Index valuations are being used by a number of lenders to determine the market value of your property without actually having to send out a valuer. The most common use for them being for remortgages and further advances.
However, I have noticed many times where the index valuation has been seemingly a lot lower than your expectations of the actual value. So you either accept it, or pay for a valuer to go out and double check the individual valuation (for an additional cost ,of course).
Landlord Insurance - professional rates - discounted
Now here’s the significance:
1. Many (and one lender confirmed to me - the majority) of index valuation amounts (when contested) are overturned by the valuer, who frequently gives a higher figure.
2. The index valuation can determine the level of the further advance, and if it’s a remortgage, what type of mortgage product you are eligible for – so if you don’t contest it, you could end up being put on a worse rate.
For example:
Current loan is £129,500, Index valuation is £175,000 therefore loan to value is 74% - eligible product is 6% for 2 years
However, if you contested the index valuation, as you believed it was actually worth £195,000, and the valuer confirmed this was the case – you’re now eligible for their 70% LTV product which is 5.4% for 2 years.
So the saving is 2 years interest savings of £777 – minus the valuation £120
£657.00
Well you know the old saying – better in your pocket than a lender!
Tip of the week 2 -
Are you paying too much tax on your rental profits?
With the welcome advent of some low SVR rates, many investors are starting to make significant profits from their portfolios. Significant for the taxman, that is.
I can’t claim any credit for this tip, as it is brought to you by an accountant friend of mine, Stephen Fay ACA. He’s an active investor and specialist property accountant,
(so he knows what he’s talking about).
Are you ready for this? Then here goes:
All property investors are required by the taxman to file tax returns, and to pay income tax on property rental profits. Whilst most tax returns will include the ‘obvious’ costs, such as mortgage interest and insurance, many investors fail to include all the costs they are entitled to claim.- meaning they pay too much tax.
Consider the following allowable expenses - often missed by investors:
Legal fees associated with arranging finance – even for new properties. Ask your solicitor to provide a separate invoice for the cost of dealing with the mortgage – this element is then allowable for income tax purposes. Don’t forget the valuation fee if it was a lender’s requirement.
Mortgage arrangement fees are allowable for income tax purposes (even if added to the mortgage).
‘Pre-commencement. Expenses’ – expenses incurred up to seven years before a property rental business starts may be claimed as allowable expenses if they would normally qualify.
Tax returns that haven’t included these, and lots of other legitimate expenses, can easily be re-stated to reduce the taxable profit.
Call one of our advisors today for more information 01424 205 373
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