Eligibility

To be eligible, applicants must;

• be genuine first-time buyers
• provide a minimum of 5% deposit
• select properties that are on the open market
• not select new builds
• select properties that have been previously occupied
• do not exceed specific maximum purchase prices, which vary based on the property type

The program will roll out in three tranches in 2024, each offering around £3 million in loans, requiring applicants to reapply with up-to-date financial information for each tranche.

Supported by major Jersey mortgage lenders and brokers, the scheme requires applicants to submit various financial documents for application, with the process including a review against eligibility criteria and prioritization for loan awards.

As Jersey continues the clearing from all the damage that Storm Ciaran caused, Philip Syvret considers the impact of climate change for homebuyers, which may be more than just the risk of further storm damage.

I’ll wager that the effects of climate change are not at the top of the list of concerns for many looking to purchase a home in Jersey. Increasing intensity of climate events around the world are, however, a reminder of the potential difficulties to be faced in years to come.

What is presently a peripheral concern to homebuyers is, however, a matter on which our Government is heavily focussed. We are all now signed up to a carbon neutral strategy with a view to the whole Island being carbon neutral in a little over 25 years. 

To get to that position there will have to be some serious adjustments in all aspects of our lives. The way we own and occupy our homes will be part of that. Everyone involved in buying or selling property will have to adjust their viewpoints accordingly.

As a property lawyer, I need to advise my clients in all aspects of a commercial or residential purchase. I consider title deeds, regulations imposed by government and physical aspects of the property. Increasingly, alongside selling agents, surveyors and lending banks, I have to consider the wider impact of global change. 

It’s an area which all involved in real estate work are focused on. At the recent PWC Channel Islands Real Estate Conference nearly half of 150 industry professions indicated in their response to a survey that ESG (Environmental, Social and Governance) issues were the area that would have the biggest impact on the real estate industry in the medium (3 to 5 year) term.

An example of the carbon neutral strategy is the imposition of energy performance certificates (EPCs). That certificate tells you how energy efficient a building is. These certificates have been used in the UK for some years but will be new to Jersey. Legislation is awaited but it may well be that by 2025 you will not be able to sell a house unless you provide the buyer with an EPC. In the future it may not even be possible to sell or rent property at all unless the EPC shows that the Property is above a minimum standard.

It’s not just regulatory impact that we need to consider. Climate change brings a risk of weather extremes. In Jersey, that can mean violent storms, headland gorse fires or rising sea levels. We have seen in recent months the risk that storms can have for coastal properties. Flooding in Grands Vaux and other areas have hit the headlines in the last year. Sea wall enhancements at Beaumont and other areas have had to be implemented. Those physical risks need to be considered by any buyer.

An increased risk of physical damage leads to the secondary risk of an inability to insure. The wildfires in Australia seem a distant threat to these shores, but as a consequence of climate change, insurance costs in New South Wales have sky rocketed and some 11% of properties are uninsured because of those driven rates. 

If it becomes impossible or unaffordable to insure a property which lies on the coast next to a rising sea or in a valley at risk of flooding, the property will also become unmortgageable. 

The ability of a buyer to secure a mortgage on a property of course underwrites its value. High street lending institutions are looking very carefully at the impact of climate change on the real estate market. They are, after all, making loans on a daily basis which will last for 30 to 40 years, underwritten by expectations of the sustained value of the property that they are funding. 

In a lending market that is already constrained by strict financial stress testing, I have little doubt that increasingly we are going to see lenders taking a view on climate change impacts. The impacts that they will consider will be wide-ranging. Is the Property at risk of physical damage if storm, flood or fire risks increase in decades to come? Will the Property become uninsurable as a consequence? Will the owner be able to afford to insure? If EPCs or other directives are issued by government for energy efficiency, will the owner be able to afford to meet the costs of retro-fitting to meet requirements? 

If these are factors that the bank will consider and then they are factors which any buyer will necessarily need to consider also.

