If you are purchasing an off-plan property for investment purposes, then it’s vital to appoint the correct specialists for each step of the sales process all the way up to completion. One of these experts should be an experienced mortgage broker who can handle securing the right financing for you at the best rates possible.
In today’s article, I will outline the mortgage broker’s role in the sales process for BTL property and it’s importance to the overall deal itself.
I’m purchasing this property- what next?
Once you’re 100% decided on your purchase and have payed the reservation fee, it’s important to speak to a mortgage broker early so you can:
- See what your chances are of obtaining a BTL mortgage.
- Know what kind of rates you can achieve on your mortgage
This is when you get a general idea of what kind of financing you can achieve. Most lenders will offer Loan to Value (LTV) mortgages of up to 75% of the value of the property subject to status, but the rate in which you pay this off will depend on the lender and the value of your property. A good mortgage broker will help immeasurably with this side of the deal.
When does the process start?
The actual mortgage application process usually begins around 3-6 months prior to completion of your property. Your mortgage broker will be in touch with you around this point and keep you abreast of the current off-plan mortgage products on the market at that time.
You’ll be expected to complete a fact find to help the mortgage broker find the best product for you. It is usually completed over the telephone, or by filling in a form.
Once in possession of the completed fact find, the broker can start searching for a suitable mortgage to finance your off-plan purchase. At this time, they’ll also need to order a valuation and check that it is satisfactory.
Why a good broker is so important
It’s unlikely, but not impossible, you are going to find the best mortgage for a Buy to Let property from your high street chain bank. A specialist broker who helps hundreds of clients find mortgages at optimum rates is your best bet. Mortgage brokers are in constant touch with the marketplace. They know which lenders want to lend, which offer the best rates, and which offer the right terms and conditions for your needs.
The developers or agents you’re working with may be able to point you in the direction of an established broker. We at Tarquin Jones for example work with a trusted group of brokers that we refer clients over to regularly. Once you’ve made one purchase with the help of a broker, future purchases should be even smoother.
In most cases, the value at completion is higher than the contract price. It is one reason why off-plan property investment can be so lucrative. Now and again, though, something may go awry.
For example, the bank may have changed its lending policy between the time that you paid the deposit and completion. You may not be able to borrow the amount you had hoped. A good mortgage broker will have told you about this possibility. If so, you will probably already have a contingency plan in place.
In poor market conditions, your valuation may be below expectations. The mortgage broker may be able to arrange a second opinion. Alternatively, they may be able to work with estate agents to challenge a low valuation.
Finally, if anyone has access to the funding you need, it is likely to be your mortgage broker. Your mortgage broker will be able to use their contacts and market knowledge to reassess your options. They’ll try to get an alternative off-plan mortgage for you. This funding might come at a slightly higher rate of interest in these circumstances, but you will have allowed for this in your cash flow calculations.
Of course, you can try and do all of this yourself, but most investors are not mortgage experts and simply don’t have the time, effort and means to take all this on.
A key piece of advice to all property investors is to get the best mortgage by using a professional mortgage broker, experienced in the buy-to-let market, to do the necessary work all on your behalf.
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