September 2017 marked a big shift for lenders, brokers and landlords, straight off the back of new rules on stress testing earlier that year.
Some lenders were affected more than others, but the new portfolio lending requirements caused inevitable disruption and delay.
Portfolio business is always going to take longer than non-portfolio business, both for the broker pre-submission and for the lender to make an offer. More details are required and need to be assessed before the decision to lend can be made.
But two years on, processing has broadly improved, and landlords with four or more properties have a wide choice of more than 1,300 mortgage products, according to Moneyfacts.
But, in addition to choosing a lender you can trust to provide great service, there are other ways to help move your portfolio client’s application to offer smoothly and without delay.
What helps a portfolio case get agreed quickly?
BM Solutions’ specialist underwriters looked at cases which were agreed quickly and considered what actions brokers could take to ensure they got a quick decision.
Our underwriters deal with these applications day in, day out and by sharing this knowledge we can ensure a smoother application to offer process for you and your client.
Below are the most common traits we encounter on portfolio applications which are agreed first time:
- Correct portfolio details, including the property addresses being formatted correctly. Small details matter because if the underwriter can determine the true proposition or performance of the portfolio, they can make a decision to lend.
- Unencumbered properties are included with the portfolio, and are presented correctly. Having all details of the portfolio to hand makes the lending decision easier. These also help the portfolio loan to vale (LTV) and rental cover ratio (RCR), which make an accept decision much more likely.
- Income documentation, for both personal and rental income are provided to support the case. Very importantly brokers should include details of savings or assets which almost always help strengthen the case. They give the underwriter comfort that your client can cope with void periods or a hefty repair bill.
- The estimated valuations or rental incomes are realistic. We use external AVMs and if they are out of sync with what the client has declared, we need to investigate further, which could delay the offer, or even result in a declined case.
- The case falls within policy limits and all information presented to us is accurate. We sometimes have to decline when, on reviewing the figures declared in the application, they are found to be inaccurate and, once corrected, the application doesn’t meet our criteria. This can be avoided by ensuring accuracy at the outset.
Get it right first time
We know it’s frustrating to have an application declined and, if you’re asked to provide more information, it’s also time-consuming.
So how can you boost your chances of a smooth application-to-offer process first time?
Here are three suggestions from BM Solutions’ underwriters:
- Obtain a copy of the customer’s credit file and income evidence before you submit the case to us. This means you are presented with accurate information on their secured and unsecured balances from the off, which will cut out many of the usual delays. Our underwriter will compare the information provided to the client’s credit file, and if these match up, it helps us make our decision quickly.
- Double check the rental and personal income your client declares matches with the proof of income they provide. That is no different to any other mortgage application, but with more properties and more information to declare, there is more potential for mistakes or discrepancies on portfolio applications.
- Sense-check your client’s estimated valuation of their portfolio, and their rental income. It is important they stand up when we check them using an AVM. If the LTV or RCR is just within our criteria, use external sources such as Rightmove and Zoopla to validate the information they have given and ensure it will still meet criteria after the AVM has been run.
What underwriters really want
On your final check over your client’s application before submission, consider what the underwriter wants to see.
At BM Solutions, our underwriters are looking at the client’s portfolio, their experience as a landlord and their overall financial circumstances.
We need an accurate reflection of this, so specifically we need to see:
- Personal and rental income
- Mortgage payments and balances
- Management costs
- Any unencumbered properties
- Details of savings and assets
Satisfy yourself that all these elements have been both declared and verified, and the case should move to offer without delay.
For the use of mortgage intermediaries and other professionals only
If you do not have professional experience, you should not rely on the information contained in this communication. If you are a professional and you reproduce any part of the information contained in this communication to be used with or to advise private clients, you must ensure it conforms to the Financial Conduct Authority’s advising and selling rules. Birmingham Midshires is a division of Bank of Scotland plc. Registered in Scotland No. SC327000. Registered Office: The Mound, Edinburgh EH1 1YZ. Bank of Scotland plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 169628. This information is correct as of November 2019 and is relevant to Birmingham Midshires products and services only.