Homes are staying unsold for longer – the average time to sell reached the 200-day mark for the first time this summer.1 At the same time, costs, fees and taxes may change quickly. In this environment, property-owners may have other options. Below, we set out four ways in which we’ve helped our clients unlock value or make a move without the sale of a primary residence.
Option 1 – REDEVELOP
Refresh the property with a development loan
By investing in a property, an owner can make it either more suitable for their needs or more attractive to a prospective buyer.
At Investec, we tailor development loans according to the scale of the project. Our bespoke lending for property development covers minor renovations (such as a new kitchen or bathroom suite) and more substantial projects, including demolishing, restoring or rebuilding parts of a property. At the very top end of the spectrum, we offer self-build mortgages where the owner can construct a new dwelling.
We recently helped an entrepreneur complete a £3 million renovation of his property when he wanted to convert an outbuilding into an annex for visitors and add a swimming pool.
With many potential variables over the course of any project, including delays, changing materials costs and interest rates, we typically release funds in tranches on a variable rate. Unlike many lenders, we’ll also look to cover the property beyond completion, so owners don’t have to reapply for a mortgage immediately.
One of the biggest client concerns is ensuring they have financing to cover any unseen occurrences, such as a project overrunning. Thanks to the long-term relationships we build with clients, we can take a view of their financial position, as well as the project risk. Instead of sticking to a rigid set of pre-defined criteria, we tailor our development loans, and we can provide lending for the entire lifecycle of the project and beyond.
Option 2 – REASSESS
Buy a new home while delaying a sale
A Home-Link mortgage is a form of lending which is secured against an existing home and a new target property. The time-period for the mortgage relating to the existing property is typically up to two years, while the mortgage for the new property is offered on a longer-term basis.
While there is an expectation that the original property will be sold, this product gives homeowners more flexibility to choose their entry point into the market amid changing economic conditions.
If an owner sells in advance of an agreed date, no early repayment fees are due if the mortgage is on a variable rate basis.
Option 3 – RAISE CAPITAL
Remortgage to unlock equity
When it comes to unlocking equity in an unsold property, many of our clients explore remortgaging for purposes such as investing in a business or helping the next generation.
We offer remortgages for buy-to-let and residential properties with personalised terms, and will consider interest-only repayments and terms of up to 35 years.
We speak to many clients with different income arrangements and ownership structures for their properties. We take a more holistic approach than high-street lenders. We often find solutions even where income is irregular or from multiple sources, where clients want to borrow against multiple properties, or where they need to make decisions at speed. There are also other forms of lending we can consider.
Option 4 – RENT
Convert your home to a buy-to-let
Finally, when a residential property is taking longer than expected to sell, another option is to remortgage as a buy-to-let (BTL). This could allow the owner to live elsewhere.
We previously helped a high-net-worth couple who were moving overseas to remortgage their London home as a BTL. They were offered a competitive five-year, fixed-rate, interest-only BTL mortgage.
When it comes to buy-to-let mortgages, we look beyond rental income and take wider wealth into account, to gain a more realistic view of what’s affordable.
It may also be possible for owners to receive consent to let for up to two years on a property that has a residential mortgage with us. In these circumstances, a private banker would look to switch the rate type without increasing the loan size.
Buy-to-let has its own administrative and tax implications that need to be considered carefully. This is particularly important ahead of the introduction of the Renters’ Rights Bill. That said, we have many clients who look to convert their main property to a buy-to-let because they want the flexibility to live elsewhere while retaining the asset. In all cases we can connect them with the specialists in our wider network to help evaluate the financial impact.
Want to discuss our mortgage and borrowing options? Please get in touch today.
Our Private Bankers are highly experienced with a history in complex lending and relationship management.
1 Source: Property Industry Eye
Important information:
Your property may be repossessed if you do not keep up repayments on your mortgage. Investec residential mortgages are only available for residential properties in England or Wales and are primarily available to UK residents and subject to eligibility. This article is for general information purposes only. The opinions featured are not to be considered as the opinions of Investec Bank plc and do not constitute financial or other advice. It is advisable to contact a professional advisor if you need financial advice. Your use of and reliance on any of this content is entirely at your own risk. Minimum eligibility criteria and terms and conditions apply.
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