The short answer is, yes, most property is mortgageble, however, it is very dependent on every individual.
Our customers come to us to purchase property as an asset that will deliver them a return on investment, whether high annual rental income, good capital appreciation or both. The property type will determine how much cash input is required and what type of mortgage it may be suitable for. There is of course a large pool of lenders that will provide a finance product for your investment property, but naturally there are many different factors to consider when purchasing investment property with the aid of a mortgage.
We work with specialist mortgage brokers that deal with all types of commercial and residential property investments – they are experts in their field and fully understand the credit process and know how lenders like their cases to be presented.
As Kim McGinley from Vibe Finance explains, “There is no such thing as a tick box system when it comes to specialist finance and each case will have its ‘grey areas’ – this is where it really does come down to using a broker that is experienced and knowledgeable when it comes to shaping a case and presenting not only to a lender, but ultimately the right lender.”
Residential buy to let is the most traditional type of property to gain a mortgage on. If it is a standard type of property, fits in the right price bracket and is above the minimum loan value – your mortgage broker will have a healthy pool of lenders to reach out to and gain you the best and lowest-interest product. Financing Student and HMO’s sits quite close to this, however, the minimum loan value can increase as it is considered more specialist.
|Residential Buy to Let||Student & HMO’s|
Standard for all borrowing property types:
- The unit must be a minimum of 30 sqm
- The developer is on the lender’s panel
- You have the option of either your own legal representation or some lenders offer Dual Representation which can cut timescales down by up to 14 working days
- Assured Rental Guarantees can be a hurdle – for all intense and purposes it looks like a sub-lease which lenders do not favour.
- Commercial space under the unit – lenders always look at how re-sell-able and marketable the unit appears and this can be a negative for them.
Specialist borrowing … out of the norm:
- Units under 30 sqm, if buying multiple, could be considered a “multi-unit free block” of units and this would still comply for many lenders
- A single unit under 30 sqm would massively narrow the lenders pool, the Loan to Value will drop to around 60% LTV and the interest could be as high as 8%.
REW’S advise to clients when buying with the aid of a mortgage.
- Engage with a specialist mortgage broker and get the undertaking you are likely to achieve a mortgage based on 1. your current circumstances and 2. the property you are hoping to purchase, before paying a Reservation Fee.
- If time does not allow this e.g. last unit of its type or price, see if your investment expert can negotiate with the developer a refundable Reservation Fee for e.g. 7 – 14 days, subject to you having an initial discussion with your broker.
- When buying off-plan property you must have a Plan B in case your circumstances change:
- When it comes round to practical completion (6, 12, 18 months after Exchange) you can raise/borrow the funds without the aid of a mortgage.
- Your sales contract states the property is fully assignable and the developer has given his undertaking to either:
- Rescind the contract you have agreed between you – minus an admin fee.
- “Flip” the unit before completion. REW or any agent can sell your unit to another investor on your behalf. It’s also important to agree at the on-set, who makes any profit made from a “flip” sale and whether the agent has a selling fee.
To cover all parties, the undertaking from the developer of your plan B, should be in the Terms of Sale or at least in writing via email and ideally added to the Contract of Sale by the seller’s solicitor.
What to be mindful of when purchasing off-plan property with a mortgage
- A mortgage broker can only give an indication that you will get a mortgage based on current mortgage legislation & your current personal and financial circumstance.
- A developer generally cannot let the 28-day exchange process drag on due to mortgage suitability checks. As mentioned about this is ideally done before you pay any reservation fee.
- A mortgage broker should never request or advise you to carry-out an off-plan valuation, unless the developer is set up for this – very unlikely any developer will prepare early for this. Generally this is deemed a waste of developers time and your money, as the property can only have a valuation when physically there.
For investment property mortgage advise speak with Kim McGinley at VIBE Finance