Investors beginning the purchase process now will be resigned to the reality of paying the increased tax bill. Following the 1 April, anyone purchasing a second property, buy to let or a second home, will have to pay an additional 3% on top of the Stamp Duty bill they would normally pay for the property.
Those landlords who applied earlier in the year and have already received a mortgage offer, along with their broker, will be feeling the heat as the deadline looms closer.
This week we have asked our panel of buy-to-let brokers to tell us what their experiences have been, advising on and processing buy-to-let cases for landlords rushing to complete on their investments.
David Whittaker, managing director of Mortgages for Business, talks about the difficulties he has faced caused by third parties responsible for sending information to the borrower’s solicitor to allow the purchase to complete.
Chris Bramham, Brightstar’s director of specialist mortgages and buy to let, says the ‘stampede’ has been overshadowed by the increases in lender stress-testing on landlords’ affordability.
Jane Simpson, managing director at TBMC, reveals the lack of urgency displayed among landlord applicants and what they can do if they miss the deadline.
David Whittaker is managing director of Mortgages for Business
In our experience valuers have more than grasped the nettle and lenders, though feeling the pressure, are only slightly behind. We’ve explained to our clients how they can help expedite the process and, spurred on by a desire to save money, they have been very receptive.
Our frustrations, and that of our clients, are generally with clients’ solicitors who mostly do not understand the urgency, particularly given that the arrival of Easter shortens the window of opportunity. Searches need to be chased, as turnaround times from local authorities are inconsistent at best.
COTs (Certificates of Title) have to be completed no later than 23 March to hit the 31 March deadline. And, where clients are purchasing leasehold flats, timely communication with freeholders and/or management companies is proving particularly difficult. It’s vitally important to know about service charges and sinking funds but as freeholders don’t really have a vested interest in a buyer’s mortgage application, information is being provided lackadaisically.
Our brokers and case managers are working flat out to ensure that clients’ expectations are met and we will try to get as many cases over the line as possible. And if anyone has a magic carrot to dangle in front of solicitors, now would be the time to get it out.
Chris Bramham is Brightstar’s director of specialist mortgages and buy to let
As a result of the Chancellor’s announcement in the Autumn Statement, an increasing amount of investors have rushed to purchase buy-to-let properties before the Stamp Duty hike arrives in April.
However, despite this buy-to-let stampede, we have not seen any major hurdles or issues arising as a result, nor have any particular parties such as valuers or lenders been holding up the process. In fact, the vast majority of intermediaries and lenders have, in my opinion, been well prepared for the impending changes and, as a result, we are getting very little push back.
Although the recent surge in buy-to-let purchases has continued to make the headlines, there is actually more ‘noise’ in terms of how an increasing number of lenders are moving to increase their stress rates around buy to let, and I think it is likely that even more will follow suit in the coming months.
We are also starting to see a distinct tiering around professional landlords as well as amateur landlords. In some instances, it is actually making buy to let look unaffordable, and this is why stress rates are currently proving to be much more of an issue than the completions before the impending tax changes this April.
Jane Simpson is managing director at TBMC
At TBMC, we fully expected there to be a flurry of activity at the beginning of 2016 as landlords rush to complete their buy-to-let property transactions before the end of March. However, the increase in buy-to-let purchase applications has not been quite as dramatic as anticipated.
Perhaps surprisingly has been the apparent lack of urgency from landlord applicants themselves, some of whom are still submitting new applications in March with the hope of them completing in time before the Stamp Duty rise. Normally, buy-to-let applications take three to four months to complete, so it would appear that some landlords have left it too late.
Although not at an overwhelming level, we have found that every link in the buy-to-let mortgage chain is experiencing an influx in business. Solicitors are reporting a very busy period as are valuers, but turnaround times with these parties are normally still within manageable limits.
Brokers always have the responsibility of obtaining the appropriate documentation for applications before they can be submitted, which can sometimes cause delays as each lender has different requirements and clients do not always have information immediately to hand.
Inevitably with an increase in applications, any delay in providing supporting documentation causes backlogs with lenders and a pressure for applications to complete on time.
For landlords who have missed the chance to obtain a new buy-to-let mortgage before April, there are alternative solutions which could save them money using a bridge-to-let scheme, like the one offered by Aldermore. The scheme includes a free valuation and, if required, offers an exit route from the initial bridging loan, ensuring costs and hassle are greatly reduced. Although bridging finance can be quite expensive, using this scheme is likely to prove cheaper than the 3% in Stamp Duty.
