Looking at a property project? Refurb to Let...

Looking for a property project?  Just because a property is run down or even classed as 'uninhabitable', does not mean you cannot get a mortgage on it.  Or, if you are intending to purchase a property to let out, but it's currently in an 'unlettable' condition.  Lenders will cater for these scenarios (dependant on the exact type of works required!).  In the main, the work required needs to be cosmetic - a redecoration, maybe a new kitchen or bathroom.  Many now offer 'refurbishment' loans where the work must be carried out within a period of time after purchasing the property (normally three months). 

Our good friends at Precise Mortgages have recently launched a product called the ‘refurb to let’.  This gives the flexibility of a bridging loan to carry out the works, and the certainty that the property will then go on to a buy to let mortgage once works are finished.  They will look at 75% of the property value at the outset and allow a re-mortgage up to 80% of the end value, once works have been completed.  The nice thing with this product is you have one processor to cover both parts of the underwriting, as well as just one surveyor to review the upfront property value and then again once the works are done. No mortgage repayments are required whilst the works are being completed, subject to terms and conditions of course!

There are a raft of reasons why this type of product might be taken. These could include properties needing work to meet minimum Buy to Let EPC ratings.  Or properties purchased at auction, that need work, or where they’ve been bought under value.  Or it could simply be a landlord choosing to refurbish the property to maximise the rental yield available.

Seek out a local architect to assist you with plans and costs and always make sure you set out your budgets from the outset.

Lenders will cater for all types of scenarios (dependent on the exact type of works required!).  Each lender will work on the surveyors comments once they have visited the property and adjust their offerings accordingly.  Just because the high street or your current lender says no, does not mean that it can't be done..

New rules for Houses of Multiple Occupation (HMOs)

Concentrating on Buy to Lets this week as yet more changes are on the horizon!  With effect from 1^st October 2018, new mandatory rules will be applicable to Houses of Multiple Occupation (HMO).  Any property with five or more occupants (not all related) will now need an HMO licence, as the Licensing of Houses in Multiple Occupation Order 2018 takes impact.  

The government undertook a consultation last year designed to help councils standardise living conditions in HMO properties.  It detailed the plans to extend the scope of licencing for HMO properties. 

Currently the licence applies to properties with three or more stories and five or more occupants (not related to each other).  However, it was decided to change these requirements and ultimately increase the number of properties that require a licence.

A minimum size for bedrooms has also been implemented and the guidance will recommend that floor space be no less than 6.51sqm for a single adult and 10.22sqm for two adults sharing.  Any room with less than 4.64sqm is not to be used as sleeping accommodation.

These rules are estimated to affect around 170,000 properties (on top of the existing 60,000 licenced) and landlords that fall in to the new rules must apply for a licence or temporary exemption before 1^st October.   Failure to do so will be considered a criminal offence.

These changes will impact both existing and prospective HMO landlords and full details on how to obtain licences will be available on the relevant councils’ websites, alongside other requirements the individual council may have put in place.

In other news, our good friends at Precise Mortgages have revamped their Buy to Let product ranges and rates now start from 2.99%.  They also allow rental calculations to be assessed on the pay rate on their five year fixed rates, starting from just 3.39% and some products also allow ‘top slicing’.  This means that landlords with three or more mortgage properties, may use their income to assist with affordability on the buy to let property, if the rental income does not quite cover the loan required.  This can be complex, so speak to the experts…

AToM - Best Buy to Let Distributor for HMOs 2017!

There are many awards issued throughout the year in various industries.  Some you are nominated for.  Some you can voted for yourself.  Others are awarded to celebrate the volume and quality of the business you produce.  Thankfully, the latter applies to the latest award that AToM has just received.   At a lavish awards ceremony held at the fantastic Weston Park Stately Home in the Midlands, AToM was confirmed as the Best Buy to Let Distributor for HMOs (Houses of Multiple Occupation) in 2017 from specialist lender Precise Mortgages.  This was superb recognition for the amazing and highly knowledgeable staff we have at AToM and specifically those who specialise in the Buy to Let sector.  Well done team!

