While buying your ideal property can be an exciting journey, the process can come with its challenges.
When Rebecca, an executive director at a large investment bank, and Joseph, who works in private equity, recently set out to purchase a new home, they hit a stumbling block. The couple, who were aiming to purchase a £1.55m property, were turned down for a mortgage by a high-street bank because one of them had a Euro-based income.
The average time taken for a property purchase to complete has risen from 90 days to between 110 and 115 days during the last year.
With legal work underway and a date to exchange contracts set in the near future, the pair were at risk of losing the opportunity until they approached Investec. Within 48 hours, we obtained credit approval and completed a property valuation, factoring in their multi-currency income, carried interest and vesting stock without issue. As a result, Rebecca and Joseph exchanged on time and secured their new home successfully.
With the average time taken for a property purchase to complete rising from 90 days to between 110 and 115 days during the last year, the ability to secure capital quickly could be a differentiator for buyers in the coming months.
Here, Cameron Atkinson, a Private Banker at Investec, explains why speed can be crucial when buying a home and how the right lender should be able to support you.
1. The market may become more competitive
As Covid-19 restrictions are eased and the UK’s vaccine rollout continues, potential buyers who delayed viewings due to lockdown travel restrictions could decide to act now.
In addition, the tapering of the Stamp Duty threshold announced in the Spring Budget could see buyers look to complete purchases ahead of the 30 September 2021 deadline. This could lead to more demand for properties. Citing these factors, Savills expects house prices to grow by an average of four per cent in 2021.
Cameron explains: “If you’ve spotted your ideal home or even a buy-to-let investment opportunity, it’s normal to want to secure it as soon as possible. However, an even greater sense of urgency has built up during a time when coronavirus restrictions have made it more difficult to travel and view properties.”
Therefore, it’s important to start conversations with your lender early. “The ability to process mortgage applications quickly could give you a competitive advantage. If you secure an Agreement in Principle in advance, you’ll have an indication of the level at which we can support you before you need to submit an offer on a particular property.”
Whether raising capital against other properties or leveraging an investment portfolio with Investec Wealth & Investment, it’s important to approach lending in a creative way. With this flexibility, you may be able to secure a new property sooner than you think.
2. Lenders need pro-active mortgage advisers and credit teams
The ability to act quickly can often hinge on mortgage approval. Independent advice service HomeOwners Alliance previously recommended allowing up to four weeks for the approval process. However, since the pandemic, it advises buyers to allow up to eight weeks due to increased demand. But this timeline doesn’t apply to all lenders; some can finalise an offer within days.
Cameron says having a close relationship with your bank or broker can help. “While every case is different, at Investec each of our clients has a dedicated Private Banker working closely with them, who liaises directly with our Credit team when seeking approval.
“Our in-house mortgage advisers seamlessly plug into the process too, giving clients personal advice directly,” he adds. “Once we have received the client’s application and required information, it’s usually possible for us to obtain approval within a few days.”
3. You may be able to buy a new home before you sell a previous property
According to Quick Move Now, in the third quarter of 2020, more than half (52%) of property transactions in England and Wales fell through before completion as uncertainty plagued the property market. Nearly a third (31%) of these deals fell through because a buyer pulled out of the sale. Reasons included difficulties in obtaining finance from traditional lenders.
However, some lenders should be able to consider financial situations holistically and tailor bespoke financial solutions.
“Whether raising capital against other properties or leveraging an investment portfolio with Investec Wealth & Investment, it’s important to approach lending in a creative way. With this flexibility, you may be able to secure a new property sooner than you think,” says Cameron.
“Our mortgage structures can be very flexible too, potentially blending the debt across different fixed, variable or revolving tranches, and taking a view on interest-only or amortisation with capital reductions at times that suit your cash flow.”
Investec’s teams are deliberately aligned with certain sectors so they understand different income structures and can try to accommodate them when structuring a mortgage. Additionally, where foreign currencies are a factor, Investec’s in-house FX team can often add value by working with clients to manage their exposure.
4. Complex income structures don’t have to delay you
Not every home buyer has a traditional income structure. You may have an income that is drawn from various investment portfolios, carried interest or paid in foreign currencies.
As seen with Rebecca and Joseph’s experience, this can lead to difficulties in the mortgage application process as high-street banks may be unable to take more complex income structures into account. However, a lender that works with clients with similar profiles will understand the details.
“Investec’s teams are deliberately aligned with certain sectors so they understand different income structures and can try to accommodate them when structuring a mortgage. Additionally, where foreign currencies are a factor, Investec’s in-house FX team can often add value by working with clients to manage their exposure,” Cameron explains.
“Therefore, a complex income shouldn’t complicate a lending application.”
This may mean you can secure the home you want more quickly in a competitive market.
How to speed up the sale process even more – according to these Investec partners
“The best thing a buyer can do to position themselves for a quick exchange is get a good team around them. This should include a property search agent; lawyer; surveyor and bank who are all communicative, pragmatic and solutions-focused. They should be ready to move the deposit swiftly and be available to review advice and give clear instructions.”
Laura Conduit, Partner, Farrer & Co
The property search agent
“Time and again buyers see the most suitable properties very early in their search, but want to continue checking the market, in case another more suitable house might come for sale. Thorough market research and decisiveness can be the answer. Relying on the advice of your buying agent to give you the right market context can save you trawling the market for too long.”
James Macleod, Private Client Property Advisor, JM Chase
“Think carefully about the order you instruct the team around you. Securing a valuation early can help. A number of our clients usually engage us to provide a steer on values prior to organising a survey.”
Shaf Ali, Partner, Bellevue Mortlakes
Disclaimer: These case studies are used as examples. This article does not constitute advice. Minimum eligibility criteria applies. Your home may be repossessed if you do not keep up repayments on your mortgage.