This week I would like to continue on the mortgage processing theme as we had such a great response a few weeks ago. Getting mortgages completed seems to be getting tricker and this seems to be coming from both the client and lender. I am going to run through a few important points that we all need to be mindful of when buying an investment property.
Get your due diligence done right, and at the beginning!
As soon as your deal lands on the desk of the lender’s underwriter they will carry out a credit search, companies house search, Google you and check for any adverse media. So, have you ensured they won’t find anything?! Keeping track of your credit file and ensuring Companies House is up to date is vital, as is being totally upfront with your broker about anything they or the lender may find. It’s far easier to explain these things at the beginning than it is when you’ve been caught out.
Getting the right valuer and hopefully the right value!
This is the one thing we don’t have as much control over, and it’s easy to think that we are ‘in the hands of the valuer’ but there are actually a few things we can do.
Firstly, don’t always go for the quickest or cheapest quote. If you need a particular value to make it work, then it’s often worth paying the extra or waiting to get the right person. You can find out a lot about local surveyors by networking and speaking to other investors in the area, but a good broker will also be able to help. With good relationships with lenders and surveyors, we can make a few calls and get a feeling for what figure we might get with some lenders. With others we may not have as much influence, but we can often specify that we want to use one from a shortlist, or request not to use a firm.
It’s all about being upfront about what you need, and what experiences you have had. We will always do what we can to accommodate your requirements but we need to know on day one. Once the valuation has happened we can’t do much!
Understanding where the deposit is coming from
We have seen a big shift in what lenders will accept in terms of where deposit money is coming from, but we are still seeing clients being quite cagey about it so I think this is worth reiterating. The specialist mortgage market is changing to keep up with the needs of property investors, which is fantastic. We have lenders who are happy that you are borrowing funds from friends, family or private investors. They understand you will be paying rates similar to bridging, and that often interest will be rolled up and paid on sale or refinance. As long as we know what is happening from the initial enquiry we can find a home for it. What you as an investor need to understand is that the more ‘prime’ (for example high street, low rate) lender are more picky, so you do need a more commercially minded lender and for that you are going to be paying a higher rate. What you need to look at is the over all return on investment – is it worth paying a higher rate to do the deal? We can talk to you about specifics if you would like more information on this.
This is similar for when you are looking to refinance a property within 6 months or refurbish and/or convert the property and refinance at the new market value.
Legal work and helping speed up the process
We generally don’t like to instruct solicitors until at the least the valuation is back, or usually when the case is formally offered as we don’t want to start spending money until we have some certainty that the deal is going to complete. We can of course instruct sooner if that is a priority to you.
What you can do in the mean time, especially if it’s a purchase, is to ask your solicitor to order the searches. Lenders will generally need these (except some refinance cases), they aren’t expensive and it will really speed up the process later on. Ask us about using personal searches instead of local authority searches as they may be much quicker.
Once we are ready to start the legals, the undertaking needs to be paid as soon as possible so that both solicitors can start work. As the client you are liable for both the lender’s and your own costs, and the lender’s solicitor needs to have the funds held on account at your solicitor in case the mortgage doesn’t complete.
Getting the right solicitor
Different lenders have different requirements, and it’s important that your broker understands and explains this all to you at the beginning. You need to know whether you will need to visit your solicitor before you instruct them, you don’t want to be trekking half way across the country to sign a legal charge if you don’t need to! You need a solicitor who is part of your power team, and the most important factor is whether they have experience in the type of property and finance you require. In the same way as you need a specialist broker, you need a specialist solicitor who has dealt with the lender you are using before. Your solicitor will make such a difference to your experience, they can make or break your deal.
Other legal aspects to consider are whether you will need legal advise, whether your new lender will put a debenture on your limited company (if it’s a limited company transaction) and what other lending is already in place with your limited company. We can help you navigate through all of this.
I hope this has given you a snap shot into the type of things you need to consider, and how we can help you get your deal completed as quickly as possible.
