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If you’re looking to purchase a property at auction – perhaps to refurbish, or to acquire the land to build upon – then you may need finance to complete the transaction.
75%
1 Year
5%
Daily
25 Years
£250k
£100M+
OMV
It would be fair to describe the Buy-To-Let market in the UK to be experiencing a kind of resurgence of types. Landlords and investors, at one point, were considering pulling away from the buy-to-let market in large numbers, however, that seems to have changed markedly in recent years.
Despite a pandemic economy and a recession in 2020, the market rebounded to grow significantly throughout the year and beyond, and this has once again attracted landlords and investors back into the market.
It’s also thanks, in many ways, to the government making UK property a central plank of their economic strategy throughout the year which has meant that tax breaks, economic policy and focus have allowed things to flourish, with prices, rents and demand all growing along with yields too.
With that in mind, many landlords have actually been growing their property or investment portfolio over these past 12 months, and that’s meant that we’ve been getting a lot of queries about mortgage options for multiple properties, so we’ve put together a short guide for Buy To Let portfolio mortgages.
As opposed to a singular buy to let mortgage, this type of mortgage finance allows you to cover all of your properties if you have multiple investment properties. Rather than, say, having three different mortgages on three different properties with three different providers, you would bring them all under one umbrella, with one payment and one provider.
There are obvious advantages to this type of buy to let mortgage arrangement, rather than having multiple arrangements, and the main one is that it makes things much easier in terms of admin and organisation.
The portfolio of investment properties needs to be registered as a limited company and finances and accounts are filed as they would be with any other business. As a property investment company, a buy to let mortgage provider would expect a landlord to have a minimum of four properties to be eligible for a portfolio buy-to-let mortgage.
Due to years in the industry we’ve managed to build a large and extensive portfolio of lenders and mortgage providers, many that you’re unable to access through traditional means or if you were to approach them individually. We work with banks, investors, pension schemes and other investment vehicles that simply aren’t available anywhere else, and we operate a preferred partner scheme with many of them meaning we can offer you exclusive rates and terms. If you’re looking for a portfolio mortgage, then there really isn’t anywhere else that can get access to such a wide variety of lenders.
In terms of the criteria that lenders will require you to meet, again this will vary depending on the finance provider, however, more generally you’ll be expected to meet a few conditions.
Ready to apply for development finance UK? We work with a tried and trusted panel of development lenders who are actively lending. The deals that we can recommend to our clients are updated daily, so you have complete peace of mind that you are receiving details of the best possible development finance products on the market in real-time.
To give you a better idea of what getting this type of mortgage may entail, we’ve put together a calculator for you to play around with. It will allow you to change the rate, the length of repayment, the amount you want to borrow and the amount of your deposit. This will give you a good illustration of what to expect if you qualify for one of these mortgages.
To give you a bit more information about why so many of our clients prefer to take out a portfolio mortgage rather than separate mortgages, we’ve put a list together of the main advantages to taking out buy-to-let mortgages of this kind:
It goes without saying that from a management perspective it’s much easier to manage your portfolio of properties when they’re all mortgaged with the same lender. It makes it easier to organise your finances, set a fixed rate for all of them, and to set fixed longer term payments so that there’s no nasty surprises. It also makes it easier for tax purposes and filing accounts as you’re not having to file receipts for multiple different finance arrangements.
Some years ago, the government removed the tax benefits of being able to deduct mortgage interest from your tax returns. This, in turn, made running a portfolio more expensive and meant that a lot considered moving out of the buy to let market altogether, however, this only affects private landlords. As a business and limited company with a portfolio buy to let mortgage, you’re free to try and deduct the mortgage interest from your tax returns, however, it’s always worth consulting a property tax expert.
Because you’ll be dealing with specialist mortgage lenders, they offer much more support in terms of helping you assess your portfolio moving forward, the general management and updating your finances. For example, as a company with a portfolio of more than 4 properties, you’ll be subject to a stress test which takes into account your experience, details of your existing mortgages, your assets and tax liabilities, your cash flow, and your income. They also offer advice and guidance.