As I drive past the tree surgeons clearing the roads and the roofing contractors patching the tiles after Storm Ciaran, I am particularly conscious therefore that we are in a period of significant change. Whilst we must all do what we can to contribute to the carbon neutral policy, any property investment now will need to take a long term view as to how the climate and consequential regulatory framework might change over the years. 

Philip Syvret is one of the Island’s most experienced Property lawyers. He advises on all types of residential and commercial purchases, as well as private and commercial lenders.
He can be contacted via philip.syvret@benestsyvret.com or on 706670.

Almost certainly your mortgage will be the largest financial commitment you take on during your lifetime. It is a commitment that will last for many years. It will affect the home you can live in and the lifestyle you can lead. It is important to get the arrangements right.

Given that most people will only take one or two mortgages during their entire lifetime, here’s some of the questions you should ask your mortgage adviser when looking to take out a loan.

What is the maximum amount I can borrow?

The way in which the maximum amount of a loan is calculated varies between different banks and lenders. All lenders will however use a formula combining income multiples together with an assessment of your income and outgoings so as to determine your borrowing capacity.

In recent years, and in particular since the financial crisis in 2008, banks have applied a stress-testing process. They look not only the affordability of the mortgage for you in your present circumstances, but also if income was diminished in some way or the interest rate went up during the term of the loan. 

When asking how much you can borrow, you should also ask how that amount is calculated so you can ensure you maximise your borrowing capacity.

What different types of mortgages are available?

There are numerous different mortgage types, (sometimes called mortgage products), from which you can choose depending on your circumstances. The most common is a repayment mortgage whereby you make monthly payments, part of which discharges the interest on the mortgage and part of which repays the capital. At the end of the period of the mortgage, the whole capital amount would be repaid.

Some lenders offer interest-only mortgages. As the name suggests you only pay interest due on the capital amount each month, but no capital repayment is made. At the end of the mortgage term, the whole of the capital remains due. This kind of mortgage is really only suitable for short-term ownership, where for example, the property is to be renovated and sold on.

The manner in which interest is charged differs from product to product. A variable mortgage will have an interest rate which is fixed by the lending bank from time to time during the loan. The rate can charge upwards or downwards at any time of the bank’s choosing.

Alternatively, the interest rate can be fixed, usually for a period of two, five or even ten years. You will have certainty as to the rate that you will be paying, protected from any upward change, but you would not be able to take advantage of any downward change in market interest rates from time to time.

A Tracker Mortgage has an interest rate which is generally at a fixed percentage above the Bank of England base lending rate and will track that rate from time to time. The rate can therefore go up or down.

The quantum of the interest rate and the type of mortgage product available to you will vary depending on the amount of the deposit that you are putting down to purchase the property. In general terms, the bigger the deposit, the wider range of products available to you and the cheaper the interest rate.

A good mortgage adviser will ask detailed questions about your plans so that the product best suited to your needs can be chosen.

What are the penalties for paying off a loan early?

If you take out a mortgage with a fixed or tracker rate or a discounted interest rate, then you will undoubtedly be subject to an early repayment charge. Usually these charges are calculated by reference to a formula referring to a percentage of the capital amount to be repaid and the years left in the mortgage.

You should get a clear understanding of any early repayment charge or similar penalty as the amounts due can be very significant indeed. Whilst you may plan to live in the house for many years to come, life does not always run in a straight line. A forced sale of the house and repayment of the mortgage before the fixed term of the interest rate has expired could give rise to a hefty penalty.

As you discuss different types of mortgage products you should enquiry as to any penalties that apply.

Is it possible to over-pay the mortgage?

Over-paying a mortgage means paying an additional capital amount so as to reduce the time it takes to pay the mortgage off. While many mortgages include early repayment penalties, many will allow you to make a minor over-payment without paying any additional fee or penalty.

