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Thursday, 24 September 2009 15:29 |
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 Latest research from Paragon Mortgages says that almost 9 out of 10 landlords had found it more difficult to secure a buy to let mortgage in the last 3 months, compared to the previous 3 months. Now the cynical amongst you may say Paragon obviously have a lot of time on their hands at the moment, and therefore are thinking of ways to keep their profile in the news whilst awaiting new funding lines. (As an aside, I always really liked Paragon for their underwriting and range of mortgage products. It will be a great day for landlords when they are back in the market – anyway, I digress).
Now it’s true that lending in general, and in particular the number of buy to let products, has had a massive reduction in choice over the last couple of years but my message is simple: there is still funding out there.
The two main stumbling blocks seem to be credit score and cost, so let’s look at them both.
Credit score:
If you are experiencing problems with lenders’ credit scoring, then why not see if your partner or a member of your family can buy the property instead? (Just make sure you get your legals in place).
or why not use a lender who doesn’t use the credit score? We have a lender at 75% that doesn’t use automated credit scoring, but has old-fashioned manual underwriting. Yes, a real person.
Finally, there also a myth that once you have over 10 to 15 properties that you can no longer get a mortgage. Well, not for us! We regularly place investors with 30 to 40 existing properties with buy to let lenders.
Cost:
There’s nothing like talking about buy to let arrangement fees to raise the blood pressure of the seasoned property investor. However, here’s my take on it – buy to let mortgages were always seen as semi-commercial and slightly higher risk than residential mortgages.
In the last couple of years they got closer and closer to residential mortgage pricing, but that connection has now broken and for the foreseeable future I can’t see it changing.
Finance is one of the key factors that is holding back the housing market, therefore it would make sense that as buy to let finance becomes more readily available and less expensive, this will help to push the market higher. So if you find a property you want to buy, now factor in the extra mortgage costs into your projections, because if you wait until mortgage finance to get better, you may end up paying more that property anyway. It does not take much to imagine an average property uplift of over 2.5% over the coming months, and yet that is the average fee. Perspective is what is needed here; if the deal works. It works. My personal view is that we’ll look back at this point as a golden year to purchase property.
Tip of the week 1: How to dramatically cut those legal costs
Here’s a fantastic tip to save you money. If you are planning a purchase or remortgage and are looking to get a deal with a conveyancing company, then just ask your Resident Broker.
Typical costs for conveyancing can range from between £500 to £1000 for basic legal costs, plus of course, costs for disbursements. Typically, we are arranging these for our clients from £250 (plus disbursements), yes that’s right £250 – and I know what you’re thinking – who am I going to get to do this for £250 and are they human? Well, the answer is yes – we have many examples of satisfied clients – all conveyancers on our panel have a feedback system (a bit like eBay) so any bad feedback soon results in them not being used.
What we find is that the best conveyancers soon rise to the top because of our own experiences, client feedback and of course a competitive price.
Even if you are not using us for the mortgage (I can’t believe that would happen, but anyway) you can still use this service, so give us a call.
Tip of the week 2: Purchasing from own limited company
If you are in that catch-22 situation, where you have a property in a limited company (perhaps you originally constructed it within your company) and you have been frustrated with the inability to refinance it with any lenders on a buy to let basis, then please remember you can always purchase it in your personal name from your limited company.
At the moment if you have it with a commercial lender, they are probably forcing you down the route of a repayment mortgage, so if you’re not happy with that then simply use a buy to let mortgage. Even though you own it within a limited company, because you and your limited company are two separate legal entities, it is classed as a purchase rather than a remortgage.
Call one of our advisors today for more information 01424 205 373 |