. You can search the register by entering the company name, city or county, and their registration number if known. There is no charge for this service, and it can be done online.

The Buildmark cover provided by NHBC is created to help the process of securing a mortgage. It provides the lender with confirmation that the property is covered in case anything should go wrong with it. Buildmark provides a two-year warranty on a new property and an additional eight years’ worth of insurance after that. The cover begins when contracts are exchanged on the property. Cover is typically available for new builds, but it can also be applied to newly converted homes. The maximum period of cover is 10 years. It also provides deposit insurance, covering the value of your deposit in case the builder goes out of business before you complete the process of buying the property.

 



Non Resident Landlords

A non-resident landlord is someone who owns a UK property and rents it out to a tenant but lives elsewhere for over six months in the same tax year. The non-resident landlord description is recognised by HM Revenue and Customs (HMRC).

It is very important to check whether you meet the description provided by HMRC. You do not need to live in a main residence in another country to meet the requirements, but you do need to fulfil the requirement for being abroad for over six months. Remember too that the description refers to the tax year rather than the calendar year. You should also note that you can have a residence in the UK for the purposes of tax, providing you do not spend more than half the year there.

The official government website has various forms you can review and fill in if this description applies to you. If you are a non-resident landlord, you can apply to receive the rental income gleaned from your UK property (or properties) without having tax deducted by HMRC. The form for this is NRL1 if you are an individual. There is a separate form for companies with properties bringing in rent from UK properties, known as NRL2. Separate forms exist for letting agents as well.

The scheme is obligatory to join if you meet the requirements set up for it. As such, you must make sure you complete the necessary paperwork in good time and register as a non-resident landlord with HMRC.

Jargon Buster N

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