I keep hearing about the 6-month rule – technically it’s not a rule as lenders view it very differently. Some enforce it almost to the minute whilst others are more comfortable.I keep hearing about the 6-month rule – technically it’s not a rule as lenders view it very differently. Some enforce it almost to the minute whilst others are more comfortable.
It’s not just your ownership but the sellers as well so always ask how long they have owned it.
There are several competitive BTL lenders who will accept an application within 6 months. Reasons to remortgage early include:
• Repay a more expensive short-term/bridging loan
• Release your cash earlier to buy your next property
• Improve your interest rate
• Obtain a mortgage on the increased value if you have refurbished it
I deal with the Bank’s every day and its clear there is a huge difference in what they say in the media and what they do. They keep banging the drum that they are open for business and they have money to lend. But do they want to lend? Yes they do but you now have to work at getting the funding.
I see three main issues with the lenders:
1. Managers who don’t understand business – most of the experience has gone
2. Faceless underwriters who are scared in putting their name on a “YES-we will agree this one”
3. They don’t have as much money as they use to so the quality line has gone up.
On the positive side, it is getting better and more lenders have entered the market.
To maximise your chances of getting the funding:
1. Keep them informed on a regular basis-they don’t like surprises
2. Treat them as a shareholder
3. Tell them about your future plans and not just the past
4. Draw up a business plan. It can be just 1 page
5. Show them numbers – they like numbers. As well as your last annual accounts show them current figures as well
6. Advise them in advance of any cash flow issues. You are more likely to get it paid
7. Find out how your manager is targeted – see how you can help them
At Searchlight we have strong relationships with the lenders so if your current lender says no contact us to see how we can help.
Not wanting to be too controversial but various cases have led me to the conclusion that not all lenders look in detail on how they are going to get repaid. I must stress it is some and not all.
Being the rare breed that I am of broker, landlord and experience of running a bridging company the exit does concern me. Now three cases were all presented by other brokers to lenders with repayment coming from a remortgage. All had major holes in that strategy and the risks were never explained by either the broker or the lender.
1. A six month loan on a low rate when a client needs nine months. To extend costs far more than a nine month term with another lender.
2. A remortgage to a limited company whose main director/shareholder had adverse credit as long as your arm but the lender put exit down as a remortgage.
3. A valuer saying there was asbestos in the property but no specialist report being requested.
A recent case has got me thinking on how little due diligence is done by some lenders on the exit.
We have another broker introducing Steve to a bridging lender to convert and a guest house into an HMO. The deal gets done, refurbishment goes to plan and after several weeks of the client not getting the exit I get the call to sort out the repayment.
Steve meets the criteria of the HMO lenders. I ask the client about planning and he tells me it has established use. I say prove it as that’s what the lenders need. He then comes back to me and says it doesn’t have planning and has to apply for it.
So Steve has spent his money on a property that has planning for a guest house. Now he admits he missed it but this was never discussed by the lender or the broker. Surely their solicitors knew as well?
What does that mean to the bridging lender? Well the cynic in me says another two-three months of receiving interest and the bigger cynic the possibility of default interest.
Now I hope I am wrong but I can’t see any reason why the lender did not identify this and bring it to the client’s attention.
Now that’s four cases where their broker gave them a product that was never going to work. Clients weren’t aware of it and it has cost them all financially, never mind the stress and anxiety.
At Searchlight, we work on the exit first and if it can’t be provided by multiple lenders we won’t do the bridge.
Contact us now to see how we can help you as we don’t expect this product to be around for long
All products are aimed at UK business BTL landlords and subject to underwriting. Your home may be repossessed if you do not keep up repayments on a mortgage or any debt secured upon it.
Searchlight Finance Limited is registered in England and Wales No.07929050
Searchlight Finance Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register (http://www.fca.org.uk/register) under reference 743220. The FCA do not regulate Business Buy to Let Mortgages or most Commercial Mortgages and Bridging Finance.
ICO Number Z3109319. Your property may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it.