Top Tips For Arranging Property Finance

It’s critical to get the best property finance possible for your real estate investments. There are a lot of mortgage products out there, and picking the one that is right for you isn’t easy. Each of the hundreds of lenders will have its own pricing and qualifying requirements, which can change at any time based on market conditions. If you’re still wondering why should I invest in property? Then check out our last blog.


Even if you’re a seasoned real estate investor, finding the best property finance for your next project isn’t straightforward. We’ve put together a list of things to think about to help you narrow down your options and get the best financial arrangement.


How many mortgages do you currently have?


The number of mortgages you currently have will always be of interest to a lender. If you already have more than three buy-to-let mortgages, some lenders will refuse to give you another one.


Other lenders will set a limit on the number of active buy-to-let mortgages you can have. This could range from five to ten buy-to-let mortgages. If you own a number of buy-to-let homes, you can have more than ten buy-to-let mortgages. In this situation, you can still get a mortgage from a specialised lender.


Total of your mortgage debt


If you have a portfolio of homes, any potential lender would almost certainly want to examine your total mortgage balance. Some lenders will set a restriction on the amount of money they are willing to lend you against this.


Furthermore, some lenders have a maximum amount that they will lend to any individual property owner or limited company. This is true throughout your entire portfolio. The bottom line is that if you already have a mortgage with a particular lender, they may be hesitant to lend you extra money.


Property Finance


Your Earnings


Several lenders will want to know about your additional sources of income than rental revenue. They often have a minimum income criterion of roughly £15,000. Some lenders have a higher income requirement.


Your Portfolio’s LTV


A potential investor will almost certainly want to know the average LTV for your entire portfolio because it gives them a clear sense of current and future risk. If your average portfolio LTV is low, potential lenders will be more responsive. If this is the case, you will almost certainly get the greatest rates.


Portfolio and Property Interest Cover Ratio (ICR)


If you’re not familiar with the interest cover ratio (ICR), it’s a stress test that most lenders use to compare different interest rates. A potential lender will want to make sure that the rental income you receive from the property is sufficient to support mortgage repayments should interest rates fluctuate on a property-by-property basis.


When you have a portfolio of buy-to-let properties, most potential lenders will do ICR stress tests on your entire property. When it comes to stress tests for ICR, each lender has its own set of requirements.


So keep these factors in mind when you plan your next property finance transaction. Before approaching lenders, make sure you have all of the necessary information. This will make your life easier.

Why Should I Invest In Property?

The question we get asked most. Why should I  invest in real estate? Look at the world’s wealthiest people and you will realise something: the wealthiest people, no matter where they are on the planet, have either made their money from property or have invested their money in property. Their triumph has left a trail.


Why do they invest in real estate? One of the primary reasons is that it is a secure place to invest their funds. Many of them have made their fortunes through real estate, or by investing in real estate in the first place.


In this blog we’ll go through five reasons why we believe now is the best moment for you to invest in real estate, and why property is one of the safest investment vehicles available.


The first reason is population growth

The population, or population increase, is reason number one if you’re investing in the UK housing market.


We have some information here. Apart from the fact that we reside on a little island that isn’t getting any bigger, no new land is being built. The size of the island is what it is. However, the statistics shows that the UK population has risen by an unprecedented 8%. In just the last decade, the population has risen by 6 million people. As a result, the current population is little over 66 million people. On a little island, there are 66 million people. Every day, that number becomes more and larger. But there isn’t any more room. As a result, there is a severe housing scarcity.


In the next 20 years, there will be 28 million different households in the United Kingdom. We aren’t constructing dwellings quickly enough. Every year, this equates to an increase of roughly 250,000 households. An rise of 250,000 people per year! And we aren’t even close to meeting that demand for housing. So that’s the supply and demand situation right now. Supply is insufficient to meet demand, resulting in a need for housing, as well as a need for rental housing, and driving up house and rental costs.


With 402 people per square kilometre, the UK is now even more populous than any other European Union or G8 countries. That’s an incredible number of people packed into a square kilometre.


Housing is a critical requirement. Houses are necessary for people to live in. There will never be a scarcity of housing in the United States. However, the real houses themselves are in low supply, which is driving up costs. We aren’t producing enough supply. But the scariest part is that we don’t appear to have a plan in place to build enough supplies.


Should I Invest In Property?


The second reason is that you will have immediate equity

When it comes to real estate, you can make money the day you purchase it. You can get a home for a lower price than the market worth. Let’s imagine you have a £100,000 residence that you know is worth £100,000. In the same area, a house in similar condition sold for £100,000. You’ve done your homework. You’ve looked at Rightmove, Nethouseprices, and all of the other comparable sites. You’ve looked at the most recent sales. You’ve looked at what’s currently available. And you’ve discovered this mansion, which is worth £100,000. However, it is currently available for £80,000. You’re putting down a deposit of £20,000 right away. You’ve made a 20-thousand-dollar profit today. If you sold that house for £100,000 in three months, you would make a £20,000 profit.