I mention credit scoring/searching quite a bit, but it really is so important in the current financial world when lenders are deciding to lend to you, or not.  Most lenders credit score applications based upon the amount of credit you have, whether you are on the electoral role and your recent payment profile on any existing credit.   The number of recent credit searches you have on file will also have an impact.  So, over the festive period, just be wary when getting quotes for car or home insurance, mobiles, etc that each of these will register a search against you, especially if you’re planning to review your mortgage in the near future.

We have seen a number of good product innovations during the last few weeks.  One that sticks out is that Precise Mortgages have recently launched a new buy to let that allows the customers personal income to top up any rental shortfall.  Usually the mortgage on a buy to let is calculated on the rental it achieves. Occasionally this may not achieve the loan required.  So, to allow surplus income to be used to ‘top this up’ is a great addition from Precise. 

The Buy to Let sector generally is becoming very competitive and despite an increasing number of options and new lenders launching in to the market, demand is still increasing.   Whilst first time buyers struggle to get on the property ladder (hopefully the recent stamp duty changes may help?) and savings interest rates remain low, many continue to invest long term in to property and there's no immediate reason why this should change.  However, with all of the recent tax changes on Buy to Lets, you should not only seek professional mortgage advice, but also tax advice from an accountant who understands property.  Get it right first time.  

HMOs, Ltd Company Buy to Lets and Credit scoring!

There have been a number of competitive launches this week in the Buy to Let sector.  Especially for those buying a House of Multiple Occupation, or in a limited company name.

The more noticeable includes the launch of new products from our friends at Precise Mortgages, designed to assist those looking to purchase investment properties in a Limited Company name.  With Buy to Lets, the loan tends to be calculated based on the rental income achievable. If the product is not a 5-year fixed rate, then this is required to be at a nominal rate of, circa, 5.5% and with rental required at up to 145% of that figure.  With the Precise product, the lender will use the pay rate of 3.09% to calculate the loan, as it is a fixed rate for five years, and with a 125% rental requirement, depending on individual circumstances.  This makes a huge difference to the loan available, and a fixed rate that low is an attractive deal also.

With the recent reduction in mortgage interest relief, since April 2017, landlords are only able to offset finance costs at the basic rate of tax at 20%.  This affects higher rate tax payers, but also basic rate tax payers if they are pushed in to the higher rate bracket, perhaps as a result of their rental income.  As such, we are seeing more and more customers look at a Ltd Company Special Purpose Vehicle to hold their investment properties and provide more efficient tax benefits under current legislation.  Obviously, tax advice should be sought as individual circumstances vary!

Sticking within this area, Landbay have launched some attractive Buy to Let tracker rates with no redemption penalties at all.  These products are great for those looking at a short term project, or perhaps where they want to re-mortgage after a short period, possibly following some works to the property, and taking money out of the increased value to reinvest in further properties, and so on.

Conversely, with lenders reducing rates and chasing completion volumes for year end, we are seeing more people being declined.  Not necessarily due to adverse credit, but because their credit score is not as high as they thought, and they don't meet the lenders requirements as a result.

Credit scoring is one of the most widely used means to assess a customer’s ability to obtain a mortgage.  All credit scores include a credit search – this reviews your financial history, payments to utility suppliers, mobile phones, etc.  The high street lenders, in the main, use credit scoring.  However, do your homework as many smaller lenders will offer just as attractive rates, but they will manually assess your ability to obtain a mortgage and use a human to assess your credit profile, rather than a computer aided credit score decision making system.  

Rates to rise in 'near term'.

Hopefully you will have seen the headlines this week, but if you haven’t, the specific one I am referring to is where the Bank of England governor Mark Carney has said he expects the bank base rate to rise in the “near term” – thought to be within the next few months.

He did emphasise that this would be a limited and gradual process as the bank begins to ease its “foot off the accelerator” of the UK economy.  Mr Carney also warned about lenders becoming more reckless in their consumer credit lending, including credit cards and car finance.

