FISCUS MORTGAGES - INFORMATION AND ADVICE

The Process of Purchasing a Property to Let

1. Find out how much you can borrow. How large a deposit will you need? Investigate all associated costs that you will be liable for, such as solicitors, stamp duty, survey / valuation fees, broker / lenders fees etc.

2. Decide on a solicitor and a broker that you are going to be happy using.

3. Research the market. What type of property will provide the best returns (i.e. increase in value and rental returns)? Do you plan to manage the property or will somebody else do it for you?

4. Make an offer. You should only commit to this when you have found the right property and checked with your broker that the property makes a sensible proposition from a financing perspective.

5. Inform your legal representative. When the offer is accepted, tell your solicitor the basis of the deal you have agreed.

NOTE: from this point onwards you are spending your own money. The vendor does not have to sell the property to you until you have exchanged contracts. The vendor could, for example, accept a higher offer from somebody else and you would have wasted your money. Gazumping is commonplace.

6. Make a mortgage application. Shop around for a good deal or pay a good broker to do it for you. If you would like one of our buy-to-let specialist IFAs to contact you, please complete our quick enquiry form.

7. “Chase” the vendor’s (seller's) agent on a regular basis, ensuring you are kept abreast of all progress regarding your property (i.e. build schedule or details of when the vendor will move on).

8. Speak to your mortgage provider / broker and solicitor on a regular basis. Good ones will call you and inform you of any advancement in the deal. Ensure they are chasing other involved parties, such as valuers, accountants, references from employers etc. Find out what they need and chase the appropriate people to help speed up the transaction.

9. THE MORTGAGE PROCESS:

• All applicants will be subjected to a credit history check. Further to this, all applications must meet the lender’s own criteria.

• Assuming the above is positive, a valuation will be instructed. The valuer will comment on the general layout of the property, the location, the value (by comparing recent sales of similar properties), the general state of repair and any obvious defects. The valuer will also suggest a monthly rental figure and comment on the letting market.

NOTE: if the valuer comments on any potential defects in the property, the lender is likely to request a specialist report, for example; Damp & Timber Report for woodworm/damp, Structural Engineers report for cracks, Tree Surgeons report for tree root damage etc.

• Alongside this, the lender will contact the references you have submitted. The type of reference will depend on the lenders criteria. It may include an Employers Reference, Accountants Reference, Lenders Reference etc.

• The lender / broker will also contact the client to advise of any further requirements or to chase information which should have been provided at the application stage.

• Once the lender is entirely satisfied with all the information, a mortgage offer can be issued.

10. It is now up to the solicitor to exchange contracts. He can not do this until the purchaser can prove that he has enough money to complete the purchase. This usually means that a mortgage offer is required prior to exchange of contracts. The solicitor is also responsible for ensuring that his client is clear as to what exactly he is purchasing. This will include checking boundaries, making sure that all previous mortgages are cleared on the property, obtaining local searches etc.

The solicitor will be responsible for handling the purchase money, i.e. receiving it from the lender and paying it to the vendor. In the case of a refinance package, the solicitor will also pay off the old mortgage with the new mortgage money.

11. Property Insurance. Once contracts are exchanged, the property is contractually yours. You must, therefore, insure the property at this point. Use established Buy-to-Let insurance brokers to minimise costs.

12. Completion. This usually takes place about one week after the exchange of contracts. Once completion has taken place you can let the property, subject of course to its condition. If the property is vacant at the point of exchange of contracts, it is in your interests to negotiate a longer period between exchange of contracts and completion, together with negotiating access to the property so that you can decorate it. The vendor does, however, have the right to refuse this.

13. Monitor the property value so that you can capitalise on opportunities to release further money through remortgaging or further advances, in order to raise monies to fund deposits towards expanding your property empire further.