Lot's of building work happening!

There is a lot of building work going on locally.  In the main, it is by large property developers/builders, but we are receiving enquiries for those privately looking to build their own dream home or renovate and extend their existing properties.   This can also include knocking down the property and building a new one in the same location.  These are normally called Self Build Mortgages or Development Projects. 

If you are considering these, have a chat with a local architect first to see if your plans are realistic possibilities. They will have a good idea as to what the local Council Planning Officers will accept and of course, what they will reject!  Lenders then may look to lend funds on a stage payment basis. Stage one might be the foundations, stage two might be ground level and so on.  Each stage would require sign off by the buildings inspector, and often the lenders own valuer, then funds would be released.  The lender may not lend the full build amount, so be prepared to put in a reasonable deposit, especially at outset to demonstrate your own commitment.  

For extensions and renovations, it may well depend on the size of the work and what funds are required.  If you are altering the property substantially, rebuilding etc, you will tend to find that only specialist lenders will take these on and in some instances, these may be on a short term basis.

Development Finance and Bridging Finance (now also known as short term lending) is money to be used in the short term to facilitate a financial transaction which has either an urgent or short lifespan and which is primarily geared to a property transaction.  The most regular type of transactions include: a property being purchased at auction: the purchase of a new property whilst the current one is still being sold: acquisition of a property which needs substantial renovation before it is suitable for a traditional mortgage or payment of an unexpected expense whilst more regular finance is being arranged, and so on.

Beware though, these lenders will need certainty on the exit route (how will they get their money back?) and with this type of lending and associated fees, it can be more expensive than a normal mortgage. Therefore it makes sense to exhaust all other channels first!

Too much information online can be confusing!

As rates continue to reduce, competition has moved at a pace on the high street.  Most of these lenders can offer attractive low rates with free valuations and free legal costs on remortgages.  This is great if you fit the lender's mould and meet their requirements.  However, if you don’t meet their requirements or if you fail the lenders credit score, where do you go next?

The easy response is a mortgage broker who not only has access to the high street lenders but the whole of the mortgage market.  

According to recent reports in the mortgage media, circa 72% of all mortgages are now arranged through a mortgage intermediary.  A good mortgage broker will not only have access to and understand the high street offerings, they will also have access to smaller building societies and other lending institutions who can think 'outside the box', manually assess applications and lend when the high street lenders might not.  This can include lending in to retirement/over age 70, lending to the complex self employed, ExPat mortgages, buy to lets, holiday homes, multiple properties on one title and so much more.

With technology taking over the world, and so many transactions taking place over the internet, it might be easy to be attracted to products online.  There is so much information readily available and over 11,000 mortgage products to choose from, but these types of things can get lost in translation.  Therefore seek advice.  Yes, it may cost you a small fee to have someone research the market on your behalf and make recommendations, having assessed your short to long term needs and requirements.  More importantly, it could save you thousands in the long run, over choosing the wrong products yourself. In addition, any professional will probably build a long term relationship with you and contact you at the time your current rate is coming up for renewal to ensure you have the best rate available.  It's good to talk..!

Some great rates available in the Buy to Let sector

At the time of writing, there is some quite serious competition in the Buy to Let sector!  Our good friends at Foundation Homeloans have just launched a 5 year fixed rate, sub 3.50%, with a 2% lender arrangement fee.  This is a really impressive move by the lender.  Not only that, but with Buy to Let properties, the mortgage is usually based on the rental achievable.  Lenders calculations vary but generally working on a rental income of 125% at a ‘stress test’ rate of 5%.  Foundation's product works on 125% of the actual pay rate (if you are purchasing in a Limited Company name).  This makes a huge difference in the amount of mortgage loan achievable.  Maximum loan allowed on this product is 75% of the property value. 

With Buy to Lets, the minimum deposit can be as little as just 15%.  At this level, there are only a few products.  With a 20% deposit, the numb er of products increases substantially, as do the options with a 25% deposit, and so on.   And rates are now so low that there's actually not a huge gap between Buy to Let rates and normal Residential rates, as there used to be. 

As the new taxation changes are implemented, we are seeing a lot more people purchase properties in a Limited Company name.  This sounds complicated, but any good property accountant will be able to advise you at the early stages if this is more beneficial to you, rather than buying in a personal name.   The most important thing is to ensure any property investment versus outlay gives you the best return possible. 

Finally, it doesn't matter whether you an experience landlord, or this is your first time.  Property ownership can be complicated, so explore all the options and shop around.  There are a huge number of lenders available to you and all have competitive edges and good criteria options for the right customer.  Make sure you understand everything at the outset so you don't regret it later! Always seek professional advice.

Great products, but processing delays across the market

Supermarket giant Tesco has launched it's mortgage proposition into the intermediary sector this week.  With some very attractive tracker rates, two and five year fixed rates, I can see Tesco Bank being a popular choice in the coming months and years.  And not one mention of a club card! 

Coventry Building Society has launched a competitive ten year fixed rate mortgage.  Available to those borrowing up to 65% of the property value, rates start from 2.99% (3.6% APR) with a £999 lender completion fee, free valuation and free legal costs on remortgages.  The mortgage is also available as an offset mortgage (which allows you to offset your savings against the mortgage interest amount, terms apply) at a slightly higher 3.19% fixed rate (3.8% APR).  The long term deals are great if you know your plans for the foreseeable future.  Speak to an adviser to find out more.

Despite some of these amazing products being launched and lenders looking to attract new business, we are seeing general processing delays across the market.  Some lenders are not taking appointments for two to three weeks, some are up to ten working days behind on processing, and we have experienced recent telephone calls taking over an hour to receive any kind of response!  These are just on the broker side so heaven knows how customers are faring!