Coming from the Bank of England, this is a bold statement and one we should all take note of.  So, is now the right time to long term fix? 

Difficult to answer, as it’s down to personal preference.  The points to note in the statement are that this will be a gradual process.  We all know rates will rise, but it’s when and by how much that no one can predict.  Therefore, if you know your circumstances are not going to change for the foreseeable future and you like the security of knowing your outgoings remain the same each month, then a long term fix is probably for you and there are some great deals to be had currently.   But if you like a bit of comfort in your monthly budgets and are a bit more of risk taker, maybe something shorter term is more applicable to your needs.  The rates will be slightly lower, but of course at the end of the term, you could be meeting the full on barrage effect of a rate rise.  Obviously, terms and conditions apply and each person is different, so personal preferences is key and advice should be sought.

And finally this week, some great news from our good friends at Precise Mortgages.  Charter Court Financial Services, the parent company of Charter Savings Bank, Precise Mortgages and Exact Mortgage Experts, has been valued at approximately £550m as part of its stock market flotation.  The specialist mortgage finance company will make more than 95 million shares available.  This shows the continual need for specialist mortgages and how well the lender has done since launch in 2011.  Congratulations to all of the teams there. 

Don't talk the market down, it's ticking over nicely!

There have been a number of comments made in the national press recently regarding the market being in a lull and how mortgages are becoming harder to obtain.  I do think sometimes that people talk the market down, rather than reporting the actual situation.

As both a specialist mortgage provider, as well as whole of market (including the high street lenders), AToM has actually seen an increase in business recently rather than a drop in activity.  From talking to our peers we are aware that they are experiencing this growth too! 

We have also seen a number of  new lenders enter the market and there are others due to launch soon.  This would not be happening if any lender thought the market was in decline!

One lender, Masthaven Bank, launched recently in to the residential sector looking specifically to fill gaps in the specialist market.  These include allowing gifted deposits and equity, contractors, self employed - straight forward or complex, customers borrowing in to retirement and those who fail credit scores, to name just a few.  With rates starting from under 3%, this is a lender who is looking to lend and they should be applauded for such innovation and great launch products.

Other recent 'game changers' include Kensington Mortgages who cater for those with historic blips and with only a 10% deposit.  Precise Mortgages and Kent Reliance, who are both positively active in the Buy to Let sector, especially with regards to Houses of Multiple Occupation, Ltd Company BTLs and with new underwriting regimes on the horizon for Portfolio Landlords (those with more than 4 properties) and these are definitely ones to watch.  Tipton Building Society and Dudley Building Society for allowing lending in to retirement and above average income multiples. And there are so many others who I don't have space to mention!

So the bottom line is simple.  Just because the high street says no, or your mate down the pub says 'you'll never get a mortgage' because of your situation, find an experienced mortgages specialist who may be able to open up a door to a wide range of opportunities available to you.

Stick with your current lender?

So, your mortgage product is coming to the end of it's term.  You may have fixed for an amount of time, maybe two, three or five years.  And now your rate is due to change to the lenders variable rate, which in the main, is higher than the rate you are currently on, and your monthly payments are about to increase.  But hold on, your current lender has seen the light and decided to offer you some 'fantastic' products to keep you.  Even though you are four months out of your product change, they've given you just fourteen days to decide whether to choose a new product to stay with them.  What do you do?

One recent example a customer showed us, had some very attractive rates.  However, when we looked, the same lender was offering better rates through the intermediary sector, with the same fees, etc.  I always say do your homework, and lucky this customer did as it saved them 0.1% on the rate over a three year period.

Even though some lenders put a deadline on any new offerings, remember most are contacting you three or four months before your product changes, so there is plenty of time to review your options and choose the best one for you. 

This is the biggest debt you will ever take on, take your time and ensure you will not regret it further down the line.  Always seek advice! 

