23 May 2013

Short Term Finance

The ‘Short Term Lending’ market continues to grow at a rapid pace.  Specifically geared at fast financial assistance, perhaps to purchase a property at auction or to enable a new purchase prior to sale of an existing property.  This is normally with a monthly interest rate and with a pre-agreed ‘exit’ route.

The term ‘Bridging Finance’ is quickly becoming a household name but most lenders now like to title it under the banner of Short Term Lending.  Many lenders in this sector of the mortgage market will offer loans up to 75% of the property value (sometimes higher with additional security offered). The loan is usually calculated and charged on a monthly basis and, in all fairness, can be quite pricey! Some of the lenders are happy to allow a 'roll up' of interest (no committed monthly payment) with the full debt settled at redemption.  Interest rates start from, circa 0.69% per month and normally are arranged over a period of between 1 to 18 months.  Most will carry a lender fee, an assessment fee, some will include early repayment charges and possibly an exit fee.  However, for the right scenario, these loans provide a superb funding line.

Ideal scenarios include –

1) Chain breaking or not sold your property yet
When the chain breaks or you have not sold your property but found one you have fallen in love with, bridging finance may enable you to complete on the purchase before you have sold your existing home.

2) Refurbishment – allows you to buy and refurbish property quickly
A loan to support with the purchase of a property and then undertake the refurbishment
before it is eventually presented to a mortgage company or bank for long term re-mortgage finance, or sold on at profit.

3) Purchasing properties at auction
Short Term Loans can be arranged very quickly and can be ideal where there are tight deadlines to meet.  A typical 28 day completion from purchasing an auction property is usually easily achievable. A pre-auction valuation is considered a must.

These are just some examples, there are many others.  However, where there are positives, there can be negatives!  Many lenders have set a minimum term for a property to be owned before they will allow a remortgage to occur. This is often six months.  So please ensure this is factored in to any purchase, budget calculations and financial requirements before committing to any Short Term Funding/Bridging Finance.  For more information, or to discuss a specific scenario, please contact us!

16 May 2013

Lenders look for opportunities

Interest Only mortgages have been hitting the headlines once again.  This time after our regulator, the Financial Conduct Authority (FCA), have carried out a thematic review on interest only across the market.

The report highlights that 2.6m residential interest only mortgages represented 29.4% of all residential mortgages in December 2011.  It is also estimated that 12% of residential interest only mortgages are currently in negative equity (value of property less than the loan borrowed).  

Most believe that in the height of the 2007/08 market boom, many interest only mortgages were taken out, without a repayment vehicle in place (historically endowments, more recently ISA’s, etc).  But with so many not having plans in place, this is a potentially huge problem on the horizon for the FCA and lenders to deal with over the coming years/decades.  

For a customer to get to the end of their mortgage term and still owe exactly the same as when they took it out, with no form of repaying the loan apart from selling their property, creates a major headache for the lender, especially when they want their money back!  This is also part of the reason as to why so many lenders have recently moved away from interest only all together.

In addition, most high street lenders will only lend until normal retirement age, so those looking to extend their loan beyond normal retirement age, may only find a small number of mortgage lender options.

However, some lenders are seeing this as an opportunity.   One such lender has targeted the over 65s and provided a solution to the ‘lending in retirement’ conundrum.   As long as the loan is below 50% of the property value, affordable within 4 x salary/pension/income with £150k equity in the property, then a long term interest only mortgage may be possible (not equity release).

This may also apply to those who, whilst having no mortgage, have suffered from reduced income and need to review options. Product innovation is providing schemes where equity can be turned into a mortgage and where off-spring may be able to assist with the repayments in order to secure and protect their inheritance whilst also ensuring a comfortable retirement for their parents. This is not right for everyone but it is certainly worth talking to a qualified advisor to review all possibilities.

09 May 2013

Halifax help First Time Buyers

A helping hand for First Time Buyers this week as Halifax for Intermediaries launched a promotion where they will pay the Stamp Duty for all properties with a value between £125k and £250k.  With products available to customers with a minimum 10% deposit, this is a nice move by the lender, especially as this is not restricted to just ‘new build’ properties.

Nationwide’s House Price Index suggested that the typical value of a house declined by 0.1% between March and April, with the typical UK home now being worth £165,586.  This is still 0.9% higher than April 2012.

With this in mind, lenders require a valuation to be carried out, by their approved valuers, on every mortgage.  This report is for the lender only and should not be relied upon when purchasing a property, as it does not go far enough.  It only responds to the questions lenders ask relating to the property being suitable security for mortgage purposes and an increasing number of these are now done by a ‘drive by’, so the valuer may not even enter the property!  They have no obligation to tell you what is in the report, or give you a copy!  Therefore you should always consider the benefit of an independent and more in depth survey on the property you are purchasing to ensure all defects are noted before signing contracts.  The extra few hundred pounds cost upfront could save you thousands later on.

Mortgage approvals were up 5 per cent in March, compared to February report the Bank of England.  House purchases rose 3 per cent to £8bn and remortgaging up 9 per cent to £4.1bn.  Positive signs and shows how attractive the current rates are in the market.  We are seeing a huge amount of long term fixed rates being snapped up.  Criteria is also being relaxed slightly as lenders target volume business.  If you don’t think you can get a mortgage, have a chat with a local independent mortgage brokerage as you may just be surprised with how they respond!

02 May 2013

Volumes on the up!

The mortgage market is incredibly busy and frantic with activity.  This can only be welcoming news as we all thrive on a competitive market which provides the end consumer with a great choice of products and great mortgage rates!

A huge thank you to all who have let AToM take care of their mortgage requirements over the last few months.  April was our best month for new business and also completions for over four years!  So thank you again, we really do appreciate it.  In fact, levels have been so constant that we are now looking to recruit, so do please review our careers page on our website if this might be of interest.  Plug over!

With the increased volumes of business, we are seeing an increase in the range of property types.  The government are obviously promoting new build properties and you can’t miss the amount of building works taking shape around the Horsham area.  However, on a smaller scale, many run down or derelict houses are being snapped up and converted in to more modern dwellings, or split in to a number of properties.   We are seeing a big demand for mortgages on houses that have been converted in to a number of flats and this is also true for old pubs and offices.  Beware though that some lenders treat these as newbuild and new build flats are of a limited appetite to some lenders in the current climates.

Others are converting outbuildings in to guest or ‘granny flats’ or building annexes on to the side of existing properties.  Both these and the converted flats will be subject to the valuers comments when they visit the property and can be subject to the relevant leaseholds being in place. 

Where two properties are on one title and not split in to separate titles, be advised that these may not be acceptable to many lenders and you will need to seek a specialist lender.

Holiday homes are also on the increase.  Where these are in the UK, lenders will help, but in most cases they must be restriction free.  Some have restrictions such as ‘can only be sold to people living in the area’ or ‘can only be let out 11 months of the year’.   For those looking to purchase properties abroad be aware that although rates are pretty low throughout Europe, deposits required can be quite substantial.