by Steve Olejnik, head of sales, Mortgages for Business
of purchases versus remortgages in this sector at 19% versus 81%. This represents a dramatic swing from the 41% (purchase) versus 59% (remortgage) in Q1.
Risky business Whilst yields make an attractive headline, it is important
for would-be investors do their homework. The complex buy-to-let investment is a riskier strategy. Average property values and management costs are higher; loan-to-values are lower; add to this time spent finding tenants, void periods, dealing with letting agents, arranging insurance, acquiring the relevant licences and it is quickly clear to see that this business is not for the fainthearted.
Additional lending criteria Lending criteria for the more complex residential
investment is stricter than for a vanilla buy-to-let mortgage. In general, lenders require that investors have previous experience as a landlord, although not necessarily in the complex arena. They also insist that licences for HMOs are already in place. Rent to interest cover is stricter but as yields tend to be higher this is not normally an issue. Additionally lenders like to see a detailed valuation report and so tend to instruct valuers with more commercial property experience. On the bright side lenders’ arrangement fees for complex buy-to-let mortgages tend to be similar to those in the vanilla sector and range between 1% and 3%.
Seizing opportunity Brokers looking to break into the complex residential
investment arena need to take the time to research the market. In particular, they should:
● Be able to identify and understand the properties, tenants and funding vehicles that fall into the complex residential investment market
● Make sure that they have a strong understanding of the different lending criteria for each of the niche providers particularly Aldermore, Paragon and KRBS
● Align themselves with the specialist broker that has access to the niche lenders
● Ensure they understand fully the professional landlord’s circumstances, proposed investment property and funding requirements
● Have the ability to negotiate and design bespoke products that meet the needs of the investor
Rewards Exactly what fees a broker can expect to earn will
depend upon how much can be negotiated with the client and the intermediary that has access to the niche lenders. Broker fees are very much up to the individual broker. Brokers who actively get involved in managing the case for the client in conjunction with the intermediary can expect to receive part of the lender’s commission. Whilst there is no set rate, brokers should agree the commission structure up front. n
25
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36