New research* for Precise Mortgages, the UK’s leading specialist lender**, shows more than half (52%) of landlords use letting income to boost earnings from a full-time job. The findings highlight the need for lenders to offer top slicing to help more customers achieve greater flexibility on buy to let products and loan size.
The study found that even among landlords with bigger portfolios many are still working full-time and have other earnings beyond letting income. Around 32% of those with 11 to 19 properties say letting income supplements day job earnings while 18% of those with 20-plus properties have other income in addition to rental earnings.
Precise Mortgages has enhanced its top slicing feature, which enables customers to use surplus portfolio or earned disposable income to prove they can meet any financial stresses on a new loan application rather than through the rental income of the property alone.
It is now accepting top slicing on all eligible personal ownership, limited company, portfolio, HMO, and holiday and student let applications. First-time buyers are excluded.
Across the market as a whole one in three (33%) landlords earn their living purely from their property portfolios, rising to 47% among those with six to 10 properties. Around one in six (16%) landlords plan to add more properties in the year ahead with 71% funding purchases with a buy to let mortgage.
The research also found that 33% of landlords earn their living purely from their property portfolios, rising to 47% among those with six to 10 properties. 16% of landlords plan to add more properties in the year ahead with 71% funding purchases with a buy-to-let mortgage.
Alan Cleary, Managing Director of Precise Mortgages, said: “Given that the majority of landlords have other earnings that can be used to show they can meet underwriting standards, lenders need to reflect this in their product offering to support landlords accordingly.
“Top slicing allows landlords to manage their properties in a way they choose and gives them greater access to the products and loan sizes they want and particularly for those who may have been restricted by ICR requirements in the past.”
Precise Mortgages’ top slicing feature can help brokers and their customers to access its range of 2-year Fixed rate buy to let mortgages as well as its 5-year Fixed rate products. The specialist lender has also streamlined the application process and enhanced its online buy to let calculator.
Full details of Precise Mortgages’ top slicing feature are available at precisemortgages.co.uk. Brokers can access the online calculator at precisemortgages.co.uk/Misc/BTLCalculator
* BDRC Q1 2019 Landlords Panel syndicated research report prepared for Precise Mortgages. Fieldwork was conducted online between 15th and 26th March among a sample of 829 National Landlords Association members ** Source: BVA BDRC Project Mercury Report Q4 2018
Alan Cleary - Managing Director of Precise Mortgages
Irregular incomes and complex accounts should not be a barrier to self-employed workers when it comes to securing a loan, says Alan Cleary of Precise Mortgages.
The make-up of the UK’s workforce is changing. The recent announcement that the number of people in work in the UK is the highest since records began in 1971 is something to be welcomed, but that only tells half the story.
The UK also has a record number of people working for themselves. According to the latest government figures, of the 32.7 million people now in employment, 4.83 million of these are self-employed. These workers can take many forms – from professional landlords to tradespeople, taxi drivers to freelancers – but one thing they can all experience is a difficulty in securing a residential mortgage or loan.
So with more people than ever before now working for themselves, why are so many of them still struggling to get the mortgages they want?
The Mortgage Market Review in 2014 saw the introduction of new rules to ensure borrowers are only accepted for mortgages they can afford. All prospective borrowers must now prove their income, so the difficulty people who work for themselves have is providing that evidence, as their income can fluctuate from month to month.
Many lenders require more proof of employment from self-employed people than they do from employees; the most common difference being a two- to three-year history compared with just 12 months for salaried employees. As many lenders perceive their financial situation as being too complex or their income as too irregular, it means there are a growing number of potential borrowers unable to access the mortgages they require, as well as an increase in brokers struggling to place their customers’ cases.
Fortunately, specialist lenders understand the challenges and complexities of these cases, and can provide solutions to customers who fall outside of mainstream lenders’ criteria.
Since MMR came into force, these lenders have been in the vanguard of ensuring self-employed workers can still access mortgages.
