Urgent Buy to Let Help Required

Peter_S_4 · 19 April 2007 at 8:40PM

Myself and a friend decided to buy 2 apartments as buy to let investment properties between us. The price for each property was £211k which we negotiated to £188k, which included a 10% deposit paid incentive from the builder and some other small benefits. We put in a 5% deposit on each property to make up the required 15% total deposit. The conditions of receiving these benefits from the builder were that we had to use their mortgage advisers and exchange contracts within 28 days. As I was going on holiday before the 28 day period expired, I was put under pressure from the sales people to exchange contracts even without a concrete mortgage offer in place. The mortgage adviser told me that there would be no problems getting the offer and it would be OK to proceed. On my return, having exchanged, I was informed that the product had changed and that the mortgage was no longer available. Soon after, that particular broker left the company and I have since been dealing with no less than 4 mortgage brokers from their company at one time or another (this saga has been ongoing for 6 months) and we have tried several routes to get the finance secured (including residential, buy to let and let to buy) but with no success.

The upshot of it all is that the apartments are due to complete in just a few weeks time and we are still without finance in place despite having exchanged contracts. We urgently require finance and are now having difficulties even contacting the brokers, who seem to want rid of a difficult case. I have expressed my displeasure with the builders but that has not helped.

I would appreciate hearing any thoughts/ suggestions you experts out there have. I look forward to hearing from you. Thanks in advance.

silvercar · 19 April 2007 at 9:45PM

Do you want to buy the apartments still or are you looking to get out of the deal?

Can you deal with other mortgage brokers or are you still tied to the builder's brokers?

My concern would be, that with 4 brokers running round searching mortgages for you, your credit record is going to record a load of searches and damage your credit rating. I would suggest that you tell the builders that you need to break free from these clowns as time is short.

You haven't posted much details of your own situation. I presume that with trying to get a residential mortgage you don't have another property and have a salary to support this mortgage? If not, this may be a reason why you are having problems. Another reason may be trying to secure a BTL mortgage without a property of your own. The ratio of rental to mortgage may also be a cause for concern.

Lenders are often unhappy with gifted deposits.

MortgageMamma · 19 April 2007 at 9:50PM

Can you post more details of your situation e.g. finances, which lenders you have tried, why they declined you etc etc

JoeK_3 · 19 April 2007 at 9:50PM

Peter_S wrote: »

Myself and a friend decided to buy 2 apartments as buy to let investment properties between us. The price for each property was £211k which we negotiated to £188k, which included a 10% deposit paid incentive from the builder and some other small benefits. We put in a 5% deposit on each property to make up the required 15% total deposit. The conditions of receiving these benefits from the builder were that we had to use their mortgage advisers and exchange contracts within 28 days. As I was going on holiday before the 28 day period expired, I was put under pressure from the sales people to exchange contracts even without a concrete mortgage offer in place. The mortgage adviser told me that there would be no problems getting the offer and it would be OK to proceed. On my return, having exchanged, I was informed that the product had changed and that the mortgage was no longer available. Soon after, that particular broker left the company and I have since been dealing with no less than 4 mortgage brokers from their company at one time or another (this saga has been ongoing for 6 months) and we have tried several routes to get the finance secured (including residential, buy to let and let to buy) but with no success.

The upshot of it all is that the apartments are due to complete in just a few weeks time and we are still without finance in place despite having exchanged contracts. We urgently require finance and are now having difficulties even contacting the brokers, who seem to want rid of a difficult case. I have expressed my displeasure with the builders but that has not helped.

I would appreciate hearing any thoughts/ suggestions you experts out there have. I look forward to hearing from you. Thanks in advance.

This sounds an appauling case of promises that can't be kept.

Have the appartments been assessed for potential rental income by a lenders valuer?

JoeK

MortgageMamma · 19 April 2007 at 9:56PM

Thats what I thought Joe but I just wanted to get some facts before I said it

Sounds to me like a no goer but no one has the balls to say now they have exchanged BUT I think they shoudl see an experienced buy to let specialist to see if this can be done - BTL is not my strong point I much prefer residential so I dont have a lot to offer on this thread

Leon_W · 19 April 2007 at 10:17PM

The problem is (and I must admit to guessing !) Is that the rental income doesn't stack up. Interest rates have risen 3 times since last whenever which makes most lenders rental calcs just get more and more difficult. Nervous valuers don't help with rental downgrades common.

New Build rings bells aswell. Over supply, to little demand, "incentives" which are nothing of the sort (who "gives" away 10% ??) Obviously overvalued to start with. There is such a small number of lenders that will accept the 10% builders gift that your mortgage choices came down to under a handfull of companies that would even consider it anyway. Were you told that ???

There is one short sharp lesson from this. In no circumstances should you exchange on a property without having the funding in place as you are really setting yourself up for a fall.

I also have no suggestions. If all avenues have been explored and come up with nothing then where else can you go ? Your choices were severally limited to start with.

silvercar · 19 April 2007 at 10:33PM

Leon_W wrote:

There is one short sharp lesson from this. In no circumstances should you exchange on a property without having the funding in place as you are really setting yourself up for a fall.

I actually don't understand how your solicitor let you exchange without your mortgage offer in place!

Peter_S wrote:

The mortgage adviser told me that there would be no problems getting the offer and it would be OK to proceed.

I think a complaint to the mortgage advisor is in order here!