This could be important if, for example, your income is irregular or you have bonus payments which you would like to apply to the mortgage. A discussion in relation to that aspect will make sure that you have the right product available to you.

Do I need life insurance?

It might be appropriate to take life insurance in the amount of the mortgage. A straight life cover on the life of yourself and your partner will mean that you have a lump sum to pay the mortgage off if either of you passed away.

Again, there are different types of products which might be suitable. Decreasing term cover will reduce the amount of the lump sum you have on the death of either party to the mortgage in correlation with the reduction of the mortgage as you pay capital down over the years. 

Equally, you might combine life insurance with critical illness cover. If you or your partner suffer a critical illness as defined under the policy, the lump sum will be payable meaning the mortgage can be paid off. That would be important for example if one of the breadwinners in the family was unable to work and therefore the mortgage repayments could not otherwise be met. A mortgage adviser will usually be allied to an insurance broker who would be able to advise you what kind of insurance would be appropriate.

What documents are required?

The application for a mortgage is invariably a heavily documented process. All banks will require proof of your name and identity so as to comply with money laundering regulations.

You will also need to demonstrate your income. More than likely you will be asked to provide copies of your bank statements and credit card bills for at least the last three months, together with pay slips and income tax assessments.

Early enquiry of your mortgage adviser as to what will be required will allow you to get a head start on gathering the necessary information.

What are the costs of arranging the mortgage?

The mortgage will have some up-front costs which you will need to discharge. The costs will include:

• Arrangement fee covering the bank’s administration costs of arranging the mortgage
• A rate booking fee, if you are selecting a fixed interest rate or similar
• Valuation survey fee, repaying the bank for the cost of the surveyor to assess the value of the property
• Bank’s lawyers’ fees to reimburse the bank for the cost of engaging lawyers to draw up the documents to secure the mortgage against the property

You should ask the mortgage adviser for a clear statement of the costs relating to the particular product that you are choosing.

Remember also that on registration of the loan when you buy the house, stamp duty of ½% of the amount borrowed plus £90 registration fee will be deducted from the amount of the loan that is advanced to you.

Key takeaways

Take these lists of questions with you as you go to your first meeting with your mortgage adviser. These will help to make sure that the biggest financial commitment you will make is set up on the right terms for you and your family.

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Abigail Watkins is a solicitor in the property team at Benest & Syvret, one of the busiest conveyancing teams in the Island. She advises home-buyers and people taking a mortgage on a daily basis and has over 30 years’ experience in the legal world. If you wish to discuss any aspect of mortgage arrangements, contact Abigail on 875875.

As part of any mortgage approval for a property purchase, the bank will require the property to be valued. The purpose of this is to clarify the proportion that the bank is lending as against the open market value of the property. This is known as the loan to value ratio (LTV).

The LTV dictates rate of interest on which the bank will lend. If the amount of the loan is small as against the overall value of the property, the bank’s risk of loss if there is a failure to repay the loan is less. As a consequence, the lower the LTV, generally the lower the interest rate that will be charged on the loan.

How is a mortgage valuation survey undertaken?

In all cases a mortgage valuation will undertaken by a qualified surveyor, that is to say a member of the Royal Institute of Chartered Surveyors (RICS). The valuation of an estate agent is different and will not be relied upon by a bank. An estate agent’s valuation provides a guide at which the property might be sold and advice as to marketing. A mortgage valuation survey will inevitably be more cautious, in effect assessing a bottom line value at which the bank might be able to sell the property if it had to foreclose on the mortgage.

Each bank has a panel of surveyors that it uses for mortgage valuation reports. The bank will nominate a surveyor from that panel. If, however you are aware of another surveyor on the panel who already knows the property, it might be advantageous to recommend that the bank appoints that particular surveyor in the hope that a speedier valuation can be achieved.

The surveyor will inspect the property and then review the proposed sale price against values achieved for similar properties in recent months. Those other comparison properties will give a guide to the surveyor as to the market value. 

