Further Advance Hell or is it just me?

by Readers Question

11:30 AM, 17th August 2015
About 3 years ago

Further Advance Hell or is it just me?

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Further Advance Hell or is it just me?

I’m in the midst of an application (on my own – am not using a Broker) for a further advance and am reaching out to other Property118 forum members to learn more about their experiences.hell

Having read through several related topics on Property118 I had a vision that this would be a simple (ish) process so long as the figures all matched up and that the Mortgage provider and their Underwriters approved.

My intention has always been to secure a 2nd Buy To Let once the further advance goes through.

Also, for reference, the current rental income covers the property value by the 125% which is a requirement of the Mortgage provider – given the 5.89% interest rate they put in place to cover risk. Our joint salary income is also way above the minimum £25,000 per annum criteria .. so there should be nothing getting in our way.

However, having since applied (for my first ever further advance btw) in April 2015 it’s now mid August and I’m beginning to wonder if this mythical further advance will ever go through.

The current hold up has been caused because the Underwriters have queried as to what value property I intend to buy next and what rental income I believe I could achieve.

Hypothetically, if I were able to release £25,000 through a further advance then I cannot realistically purchase a second BTL which is greater in price than £100,000 (based on a typical 75% LTV ratio). Surely some basic maths could have answered the Underwriters own question? Anyhow, I’m not here to bash Mortgage providers and their Underwriters – although I’d love to right now!

Ideally, I would like some discussion around the average duration it takes a typical further advance to complete based upon your own experiences. Is 4+ months way too long to be waiting on a further advance completing? Do you too get silly queries from Underwriters (as above) which have delayed your application(s)? Are there any tips on how to ‘fast track’ further advances in future? Are there any mortgage providers who you would steer clear of? Have you even been so frustrated that you’ve switched Mortgage provider because of a slow/bad experience?

Also, one such tip (to kick start this thread) from my own further advance application would have been to have setup a current account (purely for all BTL financials) with my BTL Mortgage provider (Woolwich/Barclays in this instance). This would have meant that I didn’t have to print off bank statements each month from my current account provider (Natwest) then drop them off (by hand) to my Mortgage Advisor each time they requested ‘just another thing we need from you before we can progress your further advance’.

Let me know your thoughts …

Daniel



Comments

Neil Patterson

11:41 AM, 17th August 2015
About 3 years ago

Hi Daniel,

As it is a Further Advance unfortunately to a certain extent the lender knows you are a captive audience.

Some Further advances I have seen sale through in a couple of weeks and some have as in your case taken months. It depends on how organised and busy the lender's internal team are and if there are any criteria complications we are unaware of.

You have the option of escalating the lack of service to their complaints department, but you do run the risk of getting them off side.

The option of a further advance does not form part of your original mortgage contract as it is brand new borrowing so there are never any guarantees.

John Constant

15:11 PM, 17th August 2015
About 3 years ago

Daniel,

you have my sympathy! I do this job for a living (Property118 linked advisers - HD Consultants) and over a period of time you get to know "who's good and who's bad". For a lender to take 4 months for a further advance is pretty poor service.

Some lenders can get these things done in a blink of an eye and the client's money is in their bank account in no time. I don't think that I have ever had a FA take 4 months - or anywhere near.

Many lenders have automated application processes with minimal need for human intervention (or any further questions). Incidentally, although you are borrowing an extra £25,000, you could be adding your own finds to it and be purchasing a far more expensive property. In this case, the lender is checking to make sure that you don't over-extend yourself, leading to a possible default on their mortgage.

I guess that you will bear this experience in mind when the time comes to remortgage, or indeed, purchase your next BTL property.

Finally, you ask for tips about how to avoid this situation. One obvious tip from me would be to trust your mortgage consultant - and leave all the heartache and stress to them!

Daniel Ryan

15:53 PM, 17th August 2015
About 3 years ago

Reply to the comment left by "Neil Patterson" at "17/08/2015 - 11:41":

Hi Neil,

Thanks for the feedback.

There certainly is a fear factor in having an application for a Further Advance ear-marked as 'problematic' if you do decide to escalate up the chain or dare cause a 'legitimate' fuss.

Ultimately, all property investors really want is someone to do their job efficiently (be it the underwriter or mortgage advisor) but this could lead to further probing from them which will just delay the process further.

Hopefully any other investors who find themselves in a similar position will take heed of your parting advice - further borrowing sure isn't guaranteed.

Daniel Ryan

16:10 PM, 17th August 2015
About 3 years ago

Reply to the comment left by "John Constant" at "17/08/2015 - 15:11":

Hi John,

Yes, we could be buying a much higher priced property come to think about it so their question is valid. Personally, and to speed the Further Advance process up, I'm not convinced it's worth telling the mortgage provider about this even if that were an actual intention. Before you know it they'll want to see the property deeds before parting with any cash!

It also makes sense to retain some cash for a rainy day - again, not something I believe most lenders want to hear.

This specific application process seems very manual even though it is with one of the high street mortgage providers. In future, I would pose this as a key question up front (to a mortgage consultant) as speed really is of the essence as I've already missed out on a couple of opportunities to invest in another BTL.

Thanks for the sympathy and great advice.

Mike W

19:08 PM, 17th August 2015
About 3 years ago

Daniel,

I am not a mortgage advisor but reading your post it appears that your intention is that you want to borrow a further £25k against your existing BTL property. You do not say what your existing LTV is on the existing BTL but I suspect this is the source of the problem. I assume your existing LTV is say 50%?

I do not know whether you own or rent your own home and therefore whether there is other security. Moreover you haven't specifically stated your income but I assume it is £60K +

For your second BTL you appear to be wanting to borrow 75% of the value of the second property from a bank and to raise the other 25% from your existing property. In other words you want to borrow 100% of the property value at marginal rates close to 6%.

Are you close to 40% tax bracket?

Since underwriters in main banks are worried about property price drops (eg Mark et al selling their properties en mass!!), risk of redundancy, effect on rents from government cuts etc., I would suggest your case is flashing amber if not red.

Frustrating. My bank manager said ' we don't want to lend money to property investors any more' and I have been with the bank 50 years!


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