With this in mind, we've seen a lot of rate changes and reductions over the last few days.  TSB, Santander, Halifax, Harpenden Building Society, Accord, Platform, Saffron, Kensington, Virgin Money and Precise Mortgages have all made changes, to name but a few.  Key highlights include 5 year fixed rates from 1.75% up to 65% LTV, Buy to Let fixed rates from 2.99%, ExPats in Australia can now be First Time Buyers in the UK, more options for lending in to retirement and many many more positive enhancements.    Lenders want to lend!

Positive news for the Self Employed and also Ex-Pats!

The self employed have had a good week on the mortgage side.  Specialist lender, Precise Mortgages has changed criteria and will now allow customers to use just last years accounting figures as income for a mortgage.  Previously the lender, and most lenders, would look at two or three years figures and average over the period.  However, whether the customer has been trading one year, or twenty, the lender will now work on just the last years figures.  This is available right up to 85% of the property value and only via a small and select number of companies, including AToM. 

A number of lenders have joined the current price rate war over the last few days.   Metro Bank, Virgin Money and Leeds Building Society joined a number of other lenders who have cut rates substantially.  We even saw a six year fixed rate launched, under 3% interest rate, but sadly this was only available for three days before being withdrawn  - probably due to huge demand 

Others have also launched short term availability schemes. Accord Mortgages have launched a '10 day sale' on some of their products covering both their Residential and Buy to Let schemes.  These include lower lender fees, enhanced cash backs and low fixed rates options.  But be advised that these products will require your mortgage adviser to submit a full application before midnight on 1st October!  Terms and conditions apply, etc.

Finally, we are delighted to be one of only seven companies in the UK who can offer a new product range aimed at Ex-Patriots from Skipton International.  For UK Nationals  living abroad, looking to buy or remortgage an investment property in England and Wales, up to 75% of the property value, Skipton International will consider lending up to £1.5m with rates starting below 4% and no lender arrangement fee (for a limited time).  This really is a superb offering and if you know someone who may fit this criteria, please get them to contact us to find out more!         

Product innovation is key, as house prices increase

As we enter the second half of the year, we have surprisingly seen some product interest rate increases.  SWAP rates (the mechanism through which lenders can acquire a fixed price for funding over a specific period of time) have been extremely volatile over the last few weeks and have caused some concern within the mortgage market.  Rate increases do not mean a mass panic just yet as it is only a couple of lenders who have increased their rates.  However, it is something to be aware of if you are considering reviewing your mortgage options in the not too distant future.

Precise Mortgages have expanded their portfolio offerings to now include both First Time Buyers and New Build Properties. This is a positive move by the lender as they will also allow customers who have had a few credit blips in the past to apply for a mortgage.  The maximum borrowing on this type of product and for this customer type is 85% loan to value.  So effectively, a first time buyer can now purchase a new build property (including flats), having had minor issues in the past and with only a 15% deposit.  As there is currently no other product like it in the market, Precise Mortgages should be credited for their innovation and especially for helping First Time Buyers.

Finally, the positive news continues as the Nationwide House Price Index confirms an increase in the average house price for the South of England of 3%, compared to the same period in 2012.  Across the UK, this sits at 1.9% with the average house costing £168,941.  The South, especially London, has seen month on month increases and it is reported that London now sits at 5% above pre-recession prices (circa £315k average), despite the UK still around 9% below!   With the amount of building works continuing to be approved and huge demand for properties in the local area, this can only be good for consumer confidence and that house prices may continue to rise for some time yet.

It's all 'go' in the Mortgage market!

There are many changes in the mortgage market to report on this week!  I start with those who have cut rates or launched new products!  These include Halifax (some rates reduced by 0.5%), Barclays (some rates cut by 0.5% across residential and Buy to Let ranges), Aldermore Mortgages (some Buy to Let rates cut by 0.8%) and Precise Mortgages (some rates cut by up to 1%).  Others including HSBC, Tesco Bank and the Post Office have all launched very attractive low fixed rates.  However, always make sure you read the small print as although the rate may be attractive, the attached fees to the product may not be so and the deposit required is probably quite substantial.  Another important point to check is the rate you will revert back to when the product fixed rate ends.  You don’t want to have a ‘payment shock’ at the end of the term if the rate you revert to turns out to be substantially higher than your initial rate.

