Photo by Snug Properties

The mortgage market has continued to shift over the past month, with plenty of rate changes and a new Prime Minister, although we’ve avoided any base rate changes for now. It will be interesting to see how the rest of the year unfolds.

Despite the uncertainty we’re seeing in the market, we’re still seeing plenty of purchases coming through and some good buying opportunities.

Whether you’re buying your next investment property or refinancing an existing project, there are a few simple steps that can make the process much smoother. In this article, I’ll share some of my top tips to help your purchase or refinance go through as smoothly as possible.

Firstly, choose your solicitor wisely.

Have a chat with them about what you’re looking to do and make sure they have experience with that. Also, ensure they can commit to the timescale you need, and be really clear about this. That is even more important for auction purchases.

We’ve seen a number recently where solicitors are clearly out of their depth with more complicated transactions. This means it puts more on us, and the lender’s solicitor, to ensure everything completes – and you’re still paying the same!

We are always happy to suggest a solicitor as part of our service. We don’t receive any payment for that, but we have good relationships with our solicitors and know they will always say no if they can’t commit to the required timescales.

Buy at the right price, and know your area.

We generally don’t have an issue with valuation figures; most come in where we’re expecting. That is mainly down to the experience we have valuing HMOs, along with keeping control of valuers for both the bridge and term finance. We know the valuation methodology for each lender, so we know where we’re heading, and that means we know what figure you’re likely to get with each lender option.

Where things become more tricky is when clients have bought a property using cash or bridging finance without having a valuation or GDV figure at the beginning. This means we haven’t had a sense check on those figures and don’t know if the purchase price reflected the true value at the time.

The profit you receive on a deal is very dependent on your purchase price. Build costs and the GDV are relatively fixed, but the purchase price is something you have control over. Where we see clients making more than a standard 15% profit on their end value, it usually comes down to securing a good purchase price.

I don’t mean trying to get something “below market value”, as a property is really only worth what someone else is willing to pay for it. Instead, look for properties in poor condition or with issues that prevent people buying them as a family home. This means you have less competition and are more likely to achieve a better price. Overpaying will directly affect your profit.

Do your research, and be sensible with your numbers.

Using a good bridging company will help with sense-checking all your figures and understanding how your property will be valued at the end. For HMOs, they will also tell you whether it’s eligible for an investment valuation and what that valuation is likely to be.

It’s so important to be realistic with the figures you are using. There’s no point going into a project that only works on the best-case scenario for build costs and end value, as the likelihood is that it won’t go exactly to plan. There needs to be some room in there, but it’s amazing how many people I speak to who don’t allow for any contingency and are working on really tight figures. Market fluctuations can also affect your end value by the time you get there.

I have seen a number of examples recently where build costs have spiralled, and it has caused issues on refinance. Clients have had to borrow additional money from family or take out loans to cover the difference. In some instances, it has had an adverse effect on their credit, which could prevent further borrowing. I don’t want to scare anyone, but it’s important to go in with your eyes open!

And finally, be prepared to learn on the job!

Our phrase of the week is, “Every day’s a school day,” and I think it sums up what’s going on in the mortgage world at the moment! Things are changing so quickly, so being open to learning new things and being willing to do things differently is so important. Our attitude towards it all can make such a difference to the overall outcome. And then the next one should hopefully be easier…

As always, if you want to chat through anything, you can book a call with me here.

About the Author:

Ellie Broadhurst is a specialist mortgage broker working at Baya Financial in partnership with The HMO Roadmap. She works with HMO property investors throughout their journey, from clients starting on their first project through to experienced portfolio landlords and developers. Learn more about Ellie here.