When it comes to specialist finance, I firmly believe that the use of an intermediary is key. Anyone with an internet connection can go and find a ‘best price mortgage’, but when you are looking at something a little more niche you will likely find that this will not be sufficient enough to meet your requirement.
Lender criteria can often be a comprehensive list of complex details to work with, and when you are looking at such a large pool of lenders this can be a massive task for anyone. The pandemic led to even more criteria – such as furlough details – being required and the recent Base Rate increase has meant that lenders are changing their criteria more frequently than ever before. Just last week Santander announced that they will now consider self-employed applicants up to a loan to value of 90%. Couple this with lenders pulling products and increasing rates, we are reliant on the sourcing systems being regulalrly updated to reflect these changes.
With over 20 years in the industry, I can honestly say that the current mortgage lending market is one I love. Lenders are increasingly flexible on criteria and with new lenders entering the market, it is an exciting time for intermediaries.
There are three main areas of specialist finance: buy-to-let, adverse and income.
Buy-to-let
Now, I can only speak from my own experience, but when sourcing a mortgage for a portfolio client(and I mean a true portfolio landlord -one with 10 or more properties) it seems to take a very, very long time with many associated challenges. Encompassed within this is understanding the lenders who ignore mortgage free properties, properties in a limited company, and all of those properties which are not residential lets, such as commercial and holiday lets.
I could write about the finer points each lender will consider on limited company applications all day: how many shareholders are permitted, and the SIC codes. And then the multi-let, HMOs and additional licensing criteria need to be considered with each lender.
Adverse
Adverse lending is so much more than going through a list and ticking off the CCJs, defaults and missed payments in the last two or three years. With many lenders operating a common sense approach, they can often ignore an isolated missed payment, or a partial payment, or if the payment was paid within a certain timeframe of the original payment date. Smaller CCJs and defaults can sometimes be accepted if they are settled, even by high street banks.
Income
Lenders not accepting someone’s specific income type, or the length of time that they have been receiving that income, is also an area that often requires a specialist lending approach.
Examples include: employed but still in the probationary period, receiving an annual bonus, self-employed with only one year’s trading, or using the company’s pre-tax profits. Then we have people with second jobs, contractors, foster carers, on a pension or receiving benefits. Every single lender has their own policy on whether they not only accept the income, but also how much of it they will accept.
Final thoughts
Every single lender will assess the applicant and the property. Once you have found the right lender, with the correct price and criteria for your client, you then need to do some due diligence on the property yourself and ensure it is right for the lender. In comes Google street view – a mortgage brokers best friend. Bring up the property in question and do a little homework, you will be surprised (or maybe not) at the number of times that I have spotted a possible issue with a property that the client hasn’t mentioned, or doesn’t even realise.
This is a niche that lenders are realising needs to be serviced. We work with Quantum Mortgages who consider cases on an individual basis and properties most specialist lenders would decline such as: small studio flats, semi-commercial and high rise flats with a balcony to name a few. Also in this area we have United Trust Bank with some excellent criteria, such as non-standard construction. UTB also have fantastic criteria when it comes to bad payment profiles. They have recently helped me with a number of clients.
When it comes to ‘specialist’ finance there is a large number of lenders with a huge variety of attached criteria, and unfortunately there is no centralised place for all of this information. You have a number of systems such as Knowledge Bank, SmartrCriteria and Mortgage Broker Tools, but in my opinion they are not quite there yet. I believe that it is essential a broker attends the various roadshows, webinars and exhibitions where lenders are educating everyone on their criteria and promoting their USPs.
Vincent Burch is mortgage director of Vincent Burch Mortgage Services