Investigate what the fallout would be if you failed to complete. Losing a 10% deposit if this was all gifted from the builder doesn't sound a terrible way out of the mess.

If you want to proceed, and I would be checking out realistic rental values from local estate agents, you need a broker specialising in difficult BTL deals.
I'm surprised the builders mortgage dealers don't know every which way on this, but clearly they have bitten off more than they can chew.

One other avenue to try may be posting on singingpig.co.uk. The site is full of gung-ho! property investors and they have a section for "finance wanted". From memory a lot of posters on there seem to use Mortgage Express and Mortgage Works. They also talk about "getting around" gifted deposits by arranging bridging finance to tide you over completion and then remortgaging, based on market value, the next day.

Even at this late stage, I would be considering whether you want to go ahead. Losing some deposit and pursuing a complaint against your mortgage advisor and your solicitor (who I still can't believe allowed exchange with no mortgage offer!) may be more cost effective than buying the property.

dunstonh · 19 April 2007 at 10:41PM

Some very good responses above.

I only have some clarification points:

The conditions of receiving these benefits from the builder were that we had to use their mortgage advisers and exchange contracts within 28 days

....

this saga has been ongoing for 6 months

How did 28 days turn into 6 months? Was the property not ready? In which case, going for a mortgage in the early stages would have been pointless other than pointing out if you were likely or unlikely to get one.

Most deals have to advance within a defined period so if the property isnt going to be available, there at the estimated completion date, then its not worth applying.

High turnover of staff suggests they cant earn the money or the working environment is rubbish. That said, there is probably very little the mortgage advisers could do until it was closer to the date the builder said it would be ready.

Buy to lets are not risk free. You have picked quite a few high risks and suffered poor timing (which is when the consequences of risk hit home). Off plan being one, small personal deposit being another. Low rental yields and increasing interest rates reducing the amount lenders will give you.

You need to be getting your personal deposit to 15% if you can to improve the range of lenders.

Peter_S_4 · 19 April 2007 at 10:54PM

Thanks to all who have responded.

Silvercar - I do still want to buy the apartments but obviously if nothing is possible to secure the finance I will have to try to get out of the deal but I know that will not be made easy which is why I'm exploring every avenue possible to get finance. I told the builder today that I intended to use other mortgage brokers because their recommended ones didn't have anything good to offer. They were going to get on to the broker and chase them up but I've heard nothing from builder/ broker since that call this afternoon. I do have another residential property, as does my friend buying with me (mine similar in value to the apartments, my friends a little higher). The only reason we tried residential mortgages was because we were up for trying anything just to get the finance secured and we were informed that there would be a better chance of achieving that on a residential. A valuation was recently done on LTB residential mortgages and came back good but when I called today to get an update I was told that it didn't pass the underwriters because their terms had changed and because the cases didn't look like genuine LTB's but BTL's instead?

MortgageMamma - We have tried some dirty lenders, including Freedom, Victoria, and BM Solutions and so many products have been put in front of me at one time or another but all have fallen down somewhere. The recent LTB one was declined because they felt the cases didn't look like a genuine LTB situation though I don't know how they came up with that conclusion. The problem with the initial mortgages (on which I exchanged thinking that all would be OK) was that they changed their criteria and I no longer qualified. Another was declined because the builders gifted deposit couldn't be accepted. I am starting to doubt whether anything they tell me is true and 2 brokers I have dealt with there have left the company during this time and the case keeps getting passed round. Other than that my credit history is golden. Zero debts. My friend does have a bit of previous bad history but is clean now but only for the last year or two probably.

The apartments have been valued by ARLA agents at a decent value. I hate to say it Joe/ MortgageMamma but I fear this may be a no goer as you suggest. In the event that when the completion date comes I still have no finance in place, can you recommend a course of action? Whenever I've mentioned this subject to the builder, they just say we'll worry about it when it happens because it is quite a unique case but I can't afford to lose my deposit. That would leave me in the brown stuff.

MortgageMamma - Can you recommend an experienced BTL specialist? After dealing with this broking firm I only want to speak to people who do know what they are talking about.

Thanks again for your help.

silvercar · 19 April 2007 at 11:11PM

In the event that when the completion date comes I still have no finance in place, can you recommend a course of action?

Your solicitor is the person to advise you on this. Depending on what is in the (exchanged) contract, you may be able to sell the property on. When we exchanged on our BTL last Summer we had a clause put in the contract that it was assignable; as it happened we completed ourselves, but we did have the right to assign contract to another party. Even if you don't have such a clause in your contract it may be possible to obtain consent. You would then (through an estate agent) arrange to sell the property on to someone else prior to completion.

Whenever I've mentioned this subject to the builder, they just say we'll worry about it when it happens

It may be that the builder would have a duty to mitigate their losses, in other words, to try and sell the property on. The more notice they have the more likely this is. Speak to your solicitor.

Peter_S_4 · 19 April 2007 at 11:13PM

I agree that you should NEVER exchange contracts without a solid mortgage offer in place but it's too late for me this time. I've made my bed etc.

I should have said that we were also using the builders' solicitors. That was another condition of the benefits received.

dunston - the exchange had to be done within 28 days (this was back in October) but the apartments weren't due for completion until now. I didn't know it was pointless to pursue mortgages so far from completion time.

silvercar thanks for the info re singingpig. It sounds far from ideal but it may be the lesser of two evils.

Urgent Buy to Let Help Required

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