- The Mortgage Market Review - MMR - takes full effect and among the changes which were introduced, was the introduction of an obligation on lenders to make sure that borrowers could afford to service and repay the loan they were taking out.
- 2 yr and 5 yr Fixed rates continue to fall to the lowest on record, 10 yr fixed rates increased since 2016.
- Lenders now lending to age 75 and 80 for residential mortgages - however proof of income in retirement is a manadatory requirement.
- Interest Only - still available to 75% with proof of repayment vehicle
- Stricter Affordability checks and rules with ALL lenders.
- New Buy to Let lenders enter the Marketplace - for Ltd Company Lending and Buy to Let.
- New Lending above £1m to £5m Exclusive rates - to 80% LTV large loans. (Advantage over private bank lending and no need for Assets under management).
COMMERCIAL & DEVELOPMENT FINANCE
- Avenue & Co Private Finance secures further new lending partners in 2016 for £2m to £85m loans.
- Permitted Developments - New Lenders enter the marketplace
- Improvement for funding from the Banking sector - increasing appetite from the high street banks to support Residential and Commercial development projects - usually at max 60% LTV.
- High street bank lending advances limited to very experienced clients only at lending limits of circa 60% GDV or max 60% loan to cost or less.
- High street bank lending advances limited to very experienced clients only at lending limits of circa 60% GDV or max 60% loan to cost or less. Bank underwriting policy is the applicants overall ability and cash flow position to service the development loan debt upon completion if the property does not sell immediately - this factor alone is seeing many applications falling at the first hurdle.
- Loans above £5m - Lenders insist on lending to applicants who have a track record and are experienced property developers, as well as an asset base in the background.
- Any development project will become much less 'speculative' if there are demonstrable pre-sales in place or, in the case of commercial properties, pre-lets agreed to strong covenants on fully repairing and insuring long term lease agreements.
- Most lenders will not lend on new flat developments unless they are in a prime location (Central London) and where clients have an up to date full survey report from Knight Frank, Jones Lang La-Salle, Colleys, Savills or DTZ. Max LTV is around 75%.
How can Avenue & Co Private Finance help ?
At Avenue & Co Private Finance, we work with our own Development Funding Line and have strategic arrangements with a number of Merchant Banks and Private Capital groups / syndicates still able to lend to the 'right proposition'.
What is the 'right proposition' ? - We have set out below some of the key underwriting criteria that has to be covered for a successful development loan application :
- Previous Experience - it is essential that the applicant(s) can demonstrate they have practical experience working on similar types and scale of projects
- End Product - there has to be a demonstrable demand for the end product. Flats are not entirely taboo, but they will have to have some extra factor in their favour such as location, views, specification etc. in order to gain support. Any starter type home such as new build terrace homes, mews cottages, 2/3 bed semi's etc. selling at starter level pricing will always get more underwriters time. The key issue of course is the availability of adequate mortgage funding for your prospective purchaser to buy your product.
- Total Lending Exposure - no real sign of relief the ' total exposure' lending thresholds on Development Projects will remain at far lower levels than were previously deemed acceptable. In general terms the exposure level will be limited to somewhere between 50% and 60% of the project gross developed end value - the so called GDV. The higher the total exposure the greater the risk and thus higher interest rates and fees will apply. As most development loans will be offered with interest payable accrued or 'rolled up' throughout the loan period the total loan amount has to include the overall finance charges.
- Clean / Acceptable Credit History - underwriters will look to minimise the risk of lending to applicants who have previous credit problems recorded against them. Minor indiscretions and problems occurring some time past will often be disregarded but current CCJ's, IVA etc. will need to be explained away and fully discharged.
- Vendor Partnerships - We now underwrite many projects where the vendor (site owner) and the developer have come together in partnership to complete the project. If the site is unencumbered or geared to a modest level against valuation then the whole underwriting process becomes far simpler and easier to get through credit committee.
- Background Checks - We will carry out appropriate checks before submitting cases to lenders. Minimum requirements are a credit check, assets and liabilities statements, income details and cost per square foot of GDV values.
We would conclude on a note of cautious optimism and invite any experienced developer to submit their plans and projects for a free, confidential and totally unbiased appraisal by a qualified and highly experienced member of our team.
If we believe the deal can be supported we will quickly obtain ' in principle' terms to give you the confidence to progress the project. Likewise we won't waste your (and our) time if our opinion is that the deal is unsupportable in the current climate and we only offer straight talking advice.
We look forward to working with you on future projects.
COST OF ADVICE
As comprehensive mortgage advisers, you can choose how we are paid. We usually charge an admnistration and advice fee to process a mortgage application. This fee is usually £599.00. We may on completion receive a commission from the lender.
Alternatively, you can pay us a fee of 0.35% of the loan and we will refund any commission back to you that we receive. We adhere to the principles of treating customers fairly and if we do charge you a fee, we will put in writing to you details of any fees before commencing any work.
For Self Employed loans the overall cost of comparison is 7.6% APRC. The actual rate available will depend on your circumstances. Ask for a personalised illustration. This APRC is based on those with a clean credit history.
The FCA does not regulate Foreign mortgages, Foreign loans, Commercial mortgages, Trusts and some forms of Buy to Let mortgages.
The FCA does not regulate some forms of Bridging Finance.
Changes in the exchange rate may increase the sterling equivalent of your debt.
We act as introducers for Foreign Mortgages, Commercial mortgages and Trusts.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
- Tel: 0345 230 9091 (Mon-Fri 09:00 - 17:00)
- Email: firstname.lastname@example.org
- Fax: 0333 123 9093
- Avenue & Co Private Finance, 25 Sackville Street, London
- W1S 3AX