HOME TRUTHS

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Bidding in Scotland

I have read that gazumping is back. I am moving to Scotland from the Midlands and am concerned I may not receive a fair deal. What do you suggest?

Gazumping occurs when a seller accepts an offer on a property then subsequently accepts a higher offer from another buyer (or uses the higher offer to increase the selling price with the initial buyer). This can be costly and frustrating for the unsuccessful buyer.

The Scottish system is often held up as a way in which gazumping can be overcome. It has, however, a number of disadvantages. It involves a sealed procedure with the highest/best bid being accepted. At this point the contract is legally binding on both the buyer and seller. So if the bid you place for the property is accepted you have no fears of another bid higher than yours being accepted. However, you must also consider that if your bid is unsuccessful you may incur unnecessary up-front valuation and solicitors' fees. In effect, the costs of gazumping in Scotland are incurred by all potential bidders.

The government has produced a discussion document detailing a number of options to address the problem. I would suggest you speak to estate agents and if possible residents to ascertain the state of the market locally. Gazumping is essentially a localised problem, seen most frequently where demand outstrips supply. As we enter a period of sustained recovery in house prices and increasing numbers of housing transactions, more attention is likely to be paid to finding a solution to this practice.

Cost of renting

I live near a university and am weighing up the pros and cons of letting my house out to students. Would it affect the amount of Mortgage Interest Relief At Source (MIRAS) I receive?

Your mortgage lender will advise the Inland Revenue if your property is let. The loan will not automatically be withdrawn from MIRAS. The Inland Revenue will make a decision based on your circumstance and then issue instructions to your lender if the mortgage is to be removed from MIRAS. The Inland Revenue will also notify you directly.

Which mortgage?

I am a first time buyer and just a little confused at which mortgage package I should choose. Could you please throw some light on the subject for me?

Choosing the mortgage package that is right for you is potentially the biggest nightmare for any first-time buyer. It is also the area where a specialist mortgage adviser can be invaluable, particularly if he or she is professionally qualified and able to offer as much advice as you need. Some lenders only offer a restricted no-frills, no-advice service, which may not be appropriate.

The range of options available is vast. You can choose between fixed and variable interest rates, and between straightforward repayment and interest-only mortgages. Interest-only mortgages can be further sub-divided into endowment-linked mortgages, pension-linked mortgages and, in recent times, Personal Equity Plan (PEP) mortgages. PEP mortgages in particular can be attractive because of the flexibility they offer and the potential tax advantages, but there are risks and in common with all mortgages they do need to be thought through carefully, which comes back to the need for professional, specialist, and above all, quality advice.

Having found your adviser, make use of him or her - that is, after all, what they are there for. Make sure that he or she explains the mortgage package being recommended in detail, including areas like fees, early repayment charges and compulsory insurance.

Also, remember that you are no longer restricted to having to go to see your adviser at his or her office. Some lenders will now send an adviser to your home, if that is more convenient.

With the term of the average mortgage still around 25 years, getting things wrong at the outset can be extremely painful and very expensive. But like so many things in life, when approached properly and with the appropriate advice, the mystique disappears. Then your dream house can become a reality and a pleasure rather than a financial millstone for the next quarter century.

Choice is one thing you won't be spoiled for in the mortgage process. The knack is to exercise it wisely and ensure that what you get is what you want and what is right for you.

George Wise is managing director of NatWest UK Mortgage Services

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