Photo by Ikon Property

Welcome back to my mortgage market update for the month.  We are already a third of the way through the year, and it’s shaping up to be a busy one despite lenders becoming a little bit more picky with what they will do!

It’s more important than ever to make sure you’re in the best shape financially, so here are some examples based on what we have seen recently of what to be careful with as you grow your portfolio…

 

Proof of income

With more of our clients becoming professional landlords, it is vital that rental income is declared in good time.  A tax return must be completed each year for your rental income, even if you feel you haven’t made any money!

A good accountant is such an important part of your power team and as you grow your portfolio, a tax-qualified accountant will be able to advise you on how to structure your purchases depending on your future plans.  Having someone who knows your situation to call upon will save time, enable you to work out your return on investment figures and move quickly once your offer has been accepted. Building a relationship with your account will really help with all of this.

Even with all the Section 24 tax changes, it is not black and white as to whether property should be bought in an individual or corporate name – your tax status, long term plans and the profitability of the property will all make a difference.  We can work with the structure that your accountant suggests, and knowing this information upfront makes a difference to how we approach a case.  Changing the structure is also not that straightforward so it helps to start as we mean to go on.

 

Company structure

How you structure a case can really make a difference to how we manage it and the information we need from you.  We are seeing more joint venture (JV) projects, and this is having an impact on how complicated the application becomes.

There are a number of ways to set up a JV, some of which involve all parties on the application and some do not, there are pros and cons of each and this is something you need to think about carefully. Setting out an organogram with all interested parties can be useful to see who needs to be on the mortgage application and what information we will need from each of them.  We can review this organogram together and see if there is a way to revise it to make it easier – for example when you have someone who is tricky to get hold of due to their work or travel schedule.  There may be an alternative to the proposed set up, but this is easier to work out at the beginning.  Further down the line it may not be possible to remove someone.

Credit issues

As you grow your property portfolio, the number of bills to pay and direct debits to check increases and this only becomes trickier to keep on top of with company bank accounts, rental accounts and so on.  The advantage of working with the lenders that we do is that they are used to working with property owners and the challenges that this brings. An underwriter, who can take a sensible view on the issue that has arisen, will assess your case as a whole.  It is always so important to check your credit file each month, and this is easy now with free companies who email your report to you to check.  Being upfront and honest with us as brokers not only makes our life easier by knowing what lenders we can use, but it helps us to build a case by balancing out a missed payment with other positive information about you as a potential client.

Checking each month means you can deal with issues as soon as they arise to cause minimal impact on your credit rating, and help keep your lender options open.  For example, lenders often use the settled date of a CCJ rather than the date it was registered.  It helps pick up any direct debit issues straight away too.

I hope this is helpful.  Don’t forget that there are more resources for you to access on thehmoroadmap.co.uk, including two Masterclasses from me all about how to finance your HMOs so they are worth a watch!

As always, please get in touch here if you would like to discuss anything with me.

 

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.