The surveyor will also identify whether the property is suitable as security for the loan that you have applied for. If there are significant defects, the surveyor will highlight those in his report and the bank may ask you to get quotations for repairs and give an undertaking that those repairs will be completed within a fixed time scale after purchase.

If you are taking a mortgage on a buy-to-let basis, the valuation survey will also include an estimated potential rental value.

It is only once a satisfactory mortgage valuation report has been provided to the bank, that they will formally issue to you the offer letter setting out the terms of the loan. It is important therefore that the valuation process is moved forward promptly.

You will be required to discharge the costs of the valuation report. Costs vary considerably depending on the nature and the value of the property. You should ask the bank to provide you with a fee quote.

What information beside a valuation could a mortgage lender ask from you?

If the property is a new-build then the mortgage lender might ask for copies of a structural defects warranty. These are warranties given by the builder backed by an insurance company to cover the cost of any defects that might arise over a ten-year period from completion. Because of the usual ten-year period, these are sometimes known as decennial insurance policies.

Cladding systems to blocks of flats have been much in the news in the U.K., but less so in Jersey. If, however there is a known potential defect or similar problem which needs to be addressed, then the lender may well ask for a detailed report from a structural engineer and quotes for repairs.

Jersey has a system requiring fire certificates to be issued for homes that are in multiple occupation and blocks of flats. All banks will require confirmation that a valid fire certificate is in place for any property where that applies.

What happens if the valuation is less than the agreed sale price?

The assessment of a property’s value by an estate agent, or you as buyer, may well be different from the value that a qualified survey or will ascribe to the property. In those situations, a reduced valuation will mean that you either cannot borrow the full amount originally requested, or the loan to value ratio will change, therefore impacting the interest rate at which you can borrow.

Alternatively, armed with the report of the reduced valuation, you can seek to renegotiate a lower sale price with the seller so that the loan to value ratio can be maintained.

What’s the difference between a mortgage valuation and a property survey?

The mortgage valuation has as its sole purposes, an assessment as to the market value, the suitability of the property for lending generally and an indication of any material defects that might affect saleability.

The valuation report is addressed solely to the bank and you as buyer cannot rely on its findings. Thus, when buying a home, it is always good to have your own property survey for your own purposes to identify any potential issues.

Depending on the age and condition of the property, there are different types of surveys that you can obtain. The most basic survey is a RICS condition report. Alternatively, a RICS home-buyer report provides a more thorough examination. Finally, the most comprehensive (but therefore the most expensive) report would be a full structural survey identifying all issues in all parts of the property.

It might also be appropriate to get reports on selected areas relating to the property where there are known issues, for example, drainage condition, electrical installations or wet or dry rot.

Key points to take away

The mortgage valuation report is critical to the purchase and borrowing process. Have in mind: -

• The purpose of the survey is principally to identify the value of the property and accordingly the appropriate LTV ratio.
• The report is addressed to the bank and not to you as buyer and you cannot rely on it.
• If the valuation is less than the price agreed, you may have to renegotiate the sale price or your mortgage arrangements.
• It is important therefore to move quickly on the valuation report so that delays do not arise.
• It is always important to get your own assessment of any property that is likely to need repair or upgrading.

Abigail Watkins is a Solicitor in the property team at Benest & Syvret, one of the busiest conveyancing law firms in Jersey. She has over 30 years of experience in the legal world and regularly advises clients securing residential mortgages, buy to let mortgages and equity release loans. If you are taking a mortgage for any purpose, contact Abigail on 875875 for in-depth advice.

The phrase ‘let life surprise you’ might be valid from time to time, but it certainly does not apply when you are buying a property!

In acting for young clients recently in a purchase of a flat, I sent onto them, shortly after instructions, a copy of the Declaration of Co-Ownership which set out the rules relating to occupation of their flat, as well as a set of regulations which had been adopted by the co-owners association imposing restrictions on occupancy such as use for Airbnb and owning pets.