Because these types of mortgages that are buy to let are more complicated, lenders tend to offer fairly flexible terms to their borrowers to make them easier to manage and to be able to flex them around what you need and what you’d require. Many, for example, offer fixed rate mortgages for anywhere between 2 and 25 years. They also offer preferential terms depending on experience and your portfolio, and many will allow some early repayments, as well as allowing you to sell or add further properties down the line.
One of the good things about mortgages for a buy to let portfolio is that, whilst important, your personal credit rating isn’t the most important thing in your application and, in fact, lenders are much more interested in the overall health of your property portfolio, their profits, rents and your performance as a landlord. If you’ve got adverse or bad credit on your credit history then fear not, lenders will still broadly consider you for their products and help you out.
Hank Zarihs Associates streamlines your financing journey with tailored solutions, fast approvals, and expert guidance, connecting you to trusted lenders for project success
This will always depend, ultimately, on your own circumstances, however, broadly speaking it’s usually a good idea for landlords to bring all their investment properties into line with each other under the same lending portfolio.
It makes things easier, it’s more tax effective and it also means you pay a consistent rate (often less) across all your properties. It can also avoid disparities between the equity you hold across properties and bring them into line with each other.
Broadly speaking they are a good idea, but as always, we would always recommend you speak to a broker.
Our brokers are highly experienced professionals with lots of experience in the industry ready and willing to help you out from the start of the process to the finish.
They can talk you through your portfolio and quickly get you an answer on what you may qualify for and what you’re eligible for, so why not pick up the phone or drop us an email?
You may have heard about bridging loans in the context of property investment or moving house, but what exactly are they? Basically, bridging finance is a type of short-term loan that allows a buyer to purchase a property before their existing home or investment property is sold. As the name suggests, it ‘bridges’ the funding gap in the lag between purchase and sale – offering rapid access to the necessary purchase funds for a brief period of time.
Borrowers can access from £5,000 to £250 million, depending on applicant status, the value of the property and other lender criteria. Higher lending amounts are typically reserved for borrowers who can put up several properties as security. Quotes are provided on a Loan to Value (LTV) of 65%-80% in most situations.
The bridging finance market has grown rapidly, with a number of small and focused lenders now on the market, catering for specialist property finance needs. The market has changed because large high-street lenders have become less willing (and sometimes less able) to lend ever since the financial crisis of 2008.
As to whether a bridging loan for property development, auction purchase or private home buying is a good idea, it depends on a variety of factors. Bridging loan requirements vary by lender, but each will have certain common features that need to be considered.
The most notable feature of this type of finance is that the interest rate is likely to be high. At the same time, there are typically high administration fees applied to the loan. Because of this, it is essential to proceed very carefully and with a full view of the facts. Borrowers have been burned by this type of loan in the past, in instances where transactions have fallen through, or where lenders have turned out to be unscrupulous and untrustworthy.
Benefits of instant bridging loans
1. Rapid access to money
2. Ability to borrow large sums – often up to £250 million depending on applicant status
3. Options for flexible borrowing.
Possible downsides of bridging loans:
1. Failure to understand the unique features of these loans can result in financial risk
2. Bridging finance is secured against your property; meaning it can be sold if you can’t meet the repayment terms
3. A costly option with fees and higher interest
Bridging finance interest rates will vary by lender. However, interest costs of 1.5% a month are not unusual, which can equate to an annual percentage rate of 18%.
Bridging loans may have fixed or variable interest rate features. Fixed interest rates are ideal for customers who want stability, as they offer the same amount of interest for the duration of the term. The rate is pre-agreed, but there may be a premium for this security.
The other choice is to have a variable rate bridging loan which can change with the base rate. However, you can save money if the base rate decreases. Borrowers who are less concerned about security sometimes prefer the variable rate option if they believe that the financial markets will travel in their favour. Knowledge and market insight is required here, along with a thorough understanding of personal risk tolerance. If interest rates appear to be rising, most customers will choose the fixed interest rate to lock it in and avoid further increases in the event of a base rate rise.
