" Without the correct facts, research time could be longer than necessary or the final recommended products may not be suitable for the client’s needs."
However, if complex buy-to-let is not the norm, then they may need help to understand the best way to research lenders in this particular market.
Research starts with detailed fact-finding. Without the correct facts, research time could be longer than necessary or the final recommended products may not be suitable for the client’s needs.
As well as gathering hard facts such as purchase price, deposit and income etc, there are some key additional facts required for the specialist buy-to-let market. For example, if the client is a portfolio landlord, you will need the full details of all the properties held, such as values, rents, outstanding mortgages and the lenders that they are with. You will also need to gather soft facts and these come under the category of ‘strategy’.
Other examples of soft facts include, why is the client building a portfolio? Is it for income today or in retirement? Is it for capital growth? Do they plan to buy and hold the properties or buy and sell again? Have they spoken with a tax adviser and had advice on whether they should purchase via a limited company or not? Once you understand their strategy, you can begin to research the products that best suit that client’s circumstances.
It can be catastrophic to the investor if you do not do this. You wouldn't want to recommend a mortgage that was in personal names and then receive a complaint because you haven’t discussed the tax implications of transferring to a company at a later date.
So having gathered all facts, the next step is to research the lender options; where do you start if this is not a market that you are familiar with?
I teach my advisers to first start by understanding which lenders in the market will consider the client. For example, not all lenders will allow a buy-to-let for a twenty-year old or one with low income.
Once you have the lender shortlist for the client, we can now see which of these lenders will consider the property, for example, is it a flat above a shop or does the rent fit? Once we have a shortlist of lenders fitting both the client and the property, we can see which will offer the best deal.
This is where our strategy fact-finding comes back in. Knowing our client will want to capital raise on the property in two to three years means you will not lock them into a deal with five-year early repayment charges where the lender also doesn't offer further advances or allow second charges!
There are a wide range of tools for advisers to use when researching, which include starting with criteria research like Knowledge Bank and finishing with product research like Twenty7tec. Brokers, however, should also look to lenders’ websites which nearly all contain detailed criteria and rental calculators, and also to lenders BDMs who can help particularly where there are grey areas.
Packagers and distributors can also assist. It is the combination of all of these resources, rather than a single one, that will give you the confidence of knowing you are making the best recommendation.
Presenting the case correctly is very important. The underwriter has not been party to the conversations you have had with the client about their strategy, so adding notes to the application or fully completing the business plan for portfolio clients is a good way to help underwriters reach a quick and positive decision.
