Tag Archives: income
Renting costs twice as much as owning a home in US cities
People renting a home in the United States can expect to pay twice as much of their incomes on their rent than an owner on mortgage payments, new research has found. It means that it is more affordable to buy a home now in most US metros than it was 15 years ago, even for those putting down less money on a home, according to a Zillow analysis of third quarter income and home value data. Renters, however, continue to pay an increasing share of their income to their landlords as rents soar and incomes remain flat. On average, US home buyers making the nation's median income and purchasing the typical home spend 15.3% of their income on their monthly house payment, down from the historical norm of 22.1% during the pre-bubble period from 1985 to 1999. On the other hand on average, US renters spent 29.9% of their monthly income on rent in the third quarter of 2014, up from 24.9% historically. Younger buyers, earning less money in many areas and making smaller down payments on a home, should expect to spend slightly more of their income on mortgage payments at around 17.4%. The Zillow report says that homes for younger buyers remain affordable thanks to continued low mortgage interest rates and their tendency to shop for less expensive properties. However, the report warns that continuously rising rents across the country could drive more people into the home buying market, but they also make it more difficult for first time buyers to save for a down payment. A breakdown of the figures shows that Washington DC renters can expect to spend 27.1% of their income on rent, up from 16.2% historically while in Miami, rent as a percentage of income has risen from 26.5% before the bubble to 44.5% currently. ‘Despite rising home values, homeownership remains very accessible for buyers that can scrape together a down payment, even if that down payment is relatively modest, find a home to buy and secure financing,’ said Zillow chief economist Stan Humphries. ‘But what keeps me up at night is the fact that it still remains so difficult for so many potential buyers to make those particular stars align, largely because renting is so unaffordable these days,’ he explained. ‘It's very difficult to come up with a down payment when so much of your monthly pay cheque, especially on an entry level salary, is going to your landlord instead of into your savings. Buying conditions are getting better every day, and in time the allure of fixed housing payments and building wealth through home equity will draw more buyers out of rentals and into home ownership,’ he added. The report also points out that home ownership rates in the US have steadily declined, even as the housing market has recovered, in part because millennials have delayed their entry into the housing market. But it is likely that by the end of 2015, millennials aged 23 to 34, will overtake Generation X as the biggest… Continue reading
Equity release from UK homes going on improvements, study finds
The main reason home owners in the UK are choosing to unlock money from their property is to fund home improvements, new research suggests. Equity release lending has reached £1 billion so far this year and the need to renovate is the reason almost half ,48%, of all LV= equity release customers have taken out a loan. However customers are more likely to be making essential modifications such as widening doorways for wheelchair access or installing a stair lift than adding a conservatory or loft extension. The research also shows that people are using equity release to relieve pressure on the purse strings. The figures for the year to date reveal that 15% of the firm’s equity release customers wanted to use the money to top up their retirement income, with a further 9% wanting to clear an outstanding mortgage and other existing debts and loans. Financial necessity has driven much of the demand for equity release. However, treating or helping out family also remains a common reason for choosing equity release, with 10% stating this as their motivation. Whilst using the freed up equity for a holiday accounted for 6% of applications. ‘Whilst home improvements continues to be the most popular reason for using equity release, market growth is also being driven by the need to meet and reduce financial commitments,’ said Vanessa Owen, head of annuities and equity release at LV=. ‘With the reality of living on a low pension income hitting home for many retirees, it makes sense that many wish to unlock the cash tied up in their properties. At retirement, someone’s largest asset is usually their house and for those retirees who wish to stay in the home that they love, then equity release is a solution worth considering,’ she explained. She pointed out that this year’s Budget announcement gives new retirees more flexibility as to how they take their pension, but they will still see their income drop when making the transition from working to retirement. ‘As a result we are likely to see demand for equity release grow as those with small pots look to fund their later years. It is essential that retirees consider all their options and that equity release is considered alongside other retirement income solutions so that they are able to effectively plan for the future,’ she added. Continue reading
Research reveals UK landlords experience difficulties accessing buy to let finance
Three in 10 landlords in the UK plan to look for additional buy to let lending or to re-mortgage in the next three months, yet many may not gain access to finance, it is claimed. According to the latest report from the National Landlords Association (NLA) some 67% of landlords rely on a buy to let mortgage to fund their portfolio, but one in five, or approximately 300,000, landlords have not been able to expand due to difficulties in accessing buy to let finance over the last year. Furthermore, 59% say that lenders fail to consider their individual circumstances, and 56% that current buy to let lending criteria is too conservative. There are two ways a landlord can obtain a buy to let mortgage, either by going direct to a lender or by using the services of a broker, and the NLA believes it is vital that landlords have access to a wide range of products in order to find the one most appropriate solution for them. ‘A significant number of landlords are having trouble accessing finance and expanding, which is a major concern because the private sector is vital in meeting the ever increasing demand on housing at the moment,’ said Carolyn Uphill, NLA chairman. ‘Many landlords are frustrated as lending criteria is too prescriptive. There’s no one size fits all mortgage, and as the leading landlord association in the UK we understand that landlords need access to a range of products that meet their specific individual circumstances,’ she explained. She pointed out that NLA Mortgages provides a free online buy to let mortgage search facility which sources from over 600 mortgage products to help landlords find the best product to suit their needs. Mortgage schemes that are not available in the general marketplace are also available through NLA Mortgages, all via the NLA website. ‘We urge any landlords who are having difficulty in finding a mortgage that meets their needs to get in touch to see how NLA Mortgages can help,’ she added. The NLA’s research also asked landlords what they would say to lenders if given the opportunity. ‘Mortgage lenders are becoming increasingly difficult to work with. The requirement to produce further information on income is causing delays and becoming problematic…if your income does not fit their box on criteria they say no, which wastes time and slows the process,’ said one. ‘Mortgage lenders should consider each borrower on their own merits, and not impose a blanket ban on lending to individuals earning less than £25,000, regardless of their personal circumstances. Someone who is lucky enough to have no outgoings, servicing a mortgage with personal income of £25,000 a year is more than adequate,’ said another. Continue reading