Bridging loan periods tend to be for several months and there are usually different options for paying the interest portion.
Monthly repayments
The customer repays the interest every month as a separate payment, rather than adding it to the outstanding balance
Rolled-up bridging finance deals
The compound interest is calculated monthly but added to the outstanding loan balance and paid together when repayment is due.
Retained interest
The monthly interest payment due is covered up to a predefined date so that the full sum is only repaid when monies are due.
As well as interest payments, there will be an arrangement fee for the set-up of the bridging loan, which is usually around 1-2%. A repayment fee for exit paperwork may also apply, along with valuation fees for the cost of the surveyor.
Remember, this type of finance is designed to be short-term. As soon as it extends beyond the agreed interim or bridging period, penalties can rapidly stack up. Typically, bridging finance is available for 1 – 18 months.
Yes, there are two broad types: closed bridging finance and open bridging finance.
With closed bridging finance you will tell the lender how you will repay the loan – with what funds and when. These loans usually complete within a few months and the clear exit plan is required as a lending condition.
Open bridge finance won’t usually need this type of exit plan, and it is typically the loan of choice when funds are needed urgently to complete a property transaction. No detailed plan is needed to explain how the debt will be settled, and the finance tends to be offered for up to a year. Of course, it’s important to note that interest will keep being applied throughout this period.
There are also first charge bridging loans and second charge bridging loans.
If you have a loan against a property which is already mortgaged, you’d take out a second charge loan. An example of this would be if you were planning to finance a property extension to improve the property. The categorisation tells the lenders who will have legal priority for repayment if the loan was unable to be paid off at the term-end.
First charge loans apply if the new loan is the first secured on the property.
Bridging loan requirements will depend on the lender. Often, lenders will require that:
Customers must also take out their property mortgage with them too, providing the bridge finance as an interim measure before the standard mortgage comes into play.
Property is put forward as security against the loan. Some lenders expect applicants to have more than one property in order to be eligible for their bridging finance products, but this will depend on the lender and the size of the loan.
Applicants show proof of income – although, interestingly, as loan interest isn’t repaid monthly, some lenders do not request this.
The applicant shows evidence of their property investment track record if they are planning to develop their purchased property.
The applicant can show a business plan if they are using the bridging loan for commercial purposes.
Development loans are another type of short-term property development loan. They are repaid in stages and calculated on the gross value of the development. Personal loans are another option, as are remortgages when timescales are more flexible and a long-term loan is desirable.
Use a bridge loan calculator
Ask for your lender to provide a tailored bridge finance example or illustration around your particular borrowing needs.
Think carefully about the type of bridging loan that you need – whether open bridge finance or closed bridge finance.
Know whether the loan is a first or second charge type.
Clarify whether the interest rate is fixed or variable.
Review products from several lenders.
Be clear on your security.
Read the small print!
Bridging loans are offered by banks, building societies, specialist lenders and brokers. They aren’t widely advertised and usually require a direct application by the customer to find out the product features and offers.
Once you have made an application, a decision will usually be made within 24 hours. The funds then will take around two weeks to be issued, including time for checks to be carried out, the valuation and the actual transfer.
Hank Zarihs are highly experienced and specialist financial intermediaries operating in the property development market. We work with a tried and tested panel of over 60 trusted lenders and can provide excellent bridging finance with attractive features. Contact us to find out more.
Hank Zarihs Associates streamlines your financing journey with tailored solutions, fast approvals, and expert guidance, connecting you to trusted lenders for project success
A Privately Owned Independent Boutique Financier Whose Main Area of Focus is the UK Real Estate Market. Specialists in Raising Debt and Equity for Professional Sophisticated Investors and Developers.
Our core focus is offering fast solutions, financial products that deliver results, and the highest of service levels. If you would like to find out more please contact us to discuss your funding requirements.
Address: 2nd floor North Park House, The Precinct, High Road, Broxbourne, EN10 7HY, United Kingdom
Mobile: +44 (0) 20 3889 4403
Email: contact@hankzarihs.com
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