Paul Martins, consultant mortgage broker at Mortgages for Business answers some of the most common questions about the buy to let mortgage application process.
How quickly can I get a buy to let mortgage?
Each application is different but the average turnaround time from enquiry to completion is generally around three months. On average it takes just over a month to receive an offer from the lender and just under two months from this date for it to complete.
Limited company applications do tend to take slightly longer to go through, as the underwriting is typically more of a manual process.
Of course these are just averages and some cases go through in a much quicker time, as my case study below demonstrates. We also offer bridging and short-term finance for those of you who
need finance quickly.
From enquiry to completion – what stages are involved in the buy to let mortgage application process?
Like any other mortgage, the buy to let mortgage application process is relatively straight forward:
- You enquire – we source the best buy to let lender and rate for you and send over an application form
- Once you have returned the completed application form we are able to obtain a decision or agreement in principle (often abbreviated to DIP or AIP) from the lender
- In some cases you will then be asked to complete the lender’s application form and supporting documentation – we can help you with this
- The lender will then instruct a valuation of the property from a surveyor - in most cases this will be at your cost. This is to confirm the property value, monthly rental figure and overall suitability of the property
- The surveyor carries out the valuation and gives the report to the lender. If happy with the valuation, the lender processes the application and may request further documentation from you, the borrower
- If happy with the application the lender issues a formal mortgage offer outlining terms and conditions of the loan. This is sometimes known as Heads of Terms
- If you are happy to proceed, solicitors are instructed to complete the legal requirements
- You and the property vendor agree a date for exchange of contracts – if this is a purchase. If you are remortgaging a property your solicitor will now request funds from the lender
- Contracts are exchanged and deposit is paid, after which point penalties are incurred for withdrawing and the completion date is agreed
- Completion takes place and you become the legal owner of the property and get the keys
- Your solicitor completes registration of the new on the title deeds
At what stage of the buy to let mortgage process do you tend to see hold-ups?
Of course each case is unique and often there are no hold-ups at all; however if there is a holdup it’s generally after a DIP/AIP has been processed. Here’s why:
- Once we have processed a DIP/AIP it is a bit of a waiting game. Lenders work to different turnaround times and at this stage it is up to them to send through the next steps. They will often ask you for further documentation and will also need to book in a valuation.
- Another reason for a hold-up may come down to the borrower not sending their documentation through when required.
- And of course, it’s really important to remember to sign the application form! You’d be surprised at how many times this gets forgotten.
As a client, is there anything I can do to speed up the process?
Try to supply all of the information and documentation requested by the lender ASAP.
Are some lenders quicker than others? If so, why?
Yes, all lenders have different turnaround times for numerous reasons, which can include their current workload, experience and processes. We track all of the buy to let lenders’ turnaround times so that we can give you an idea of what to expect when making an application. Clients sometimes choose lenders with higher pricing but quicker turnaround times because it suits their circumstances.
What documents will I be asked for during the application process?
This differs from lender to lender but usually you will be asked for:
- The completed and signed application form of course.
- Proof of identity for each applicant - a passport or driving licence is usually acceptable.
- Proof of address for each applicant – a utility bill, bank or credit card statement dated within the last two months.
- Evidence of your deposit - e.g. bank or building society statement showing the build-up of funds over a three-month period, including the source of any large credits to the account.
- Proof of your annual income – e.g. latest P60 and last three payslips if employed, or latest two years’ tax return and SA302 if self-employed.
You may also be asked for:
- Latest accounts if purchasing using a limited company (not always required)
- A copy of your HMO licence (if your property has one)
- Proof of mortgage (if remortgaging)
Why should I use a mortgage broker?
The majority of buy to let mortgages can only be accessed via intermediaries, so you will be limiting your options and possibly missing out on the most suitable rate for your circumstances if you
choose to go direct. It will also be difficult for you to gauge turnaround times. And of course, using an independent, whole of market broker often saves borrowers time and could save you money too.
Paul Martins has left Mortgages for Business for pastures new. For more information or for any questions relating to this blog, please contact the BTL Team on 0345 345 6788, where one of our consultant mortgage brokers will be happy to assist.
Application to offer within 5 days
How I helped a part-time landlord remortgage two of his rental properties, without paying any arrangement, legal or valuation fees.
A self-employed decorator and part-time landlord from outer London approached us looking to remortgage two of his three rental properties.
The properties in question are two identical 2-bed semi-detached houses, both in the same street.
The landlord was hoping for a quick turnaround time, as he wanted to use the capital raised to purchase a new buy to let property that he had seen on the market. As well as a quick turnaround time the client had requested fee free mortgages on both properties – meaning he wouldn’t be charged a valuation, legal or arrangement fee.
Fortunately here at Mortgages for Business we track lender turnaround times, so know who can get the case processed quickly. We also have access to the whole buy to let market, so are able to offer fee free mortgages.
We approached a lender with a good record of fast turnaround times and highlighted the need for speed in this instance. The client received a formal mortgage offer within five days of submitting the application. The case is now progressing smoothly and the lender anticipates that the funds will be available for draw down within a month.
Here are the details of the deal:
(Both properties are identical)
Property value: £150,000 each
Loan amount: £100,000 each
Rate: 3.74% 2 year fixed + free legals and valuation
Term: 10 years interest only
Mortgage payment: £311 pcm each property
Rental income: £650 pcm each property
Gross yield: 5.2% pa
Lender arrangement fee: Nil
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