Specialist lenders have experience of reading financial accounts and SA302 statements, and have the risk management processes and skilled underwriters in place to ensure a good outcome for the borrower, broker and lender.
Many specialist lenders accept one-year figures and will take other income sources, such as pension contributions and car allowances, into consideration.
So if you are approached by a self-employed customer who is struggling to get the mortgage or loan they want with a mainstream lender, make sure they know there are other lenders out there who can help them.
With the number of people working for themselves growing, it has never been more important that they can turn to lenders who take a common-sense approach, taking each customer’s individual circumstances into account and assessing every case on its own unique merits.
Financial Reporter spoke to Danielle Evans, our BDM about the importance of good packaging and who she would nominate in the WRAs.
FR: What area do you cover?
I cover the East Central area. My patch stretches as far north as Huddersfield, down as far as Milton Keynes and everything in the East Midlands.
FR: If you had one ‘top tip’ for life as a BDM, what would it be?
Keep plenty of spare change in the car for parking as not everywhere has functioning ‘pay by phone’ facilities. Also, spare tights in the winter for the ladies. I can guarantee you’ll get some ladders at some point!
FR: How do you pass the time on the road - books, podcasts, audiobooks?
I’ve recently learned how to keep up with technology and discovered that my hands-free can add reminders into my diary. If I’m not answering voicemails, I’m calling out to book meetings for the coming weeks.
FR: What’s one thing you wish all brokers knew?
Brokers know the score. We’re all working towards the same goal which is to get the case completed for the client. The importance of good packaging is the key message I’m delivering at the moment, as well as the importance of adding notes to the case. This means that underwriters are best equipped to make a decision quickly and we can achieve the end goal much sooner.
FR: A quick email on Monday or a phone call in the afternoons - how can brokers contact you?
Either way. I return calls directly through the mailbox so ideally calling from the number they want me to call back on means we can discuss the case more quickly. If you can’t get hold of me, our dedicated intermediary support team is on-hand to answer any questions you might have by calling 0800 116 4385.
FR: What’s your favourite place to stop for a coffee when you’re between meetings?
I am partial to Costa Coffee, but any place that does caffeine will do!
FR: Financial Reporter has recently launched its second Women’s Recognition Awards – who would you nominate and why?
Our head of key accounts, Liza Campion. She’s one of the most hardworking and intelligent women I’ve worked with and is constantly 100mph (not in the car of course!) She always goes out of her way to help everyone. Well worth the nomination!
In an interview with Bridging & Commercial, Dan talks about educating brokers and challenges in the bridging market.
You recently restructured your sales team. What are you responsible for in the new specialist distribution manager role?
As a lender, Precise Mortgages now has more BDMs in more areas of the country than ever before, which means brokers are never far away from the support they need to access a wide variety of products, including bridging finance.
My new role is working with our key account partners and educating them about our bridging proposition. My territory is London and the South East, including East Anglia, and I work with brokers in promoting how short-term lending can be a great solution to meeting their clients’ needs, both on a regulated and non-regulated basis.
I work closely with the key account team to identify opportunities, while also working with the BDM team to help them promote and provide education on bridging finance through their intermediary relationships.
Do you think the industry can do more to educate brokers on bridging finance?
We so often hear that lenders are London-centric and how bridging finance is focused mainly on London and the South East. However, bridging finance can help you wherever you are in the UK and I believe we can do more to make more brokers aware of this. Precise Mortgages’ team of BDMs works hard to spread this message by holding regular bridging finance workshops and training sessions in locations around the country.
What advice would you give to brokers who are new to the bridging finance market?
