Purchasing a Buy to Let property can be a good investment, however, the mortgage process can seem daunting and complicated. Consultant Mortgage Broker, Charlie Potter, explains some of the most common questions we get about the buy to let mortgage process.
Getting a buy to let mortgage quickly - is it possible?
Every case is unique however we see that on average, a buy to let purchase should receive a mortgage offer within 3-6 weeks, and completion another 4 weeks from then. This can differ depending on other variables such as the chain the property is in, so may well complete more quickly than that or can potentially take longer. The process for remortgages is a lot quicker, and we would expect the full process to be completed within 6 weeks.
If you need funds to purchase the buy to let property more quickly than this, say from a property auction, you may find that Bridging Finance is a better option, as this can be completed in around a month which gives you time to get a buy to let mortgage in place at a later date. For more on bridging and auction finance, please see our blog on the topic here.
How does a buy to let mortgage work and what is the process?
- First, you need to speak with a mortgage broker about the property and/or budget you have in mind for your buy to let investment. They will give you a fact find document, which covers your finances, to complete.
- Once you’ve returned the fact find, your broker can research the market and source some suitable lenders and rates for your individual circumstances.
- Your broker will then discuss these options with you, looking at the market again and help you decide on a suitable product. Once you’ve selected a product your broker can apply for a Decision/Agreement in Principle (DIP/AIP) from the chosen lender. Depending on the mortgage lender, you may be asked to complete further supporting documentation – your broker will be able to help you with this.
- What happens after a mortgage in principle or DIP is agreed, you and your broker can complete the lender application. Your lender will then instruct a valuation on the property by a surveyor. This will confirm the buy to let property's value, monthly rental income, and overall suitability and condition of the property. Depending on the lender, this is likely to incur a cost.
- Once the valuation is complete and the surveyor has given the lender a report, they can decide on how to proceed. If everything is as it should be, the lender can then process your application. Once again, you may need to provide additional documentation at this point.
- When the lender is happy with the mortgage application, they will issue the formal mortgage offer which outlines the terms and conditions of the loan (sometimes known as Head of Terms). If you are happy with the terms, it’s time to instruct your solicitors to complete the legal requirements.
- Once the legal requirements are complete, you can agree on a date for exchange of contracts. If you’re remortgaging, your solicitor will request the funds from your lender.
- Contracts are exchanged and the deposit is paid so you can now agree on a completion date. At this point, you are legally responsible for the property and there are financial implications should you withdraw from the deal.
- Completion! You are now the legal owner of the property and can get the keys.
Where might you see delays in the buy to let mortgage process?
While many buy to let mortgage applications go through smoothly, sometimes there are hold ups along the way. We find these tend to occur after the DIP/AIP has been processed for a couple of reasons:
- If you (the borrower) do not send through documents when requested – we would always recommend sending things over as soon as they are asked for to help keep the process moving.
- Each lender has its own turnaround time. After the DIP/AIP, it’s up to the lender to complete the next steps of booking the valuation and asking for any further documentation. This can be delayed due to the lender's workload, experience and internal processes.
Here at Mortgages for Business, we track the buy to let lender’s turnaround times for these processes and can advise you on how long they’re likely to take. Sometimes clients will choose a lender with a higher rate simply because their circumstances require a faster completion time - your broker will be able to offer guidance on this.
What documentation will I be asked for during the buy to let mortgage application process?
Some lenders ask for more and some lenders ask for less, but generally, we find that most lenders will require at least:
- The completed and signed mortgage application form.
- Proof of identity for each applicant: A passport or a driving licence are usually acceptable.
- Proof of address for each applicant: For example, a utility bill and a bank or credit card statement dated within the last two months.
- Proof of funds for the deposit: bank/savings statement over the past three months. If you’ve had a large amount credited into the account, you’ll need to provide evidence of the source of that money.
- Proof of income: Your latest P60 and three months payslips if you’re employed or tax returns and calculation summaries from the past two years if you’re self-employed.
- If you are purchasing through a Limited Company/Special Purpose Vehicle (SPV), you may need the latest accounts for the company (unless it's brand new of course).
- If the property is an HMO, you will require the HMO licence or a copy of the application to the local authority for an HMO licence.
The benefits of using a mortgage broker
Many buy to let mortgages can only be accessed via intermediaries (brokers), so you’ll get a wider range of mortgage options than if you go direct yourself. This is especially true if you’re sourcing finance for a complex property as they’ll have access to more specialist lenders which will give you a more suitable product. Ultimately, using a broker can save you both time and money. You’ll also get a better idea of the turnaround times which will help you in your planning and preparation.
Case Study: Application to offer within 5 days
The Client: A self-employed decorator and landlord with three vanilla buy to let properties in greater London.
The Properties: Two semi-detached two-bedroom houses on the same road, both with long term tenants.
The Finance: The client wanted to remortgage the properties and raise capital to purchase another for his growing buy to let portfolio. He had already found a property that he wished to purchase.
The Challenge: As he’d already found a property, the client was after a quick turnaround time to secure the new purchase. To keep costs down, he asked that we source fee-free mortgage products so that he wouldn’t be charged for the valuation or legal and arrangement fees.
The Solution: Using our knowledge of the whole market, we identified which lenders could process this type of remortgage quickly and we narrowed our search to just fee-free products. Once a suitable mortgage had been chosen, we highlighted to the lender the need for a quick turnaround on the case at the start of the process. Much to the client's delight, a formal mortgage offer was granted within 5 days of submitting the application, and the funds were released within a month.
This article was updated in August 2021.
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