Remortgaging not so straight forward

by Readers Question

10:22 AM, 10th March 2014
About 7 years ago

Remortgaging not so straight forward

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Remortgaging not so straight forward

I have a couple of properties which I purchased a few years back using 70% LTV buy to let mortgages.

My plan was to remortgage to 75% LTV based on increased property values in order to release some funds to buy further properties. Remortgaging not so straight forward

I have seen a few products I was interested in but after speaking to the lenders I’ve been informed they would not release funds into my bank account for future use if I wanted to apply for mortgage greater than my current one . They will consider if the increased lending if I have another property lined up now to buy and LTV and increased valuations on existing properties stack up.

Has anyone experienced similar barriers in respect of remortgaging to release equity?

The only lender I can find currently that is flexible is BM Solutions, they don’t appear to tie you down to having another property secured now to buy before they will consider the increased lending.

Have I just been unfortunate with few lenders I have tried or is this common practice?

Any advice appreciated

Cheers

Paul



Comments

Howard Reuben CeMap CeRER

12:31 PM, 10th March 2014
About 7 years ago

Paul

By all means get yourself approved (via a whole of market broker who has access to intermediary-only products, of course) but I would not suggest that you draw down on the funds until you have indeed found a property to buy. Why pay interest on borrowed funds that are not yet required?

Lending is becoming more tight and working with a Broker should enable you to secure the funding you need - when the time is right.

The size of the mortgage (or overall borrowing levels) is not a problem for many lenders, indeed I have some Clients with 100+ properties and tens of millions of pounds of borrowing, and we still don't have an issue assisting our Clients securing more when required. Obviously, some lenders do have tighter restrictions than others, hence I should also say that you should use an NACFB Broker too, so that you have access to exclusive deals from lenders who offer specialist BTL products too.

Hope this helps.

Howard

Neil Patterson

12:57 PM, 10th March 2014
About 7 years ago

I have been away from actually placing the mortgages directly with lenders for a little while but do not remember lenders holding back funds for this purpose as a purchase can easily fall through at any stage or you could be going to auction with no guarantees.

Is this actually more common place now Howard?

Which Lenders did you get turned down by for this reason Paul ?

Howard Reuben CeMap CeRER

13:06 PM, 10th March 2014
About 7 years ago

Reply to the comment left by "Neil Patterson" at "10/03/2014 - 12:57":

No, not commonplace, I just couldn't recommend drawing down funds when they're not actually going to be used / needed for the foreseeable future. That's just having a debt for debts sake.

There have definitely been a few times when the lender has queried why a single BTL property (and mortgage amount) is higher than the landlords own personal resi value, but that's where an experienced BTL broker can assist by painting the full picture to the lender.

Neil Patterson

13:12 PM, 10th March 2014
About 7 years ago

Reply to the comment left by "Howard Reuben" at "10/03/2014 - 13:06":

I would counter with the old "Take the money and run while you still can" saying.

Obviously not appropriate in all circumstances before I get my Knuckles rapped Howard lol.

Neil Patterson

13:13 PM, 10th March 2014
About 7 years ago

N.B. Howard is fully regulated. I am not so can have more fun with my opinions 🙂

Mark Alexander

19:23 PM, 10th March 2014
About 7 years ago

Surely it's just a case of telling the lenders what they want to know.

Purpose of loan = capital raising to fund deposits on further BTL purchases.

That's about the extent of the size of the box on any lenders application form anyway.

I can only assume that Paul volunteered information which the lender didn't request. All information provided, whether it is requested or not, has to be considered. Therefore, if Paul had enclosed a covering note with an application form for example he may well have shot himself in the foot depending on what he said. Similarly, of he said on the application form - Purpose of Loan = to increase my bank balance, that could also raise more questions.

Obviously you have to tell the truth but the art is knowing how to present a case to make a lenders decision easy. A good broker will be able to do this as he/she will be doing so on a very regular basis and will know what lenders need/want to see.
.

Paul Barrow

22:56 PM, 10th March 2014
About 7 years ago

Hi ..

Thanks for the feedback guys..

Skipton was the building society that raised the issue . They asked what current mortage was and what I wanted to borrow on re-mortage . They asked what I wanted to do with extra funds and I said to release capital for further buy to let investments down stream . They said at under writing stage they would only release if specific property details could be confirmed .

Given I've seen a few potential auction properties coming up, I wanted to release some equity so I knew what I had to play with rather than just increasing debt with no real strategy.

Howard , one of your guys has been looking into it for me and when I questioned it , he confirmed most will only lend when you are actively pursuing another property and this can be referenced etc..

This effectively means some of the more attractive deals have been ruled out which came a bit of a surprise

Mark Alexander

7:29 AM, 11th March 2014
About 7 years ago

Reply to the comment left by "Paul Barrow" at "10/03/2014 - 22:56":

Hi Paul

I dealt with several underwriters during my career as a broker and came across situations like this many times. I strongly suspect that the underwriter you dealt with at Skipton was newly mandated and therefore quite nervous. He/she would probably have low targets whilst new to his/her career.

In this situation underwriters have a tendency to over-think deals and prefer to say no as opposed to asking better questions and taking a view. They are like new goalkeepers, they need to play safe and create an impression.

My best guess is that your words "down stream" are what caused the problem. Had you missed those two words from the end of your sentence whilst explaining the purpose of the loan you would probably have been approved.
.


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