My advice to brokers regarding the bridging market would be to make sure you’re up to speed on the benefits of short-term finance. It’s a really flexible product and can be used in a wide variety of situations, whether that’s as a solution to a chain-break situation, as a way of quickly raising capital or obtaining the finance for a property that is not currently habitable. Take our refurbishment BTL offering, for example. Not only does it allow customers to access the short-term finance they need to refurbish a property and get it up to a lettable standard, it also gives them the peace of mind of an exit on to a long-term BTL mortgage once the work has been completed.
What do you expect will be the biggest challenge for the bridging market this year?
Most people talk about the economy being the biggest challenge, especially following Brexit. However, properties not selling and clients spotting new opportunities in the property market can drive more bridging finance business. With some rates now less than 0.5% per month, it could be a good time for clients to consider flexible short-term finance.
How did you get into the industry?
My first role in the mortgage industry was at Capital Home Loans (CHL), which I joined after completing my marketing degree. It was potluck to be honest; it was the first interview I went to and I thought it would do me good to get into finance in the long run. I joined CHL in 2006, pre-credit crunch, and what a different market it was then. I moved over to Fleet Mortgages in 2014, where I helped manage the marketing and telesales teams, before becoming a BDM. It was during that role that I learned a lot about the importance of face-to-face contact with intermediaries. I moved to Precise Mortgages in 2017 to expand my knowledge on the whole specialist market, and not just BTL.
If you didn’t work in finance, what would you be doing?
If I wasn’t working in finance, I would probably be a schoolteacher. I have two children and there’s nothing I enjoy more than encouraging and developing them. I’ll be coaching my six-year-old in his first team this year and I’m really looking forward to it. It will certainly be easier than when I used to coach/manage a men’s football team — organising and collecting the money off a group of 18- to 30-year-olds wasn’t easy!
Alan Cleary - Managing Director of Precise Mortgages
A plethora of regulatory and tax changes over recent years has seen the buy-to-let landscape shift dramatically.
Stamp duty land tax surcharge, phased reduction of mortgage interest tax relief and stricter underwriting standards, to name just a few. The list seems endless and landlords would be forgiven for thinking they’d drawn the short straw.
But landlords are an entrepreneurial bunch. While we’ve no doubt seen a number of landlords opt to exit the market, many of the more professional outfits have risen to the challenge presented to them, choosing to spread capital more evenly to bring down portfolio LTVs and minimise mortgage costs as well as considering where to find and how to create value in today’s buy-to-let market.
They’re seeking out more profitable properties to replace those that have been or are being sold. Semi-commercial, multi-lets and HMOs have seen a big uptick in popularity over the past couple of years.
Another area that continues to see increasing activity is landlords opting to purchase sub-standard properties at a lower market value and then adding capital value by completing refurbishment works, ultimately improving yields by attracting quality tenants to help maximise the rental income possible.
There are various ways to finance this approach, but bridging finance has proved very popular with landlords looking to expand their portfolios.
We spotted this trend around a year ago and, as a result, launched our own refurbishment buy-to-let proposition.
It works by combining a short-term bridging loan that rolls up interest while the refurbishment is undertaken. When the property is ready to let and meets the expected value, the customer exits on to a standard buy-to-let term mortgage — but the beauty of it from the borrower’s perspective (and the broker’s) is that there is no need to resubmit an application for the buy-to-let loan. The whole deal is underwritten at the outset. And given that it is two separate loans, the broker has the added bonus of a double procuration fee, too.
And with clever use of other earned disposable income to supplement affordability calculations, landlords now have even more flexibility on how and where they use their capital. We’ve recently extended our top slicing offering to cover our entire buy-to-let range, including our refurbishment buy-to-let proposition.
As a specialist lender, we have long understood the value of discovering and opening up niches. Supporting landlords and helping them as they reshape their portfolios is our ethos. If your customer is a landlord looking for a new way to maximise their rental yield and increase capital value, our refurbishment buy-to-let proposition could enable them to do so.
This was always a resilient sector, and it is likely to remain as such, and I firmly believe that the outlook for the buy-to-let market looks set to remain positive throughout 2019.