The clients were delighted to receive the information. They had asked the estate agent for details but the agent’s response was, “it is part of the conveyancing process and your solicitor will tell you the restrictions”. The agent could not be persuaded to obtain details. The problem is, of course, that by the time the information came through from the solicitor, my clients had already spent a considerable amount of money on a survey, legal fees and a booking fee for a mortgage rate.

I see this problem regularly. Often the buyer finds the property of their dreams and falls in love with it. All they really want to know is how quickly they can collect the keys and move in. 

On the other hand, the agent works for the seller and there is a disincentive to reveal information that might put a buyer off, leaving any bombshells to be revealed when the buyer is already heavily committed in terms of their passion for the property and costs incurred.

The potential bombshells are wide ranging: there may be restrictions on parking commercial vehicles or running a business from the premises. The long garden wall that is about to collapse may be a party wall to which the neighbour can force the buyer to complete expensive repairs. The service charges may be beyond the buyer’s budget.

Different things will be important to different people so determining the information that should be provided to a prospective buyer before or at the time of viewing the property is always going to be difficult. 

Those who have bought and sold recently will be familiar with the Law Society Standard Questionnaire (SSQ). That provides a limited set of warranties confirming the seller’s knowledge as to any known defects in, say, the electrical system, drainage system or items such as disputes with neighbours. It cannot possibly, however, cover all aspects of disclosure that would be of interest to a particular buyer. Equally, disclosure of the SSQ often comes at the end of the process given the need to circulate between seller, buyer and their respective solicitors. 

The consequence of a lack of early disclosure causes, at least, delay, or worst, the collapse of a transaction (and any related chains of transactions) causing costs and anguish to all involved. 

How then do we resolve the problem to ensure that a last-minute bombshell of disclosure does not arise? 

First, buyers need to get clued up. Questions asked of the agent or the sellers should be directed to the buyer’s particular needs. Ask about relations with the neighbours, restrictions on occupation, difficulties encountered with the property. If answers are not immediately available, indicate that you are prepared to make an offer but only when those questions are answered. In the present sluggish market, that will induce very quick answers indeed. 

Equally, the estate agents need to be on their game. They need to quiz the seller in advance on all aspects of the property so they can be ready with immediate and accurate answers to any questions that a buyer will put. 

Propertymark, the leading Estate Agents association in the UK, now produces a property information questionnaire known as a ‘PIQ’. This is completed by the seller to give to a potential buyer detailed information about the property being sold. This was brought in as part of the English Law Society Conveyancing Protocol with the intent of streamlining the procedures used in residential conveyancing. Its questions are more wide-ranging than the limited matters presently adopted in our SSQ.

I would suggest that the time has come for local estate agents to work hand in hand with Jersey property lawyers to produce a preliminary PIQ that could be handed to purchasers, answering a standard set of advance disclosure items. Those would include the Energy Performance Certificates which are to come in next year for residential properties. 

I would not suggest that a PIQ would constitute binding warranties, but instead a statement which the vendor declares to be fair and accurate for guidance purposes pre-completion. Whilst matters would remain for surveyors and solicitors to verify as part of the standard due diligence, the risk of a late disclosure bombshell arising would be considerably reduced.

Perhaps then, at least in terms of property purchases, we will be able to swap out the phrase ‘life is full of surprises’ to the more worldly-wise ‘nothing surprises me anymore’!

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Philip Syvret is a Jersey property lawyer with 30 years’ experience in dealing with residential and commercial property purchases. He sits as a Member of the Law Society Conveyancing Sub- Committee advising on improvement and amendments to the conveyancing process in Jersey and was instrumental in the introduction of the Law Society’s Standard Seller’s Questionnaire (SSQ).

To contact Philip, telephone Benest & Syvret on 875875 or email via philip.syvret@benestsyvret.com