Given the increase in demand for ‘complex’ buy-to-let mortgages, TBMC is receiving higher levels of enquiries about HMOs, limited companies, multi-unit blocks, semi-commercial properties and large portfolios. These types of cases are, more often than not, placed with specialist buy-to-let lenders.

For intermediaries working in the buy-to-let sector, staying on top of all of the latest product updates and criteria changes is an ongoing challenge. This is especially true for ‘complex’ buy-to-let where the variation from lender to lender differs widely. For these types of cases, brokers may benefit from the help of a specialist buy-to-let broker such as TBMC.

Semi-commercial

Professional landlords looking for higher rental yields or to diversify their buy-to-let portfolios have often found success with semi-commercial properties. These properties usually comprise a commercial unit with residential unitsabove and are exempt from the 3% stamp duty surcharge for second homes.

However, to place these cases successfully there are some keys pieces of lending criteria that brokers should be aware of. For example:

• Does the residential component make up over 50% of the building as some lenders require this?
  
  
• Does the property have independent access to the flats from outside of the commercial unit?

• Does the square footage of each individual flat meet the minimum size requirement?

• Shops and offices are normally acceptable by lenders. Pubs, take-aways and launderettes are examples of properties that will be referred to the lender on a case-by-case basis.

Multi-unit blocks (MUBs)

Finance for multi-unit blocks is becoming more readily available with a wide choice of lenders and products in the marketplace. It can be more time consuming to place complex buy-to-let cases such as for MUBs and the lending criteria may be quite specific. For example:

·       Most lenders will require each unit to be individually saleable

·       Separate utilities - each unit must have its own gas, electric and water supply.

·       Separate entrances – each unit must have its own secure entrance, be that inside or outside

·       Separate facilities - each unit might be required to have its own living space, kitchen and bathroom.

·       Check the individual units' square footage - lenders will have a minimum each unit needs to meet. Exceptions for smaller units can be made where the majority of units meet criteria. TBMC has placed an MUB with one unit at 19 sqm before.

·       Your client will normally need letting experience when purchasing their first multi-unit block. Typical minimum criteria is 2 years' landlord experience.

Client referral service

The increasing complexity of the buy-to-let mortgage market means that cases can often take longer for intermediaries. For some it has become too time-consuming to seem worthwhile in comparison with other financial products that they arrange for clients.

For this reason TBMC now offers anew ‘client referral service’ for directly authorised and non-regulated brokers who receive buy-to-let enquiries, but for a variety of reasons would prefer not to be involved in placing the business.

Instead, they can refer the case to TBMC who will deal directly with the client and process the application from start to finish. This means the broker can still offer a service to landlords and will receive a share of the procuration fee on completion for referring the case.

Our client had owned one buy-to-let property for 12 months and was now looking to purchase an HMO to maximise his rental income. His income was around £16,000 and he currently lived with his parents. 

Property consisted of 5 bedrooms each with a kitchenette and en-suite facilities, a shared kitchen and large bathroom but no shared living space. 

It was a large, 2 storey, leasehold flat above a parade of shops on a small high street. No takeaways or pubs immediately next to the property but present at the end of the high street. 

The client planned to let the property to students. 

Solution provided:

Many lenders were put off by the commercial elements and lack of shared communal space. The property was deemed unsuitable for family letting. 

The case was discussed with several lenders and proceeded with one who later declined the case following the valuation. 

We promptly placed it with an alternative lender using the existing case details and obtained a mortgage offer. 

The process from mortgage application to offer only took around 5 weeks despite the initial declined valuation. 

Product chosen:

Fleet (HMO range) - 3.39% 2 year fixed with a 1.5% lender fee

Monthly payment: 

£537 pcm (with lender fee added to the loan)