Therefore, to make the process as smooth as possible, make sure you have all details to hand at the outset.  With all new mortgages, a budget planner will be required.  Make sure you know and can advise exactly how much you are spending on your lifestyle.  Especially make sure you know your monthly costs on food, household expenses, travel, pension and saving contributions and other likely costs such as hobbies, going to the gym, lottery direct debits and more.  Every lender will review your ability to afford your new mortgage over coming years so all direct debits and most entries on your bank statements or credit report will need to be advised.  This is so the lender can make a viable stress test on future rate rises and ensure that you will still be able to afford your mortgage at that time.  Yes, maybe there is a little guess work, but do make sure you disclose all monthly expenditure as the lender will normally want to review your bank statements and will see it all anyway!

Smaller lenders launching innovative products

A quick test to start this week!  Have you heard of the Dudley Building Society?  What about the Buckinghamshire, Harpenden, Marsden, National Counties, or Newbury Building Societies?  Not necessarily household names, but not ones to be ignored either.  We are seeing these names and a lot more like them launching innovative products.  Not necessarily looking for huge volumes, but looking to fill gaps in the market and this should be applauded.  

One such example is from our good friends at the Saffron Building Society who have a superb product aimed at First Time Buyers.  The lender is offering a 95% mortgage with no credit scoring, to those who have never owned a property.  Customers will still be credit searched but cases are reviewed on a manual assessment, rather than a computer making the decision.  There is a five year fixed rate option and the arrangement fee is just £495.  This is not just aimed at New Build properties either!  Obviously terms/conditions and other fees may apply, but this kind of innovation is exactly what the mortgage market needs! Others will look at complex deals including guarantor mortgages, shared ownership, mortgages for the self employed, contractors, professionals, all types of Buy to Lets and Self Build projects. What this all demonstrates is that there is a huge appetite to lend.  However, many consumers are turning to the internet as it’s such a superb tool.  But it can also be a disadvantage as so much information, news and in-depth product detail can make it more confusing than planned.  A good ‘old fashioned’ face to face conversation with your local specialist independent mortgage brokerage might be the answer. They will, in most cases, have a relationship with the lenders (even those you’ve never heard of!), understand their requirements and ensure all the correct information is submitted from day one.  Some even have onsite underwriters from the lenders, so can turn things around quickly and especially useful if an urgent valuation is required in a contract race scenario.  There really is no better time to utilise the expertise and staffing levels they can provide for you in what’s becoming an over informed and more recently, highly competitive market place.

Lending to those over 70yrs old is not a new thing for AToM!

Rates continue to tumble as the cost of funds remains low and lenders fight to attract your custom. During the last seven days, we have witnessed Halifax reduce some rates by up to 0.30% and Coventry Building Society reduce some of theirs by 0.20%.  Other lenders have reviewed their criteria.  For example, Kensington Mortgages will now consider 100% of a customers annual bonus when it comes to working out affordability (most lenders will only look at 50% of non guaranteed income).  New  lender, Bluestone Mortgages, have reviewed their criteria and will now accept contract workers who only have three months remaining on their contract (normally six months).  In the main, lenders are making positive changes to increase their market share.  Even if you have something you think is 'out of the ordinary' or 'impossible', do explore your options as there might be a lender out there who will assist.
 This does not exclude age either!  Many think that you cannot have a mortgage over the age of 70.  And, on the high street, this may still remain true in some cases as these lenders generally allow a mortgage term to last until the applicants retirement age.  This used to be 65, officially it's now 67, but the reality is it can be much later.  Most lenders increased their maximum age at the end of mortgage maturity to age 70.  However, we all know that people are working a lot longer now and repayment of such a large amount of money may not be possible in these restrictive conditions.  So the option is to raise further finance to repay the original loan or sell the property.  Thankfully, the first option is less onerous as it used to be.  Many non household named lenders will look at lending to customers to a lot later in life, assuming the customers can prove their continued ability to pay.   This can take the maturity age up to age 80, 85 or even 90 and above.  If the customer has a good and regular amount of income, a high level of equity in the property and can satisfy the lenders affordability requirements, then some lenders will be happy to lend.  Seek specialist advice from someone who offers a range of lenders from the 'whole of market', not just a restricted panel or the high street. 

Increasing number of people look at buying 'projects'

We are seeing an increasing number of people look at buying 'projects'.  Just because a property is run down or even classed as 'uninhabitable', does not mean you cannot get a mortgage on it. Nor if you are intending to purchase a property to let out, but it's currently in an 'un-lettable' 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 lenders now offer 'refurbishment' loans where the work must be carried out within a period of time after purchasing the property, normally three months.  Others will allow the works to be completed, revalue the property and lend based on the newer property value.  Each lender will work on the valuers 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! As the local area continues to become a 'new homes exhibition', there are a number of lenders also assisting customers with more private projects such as development and self builds.  Normally the customer will purchase a property in need of work, knock it down and rebuild, or extensively renovate their existing home.  Either way, the lender who funded the original purchase will need to be advised and made aware of all works as you will be altering their security! If you plan to build your own house (Self Build), the lender will issue the funds on a stage basis. Normally once the foundations have been laid, property built to eaves level, made watertight and so on.  At each stage a surveyor will review and advise the lender of progress and to release payments.  If the property has increased in value as a result, you will tend to find the lender may lend on the Gross Development Value (the end value). On a full refurbishment, again, the lender will want to know the plans and may lend in stage payments against the end value of the property, depending on the extent of the works involved. The lender will require sight of all planning permissions and estimates of costs involved before lending any funds.   Seek out a local architect to assist you with plans and costs and always make sure you set out your budgets from the outset.