Saffron Building Society have launched a superb innovative product in to the specialist sector aimed at those who have had a slight blemish or two on their credit history.   Called the ‘Credit Repair Mortgage’, the product, which has no early repayment charges at all, is looking to assist those who have had financial issues in the past obtain a mortgage with a view to repairing their credit score and eventually getting them back on to high street rates.  The product caters for First Time Buyers as well as home movers and is initially for those who are employed.  The real win win on this product is that the longer the customer is with the lender, the lower their rate becomes.  For example, one product tier reduces annually by 0.4% for the first three years.  This is great innovation!  Terms and conditions apply…

Secured loans have also had a positive week as Shawbrook Bank launched a 95% LTV (loan to value) home owner product.  Loan sizes range from between £3,000 and £25,000 and are secured against the property as a second charge.  This is a really great move by the lender and will service a considerable gap currently in the market when mainstream high street lenders won’t allow a high LTV loan to a customer as a first charge.

Early Christmas Present - A Rate Price War!

The price war continues as three more lenders reduce their rates.  Nationwide, Virgin Money and Precise Mortgages have all cut rates as they try to lure customers to their attractive propositions.   

This is really great news for the end customer as there are some very attractive and competitive rates out there in the run up to Christmas.  Highlights across the market include 5 year fixed rates at sub 3% rates and shorter 2 or 3 year fixeds with minimal or no fees.  This really is a great time to review rates and see if a change of mortgage lender will save you money.

It’s not just the prime side the rate war is affecting.  For those who have had previous financial issues with their credit, the lenders who cater for this sector (normally called Near Prime) have also lowered rates as demand increases for these types of mortgages.   

There are many lenders re-lending in this arena and they will cater for a missed mortgage payment in the last 12 months, historic defaults, County Court Judgements (CCJs).  A limited few will also consider those who are discharged bankrupts, had IVAs or who are in a debt management plan.

There’s no denying that this area of the market took a battering back in 2007 as many, many lenders who offered these types of mortgages were shut down or mothballed.  However, the regulatory lending restrictions are now more stringent than back then and the new breed (some never really left) have a whole new outlook on the term ‘responsible lending’.  But where there is demand, there will always be supply.  Rates range from late 3%s, right up to double figures depending on individual circumstances.

Finally, the Near Prime lender tends to be a ‘stepping stone’.  Most issues usually disappear from a credit search after a few years.  Therefore, the aim would normally be to cater for current requirements on a short to medium term basis with the longer term outlook being structured to enable the customer to get back onto high street mortgage offerings, as quickly and cost effectively as possible.  Terms and conditions always apply and always best to seek professional advice.

Exclusively through AToM - Packaging!

It’s been a really busy few
weeks at AToM HQ. For those regular
readers, you will know that AToM does not only arrange mortgages for the
general public who visit the shop front, but we are also a specialist packager/distributor
dealing with mortgage brokers, estate agents and independent financial advisers
nationally. For some lenders, AToM acts
as the administration arm, collating information, instructing valuation and
processing applications right up to mortgage offer status. For other lenders, AToM will be allocated a
tranche of funds to lend on their behalf and AToM advertises them and controls
the administration process. Any mortgage
broker, independent financial adviser or similar, who require these certain products,
will often have to come via AToM to gain access to such products.

One recent example is from a
company called Precise Mortgages. They
have launched a product aimed at the ‘Near Prime’ sector, and this means those
who have had some financial issues in the past.
Their normal core range is available up to 80% of the property value,
but via AToM, customers can achieve 85%.
This is totally exclusive.
The benefit to the lender is that AToM carry out all the work, including taking
telephone calls, requesting information from employers/accountants, collating
documentation, and more. So it’s cost
effective for the lender. In return,
AToM gets ‘almost’ guaranteed business.
A great two way relationship! As
the saying goes, it’s amazing what happens behind closed doors!

