Lenders fee | Baya financial

The importance of looking after your credit file in the current market.

Lenders are being careful with who they lend, and are more cautious than normal given the situation. This is inevitable really, if there is a history of a client not paying a bill or mortgage, they are statistically far more likely to do it again, and with the current financial uncertainty, this could become something that is more likely.

Usually, we can speak to the specialist lenders we work with, and where there is a good explanation for poor credit they can look to lend. They understand that as property investors you have lots of tenants and utilities particularly can be an issue.

What we are seeing at the moment though, is that this is not necessarily the case. We are seeing some lenders formally restrict their criteria to allow fewer credit issues, as well as others who usually take a more pragmatic approach and have a blanket rule on any blemishes.

So what can you do?

First of all, you should all be checking your credit search each month anyway. You can use a free company such as Credit Karma, which emails you each month with your new report. they also notify you of any changes to it. This means that if there are any issues, for example, something has gone to an old address, or direct debit hasn’t been paid then you can rectify it immediately – this should stop any future defaults.
Secondly, when you approach your broker for a mortgage make sure you know if there’s anything on the search and give us the exact details of it. This means that neither of us is wasting time applying to lenders who won’t be able to help. It also means you’re not worsening the issue by adding additional credit searches to your file.

How can you future-proof yourself?

Cash flow is always key in property development and investment. It’s vital to keep on top of this, and it does nip at your heels. Especially in today’s market, you need to be building in contingencies for time and cost to ensure that this doesn’t cause any credit problems down the line.

Being realistic with your costs, timescales, and end values is also key to ensuring that things run smoothly over the next 6-12 months. Getting this wrong could impact your cash flow and credit file.

We are happy to run through figures with you on your exit, and where we are looking at a bridge we will always ensure that it fits at a conservative estimate on that exit.

What are the benefits of using bridging over cash to purchase your next deal?

The Valuation

Your bridging lender will instruct a valuation and the surveyor will have your schedule of work, so you have a professional opinion on your now and after-works figures.

The surveyor will also pick up if there’s anything that the lender doesn’t like – for example its location, neighbors, or nearby commercial units.

The Legal Process

Although you will need your own solicitor to purchase property cash, they are not the lender’s solicitor and therefore won’t be able to get their take on any unusual legal issues. It is much more tricky to resolve lease issues for example after you have purchased a property. Using a bridge means we have access to a lender’s solicitor and know that the property is mortgageable.

It Frees Up Your Money

You can look to take on multiple projects if all your money isn’t tied up on one, which it may be if you are funding the deposit and refurbishment yourself.

You also have the option of borrowing your refurbishment costs, which on bigger projects can mean you are putting in as little as 30% of the purchase price and the purchase costs.

It Doesn’t Cost Twice As Much

The preconception is that bridging is expensive, but there are lots of ways we can reduce the overall cost if you need a bridge and an exit with the same lender.

Lenders can reduce arrangement fees, valuation costs, and legal fees if you use them for both, and Baya will only charge an admin fee for the refinance if we have arranged the bridge.

Importance of Your Credit File