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Buy-to-let watch episode 9 | Tales of When BTL Gets Tricky

Buy-to-Let Watch Episode 9

Buy-to-let watch episode 9

Liz Syms
Liz Syms, CEO and Founder of Connect Mortgages


In the latest instalment of our Buy-to-Let Watch series, “Buy-to-Let Watch Episode 9 | The Extraordinary Tale of When BTL Gets Tricky,” we aim to provide our readers with the role specialised lenders play, following the previous episode, “Buy-to-Let Watch Episode 8 | Why Lenders Are Jubilant In Their Efforts.”

Securing buy-to-let (BTL) mortgages with unique challenges requires strategic approaches, and advisers can employ various tactics to assist clients in obtaining the necessary financing. Exploring opportunities with specialist lenders proves beneficial, given their flexibility in lending criteria and willingness to cater to clients facing complex financial scenarios or dealing with unconventional properties.

In instances involving limited company BTLs, extensive houses in multiple occupations (HMOs), multi-unit blocks, holiday lets, and BTLs linked to offshore entities, the expertise of a specialist lender becomes indispensable.

Buy-to-Let Watch Episode 9 | Expertise, creativity, and persistence: Successfully placing tricky BTL mortgages necessitates a comprehensive understanding of the specialist lender market. Advisers must identify lenders that are aligned with their client’s unique needs. Recent cases illustrate the diverse challenges, including flats with deck access, properties situated above takeaways, and constable tenants in case of mortgage default.

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Buy-to-let watch episode 9 | Specialised Lenders: A key resource:  For scenarios requiring a nuanced approach, lenders like Unity Trust Bank specialise in considering unique lending requirements. These lenders extend their services to unconventional properties, charitable organisations, and other social-related lending needs, demonstrating their commitment to addressing diverse financial situations.

Buy-to-let watch episode 9 | Working with packagers or master brokers can help you find solutions you may not have been aware of

In a recent scenario, we encountered a unique housing arrangement with four tenants in shared accommodation. This did not fall under the obligatory House in Multiple Occupation (HMO) category. Thus, it did not mandate a license from the local authority. Conventional lenders like Accord or Santander could have been viable options.

However, complications arose due to internal locks on doors and individual assured shorthold tenancy agreements. Most mainstream lenders frowned upon this configuration.

This particular case found a fitting solution through collaboration with Fleet. This packager accommodated the unconventional setup. They provided standard lower Buy-to-Let (BTL) rates instead of higher HMO rates. The expertise of packagers or master brokers can open doors to innovative financing options. They present solutions that may have otherwise gone unnoticed.

Their ability to navigate unique cases demonstrates the importance of exploring diverse channels for property financing. This ensures flexibility and tailored solutions to meet specific needs.

Buy-to-let watch episode 9 | Good relationships

Effective relationships are crucial in navigating Buy-to-Let ((BTL) mortgages. Our offices have a dedicated Fleet underwriter. This role is vital in building connections with underwriters and Business Development Managers (BDMs). These relationships help secure challenging BTL mortgages. They allow advisers to understand criteria, underwriting processes, and lender requirements. Consequently, advisers can strategically position clients’ applications, increasing approval chances.

Specialist lenders are essential for limited company BTLs or large Houses in Multiple Occupation (HMO) projects. The complexities of BTL lending require a thorough grasp of the client’s finances and property details. Accurately detailed information helps lenders assess risks, leading to better lending decisions.

A new trend in BTL involves capital raising for property improvements. Due to upcoming regulations, landlords are increasingly aware of the need to upgrade properties. These include energy performance certificates and the government’s ‘Reforming the Private Rented Sector’ report. This awareness is expected to increase inquiries for capital raising on BTL properties.

However, the current market presents challenges for capital raising. High interest rates exacerbate issues related to rental affordability for existing loans. This makes additional borrowing even more difficult. Overcoming these challenges requires careful financial planning. Advisers must understand market dynamics to guide clients through the complexities of capital raising today.

Episode 9 of Buy-to-Let Watch highlights the benefits of building relationships with underwriters and BDMs. More lenders are offering income-based BTL or top-slicing options, which could help. Yet, a BTL second charge might be a solution if a landlord needs to raise capital on a property with a fixed rate.

Buy-to-let watch episode 9 | Second charge

The landscape of second charges in the buy-to-let (BTL) sector is unique, with fewer lenders considering BTL than residential second charges. However, notable players like Central Trust, Together, and West One stand out for their flexible criteria. Some even provide income-based solutions to enhance affordability.

Traditionally, securing and registering a second-charge loan is complex, often requiring consent from the first-charge lender. Unfortunately, issues arise when existing lenders impose restrictions, either denying or limiting consent. This is especially true in cases with minimal overall borrowing against the property.

However, certain second-charge lenders offer an alternative approach by using an ‘equitable charge’ as a different form of security. The advantage is that it doesn’t require consent from the first-charge lender. Consequently, this provides landlords with a broader spectrum of options.

We’ve encountered scenarios involving properties like flats featuring deck access and those above takeaway establishments. These unique cases highlight the need for a nuanced understanding of second charges in the BTL realm.

For those unfamiliar with second charges or facing intricate BTL scenarios, collaborating with packagers or master brokers becomes invaluable. These professionals can unveil solutions that might have eluded awareness, offering a strategic approach to navigating complex lending landscapes.

Successfully manoeuvring through tricky BTL mortgages demands a blend of expertise, creativity, and persistence. Therefore, proactive engagement and cultivating relationships are crucial. Tapping into a network of industry professionals empowers advisers to guide their clients effectively. Thus, they can ensure they secure the necessary financing to realise their investment objectives.

We reached the end of our publication on “Buy-to-Let Watch Episode 9 | The Extraordinary Tale of When BTL Gets Tricky”; until next time, stay Connect!

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