Finally, according to
unbiased.co.uk, and since the inception of the credit crunch, there are
approximately 46% of all mortgage borrowers who have failed to review their
mortgage to see if they can get a better deal!
This seems crazy on the face of it unless you are one of the lucky ones
with a rate including just a small margin over the base rate. If you are on a
lenders standard variable rate and this is more than 4% you might be missing a
valuable trick, and the opportunity to fix to avoid the potential pain when,
eventually, rates do start to rise. Seek
independent advice – you are unlikely to regret it. Even if the advice is to stay put!

Lenders products available via Intermediaries

There has been an influx of lenders joining the intermediary mortgage market recently. Having previously been solely ‘business to consumer’, these lenders are now establishing that there is value in offering their products via a wider audience and gaining a better exposure in a large, but somewhat strained, intermediary marketplace.

Although these lenders are not household names, they do have some superb product offerings and by distributing these products via intermediaries, the consumer has access to products they may not have been aware of otherwise.

Some lenders have chosen limited, or exclusive, distribution. For example, the Chorley Building Society, based in the north, has chosen AToM to exclusively distribute a product that caters for borrowing up to 85% of the property value right up to a maximum loan size of £1m. This is a rare opportunity as not many lenders will lend that high in the current climate. Others, including Precise Mortgages are choosing to solely distribute their products (aimed at those who have minor credit issues) through the intermediary sector, and AToM is one of their limited approved distributors! Mortgage Trust recently re-launched into the Buy to Let market, solely through intermediaries.

Metro Bank, Post Office and the oncoming launch of Tesco mortgages later in the year are likely to remain customer facing only. Which is fine for the right type of consumer. However, like most banks and building societies, you will only receive advice on their own products and not any others available in the market place. So although you may get a great deal on ‘club card’ points, there’s really no substitute for advice and recommendation from someone who can review the whole of market and cater to your exact requirements. Don’t you just wish they would stick to what they are good at rather than trying to take over the whole world?!

Finally, I am delighted to announce that AToM has been voted ‘Best Mortgage Packager’ for a second year running in the national MyIntroducer.com awards 2011. This is a great achievement and is in recognition of the hard working team we have at AToM.

New lender comes to market!

Each week in this column I attempt to explain what happens behind the scenes in the world of mortgages and try to keep you, the consumer, updated on information that is not readily available to the general public. At the same time, trying to keep the detail clear, concise and, where I can, positive! Although the latter has been very difficult of late!

As you know, the mortgage market is heavily regulated by the Financial Services Authority (FSA). But even I find it difficult at times to understand the breadth and depth of legislative requirements which are becoming an everyday way of life in the mortgage and financial services sector.

I am an unashamed supporter of consumer protection, but now, it seems, Brussels are to get in on the act and are looking to issue regulatory impositions which will steamroller the FSA. One of its stated initiatives is to insist on a ten day cooling off period on all mortgage business. This is fraught with potential problems, not the least of which being the additional time added to an already lengthy house buying process.

Our own regulator has issued such strict rules and restrictions that mortgage lenders are already constrained on what they can and cannot do and this is being felt in every area of mortgage lending. Impositions on mortgage types such as interest only, lending into retirement, self employed and (thankfully) self-certification have already had a major impact. The thought of further restrictive regulation is frightening! Watch this space..

On a more encouraging note, October was a fantastic month for new business for AToM. Not since July 2009 have we seen those levels of new business. We have also seen a new mortgage lender come to market. Portal Portfolio is to provide secured second charge mortgages specifically to people with pension portfolios. AToM is the sole launch distributor for this lender. And Precise Mortgages have recently launched in to the Residential mortgage sector, having previously been in the Buy to Let arena. Both lenders have their own niches and I will explain more in the coming weeks. Suffice to say though that their launches have given the sector a much needed boost.