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Dear Delia My client is a buy-to-let investor who would like to buy property at short notice. He needs 2m to buy eight flats in a 12-flat block that are being sold as a job lot. He wants to raise the capital swiftly. He has a number of buy-to-let mortgages with a range of lenders but has never been able to get a mortgage through in less than three weeks. Which lenders provide finance more quickly?

He can put down a 20% deposit and has assets worth 8m. Delia says: There are several options available, as Sue Cox of Bananas Inc and Mark Posniak of Cheval Bridging Finance explain. Have you got a problem for Delia? Email mortgage.strategy@centaur.co.uk

Intermediary response
Sue Cox is business manager at Bananas Inc

Earlier this year, flat conversions and new-build apartment blocks were being considered with caution by lenders. Bogus valuations and deals between developers and valuers led to several lenders restricting their LTVs. Portman withdrew from the new-build flat market completely at one stage.

The concern was that there was an oversupply of new-build apartments and pricing did not reflect this fact. But since then the market has settled down and many lenders appreciate that underlying conditions are sound. As a consequence, some lenders have products that would meet this client’s circumstances.

For example, CHL Mortgages’ criteria allow landlords to buy up to 10 flats in a new-build 12-flat block so your client would have no problem. The lender’s range of prime buy-to-let mortgages is competitive and it recently launched a 90% LTV buy-to-let deal that is fixed at 4.74% for two years. The recent base rate hike may affect the pricing of this product in time. Other features include no personal minimum income requirement and no income checks. There is a 1% completion fee and no higher lending charge. The product has a 6% early repayment charge until January 31 2011.

CHL is a pretty swift mortgage processor but the issue is how quickly the solicitors involved can do their work. They, in turn, will say that this is based on how the agencies involved in conveyancing respond.

From CHL’s point of view it is possible to process the loan in question here in the required period and have the money in the client’s account if the conveyancing goes to plan. But CHL cannot guarantee anything when the speed of conveyancing is out of its hands. Guarantees are almost impossible when solicitors and conveyancers are involved so a degree of caution is needed by the landlord. Also, I strongly suggest that your client appoints a surveyor to assess these flats prior to purchasing them. It is not unknown for properties to appear at short notice or auction that are impossible to get mortgages on because, for example, they are built using non-mainstream methods or have structural faults.

Lender Response
Mark Posniak is director of sales and marketing at Cheval Bridging Finance

The drawback with mainstream mortgage lenders is that they can’t provide finance at short notice. Even in these times of online decisions in principle and automated valuation models, two weeks is pushing it for such lenders.

I would be surprised if your client can find a lender willing to guarantee the money will be in his bank account within 10 working days, which is what he needs. It’s no good going to a lender that can only say it is “likely” to meet a two-week deadline. Your client wants the money to secure the property. If he has not got the money when he wants it, the deal will fall through.

His best option is specialist short-term bridging finance. This could get the necessary funds to him within a few days at a cost of around 1.5% per month. All he needs is a property or properties with sufficient equity to secure his loan against. Given that he has 8m worth of property assets, this does not seem to be a problem.

For bridging, his required LTV is a little on the high side but we at Cheval announced a new 10m lending limit and increased criteria flexibility last month. This means that while LTV remains a key part of assessing applications, it is seen in a broader context with underwriters focussing on all aspects of the loan – especially the ‘take out’ or repayment arrangements. In this situation 80% LTV should not be a problem.

Your client will be charged interest at a daily rate with no early repayment charge other than that which applies if he redeems within the first month.

As soon as bridging finance is in place he should be looking to mortgage with a conventional lender. Bridging is ideal as a short-term source of swift finance but is not designed for the longer term.

While the principle of bridging sounds simple, in practice when time is so restricted several things can go wrong. Without good service and support from the bridging company deals may not progress as they should. Choose your bridging loan firm carefully – not all have systems that can ensure you meet your client’s expectations. From an intermediary’s point of view, the commission from bridging is typically 1%. But that’s not the end of it. Given that the bridging finance will be short term, the client will require another phase of finance once the bridging loan has been repaid. Brokers can therefore have a double-dip income from the original transaction.

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