Photo by Ikon Property

Welcome back to my mortgage market update! In comparison to January, February has flown by, and it doesn’t seem to be slowing down… we’ve had the busiest beginning of the year yet and are feeling so positive about 2024. Despite the wobbles we are seeing with interest rates, the market is still buoyant and we are seeing plenty of great buys coming through. 

So this month, I want to run through some top tips to make your transaction (purchase or refinance) go through as smoothly as possible. 

Choose your solicitor wisely.

Have a chat with them about what you’re looking to do and make sure they have experience and capacity to help. Also ensure that they can commit to the timescale you need and be really clear with this (ASAP doesn’t work, it needs an actual date). This is even more important for auction purchases. We’ve seen a number of solicitors recently where they are clearly out of their depth with more complicated transactions. This puts a lot more on us and the lender’s solicitor to ensure it completes – and you are still paying the same! 

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

Buy at the right price, and know your area.

We generally don’t have an issue with valuation figures, pretty much everything comes in where we are expecting – and a lot of that is down to the experience we have with valuing HMOs, along with keeping control of valuers for the bridge and term! We know the valuation methodology for each lender so know where we are heading. Where things become more tricky is where clients have bought property using cash or bridging where they haven’t had a valuation or GDV figure at the beginning. This means we haven’t had a sense check on these figures, and don’t know where the initial purchase price sits. 

The profit you receive on a deal is very dependant 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 is with 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. You can go for properties in poor condition though, or with issues preventing people buying it for their 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 on 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 – whether it’s eligible for a commercial valuation and what that is. 

It’s so important to be realistic with the figures you are using. There’s no point going in to a project that only works on the best case scenario for build costs and end value – 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 light figures. Market fluctuations can affect your end value when you get there too. 

I have seen a number of examples recently where build costs have spiralled and it had caused an issue on refinance. Clients have had to borrow additional money from family or loans to cover the difference. In some instances it has had as adverse affect 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! 

Be prepared to learn on the job! 

Our phrase of the week is ‘every day’s a school day’, and I think it shows what is going on in the mortgage world at the moment! Things are changing so quickly, so being open to learning new things and being open to doing things differently is so important. Our attitude to 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 then you can book a call with me through the HMO Roadmap 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.