You may either add immediate equity to a property or add value to improve the equity in a short period of time, literally weeks. There is no other asset class that can do it in the same way as property does.


Reason number 3.. It’s all about the timing

Many people say that they are waiting for the ideal time to buy property. I’m going to wait till after Brexit. I’m going to wait till the government changes. They said back in 2000 that we should wait until after the millennium bug to see whether it occurred. Then came the crash in 2007, and they decided not to buy because there had been a crash. Then they most likely began to climb, and we heard the same folks complain, “The housing market is rising today, and I can’t buy.” It’s on the rise. I’ll have to wait until things settles down.


It’s nothing more than a list of reasons why you shouldn’t start. Here’s what you should do: you should buy right now. It makes no difference whether we are in or out of the EU. It makes no difference if laws change. Laws are constantly changing. It makes no difference whether there is a recession or a rise. What matters is that you purchase property now and profit from it. You get the property at a good price. You aren’t purchasing with the expectation of a future increase in value. That is a form of gambling. You could just go to the casino and bet your entire bankroll on red or black. You’re buying with the right information and awareness of what a good property is: one that generates you money, one that you can add value to, one that you can acquire below market value, secure, and build in value afterwards.


It’s all about ensuring that you have enough cash on hand. So, don’t buy a house just because it’s below market value and won’t make you any money. You must purchase for cash flow. Every month, a property should provide income for you. What was the point of buying if that wasn’t the case?


They’ll be higher in 10 years than they are now, and they’ll be higher again in 20 years, and again in 50 years. So, get started in real estate now. Stop putting things off. Stop waiting for the perfect moment to strike. It’s now or never. The moment has always been right.


The fourth reason is Brexit/Covid-19

Obviously, we couldn’t make such a list without naming these two. They’re also all over the news right now.


Recent headlines haven’t been easy to read, with a lot of conjecture about housing prices taking centre stage. The property market in the United Kingdom has proven to be quite durable, having weathered numerous recessions and depressions over the years, and we see no reason why this crisis will be any different.


House prices have risen in recent months, with activity in the UK property market continuing to rise. While the many house price indices often provide disparate findings, the data all portray a similar picture of how robust the market is right now.


On track to be one of the busiest years ever


Property is still in high demand among buyers and investors across the United Kingdom. The real estate market is on track to enjoy its most active year since the financial crisis. According to Zoopla’s latest House Price Index, 2021 is expected to be one of the top ten busiest years since 1959.


This year, over 1.5 million homes are expected to be sold, the biggest number in 14 years. This is a massive 45 percent increase over 2020. The search for room, as well as the stamp duty holiday, are driving this rapid expansion.


Pensions are reason number five

Over the last few years, an increasing number of people have realised that their pension is not worth what they thought it was or what they anticipated it would be. There are some nice pensions out there, but the vast majority are not. It will be determined by your location, your work, and the amount you are paying in.


However, in the grand scheme of things, most people do not have enough money from their pension to pay their living expenses when they retire. Their living costs that they’ve become accustomed to in the workplace, when they leave that employment and begin to rely on their pension, their income drops by roughly 70%, a massive, massive drop in terms of the money that they’re bringing in every month. There is a pension deficit. The average retirement age is increasing all the time. People born today will be in their late 70s or early 80s when they retire. Our grandchildren are even older. Because of the pension gap, retirement age is creeping closer and closer.


Just one buy-to-let property, just one investment property purchased in the right way to grow equity and cashflow, and just one property can supplement your retirement income. There’s only one! Imagine having ten buy-to-let properties, each one providing you with a monthly income.


You’ve got cashflow from those properties, but you’ve also got something you can pass down to your children, who can pass it down to their children’s children and so on.


If you’re still questioning whether or not now is the right time to invest, you can call us today for a free no obligation chat and get some advice from F&M Finance experts.

Buy-to-Let Mortgages: How to Raise Finance

Obtaining a buy-to-let mortgage or financing capital for property investment is a dynamic process. Things have changed so drastically in the past several years that it has seemed like a roller coaster, and the rate of change shows no signs of slowing down in the next years.


Your Credit Score

The importance of having a clean credit file cannot be overstated. If the applicant has bad credit, lenders have less flexibility in approving a buy-to-let mortgage than they would in approving a home loan.


Some minor previous concerns, such as a missing credit card or store card payment, may not be a concern, but defaults, County Court Judgments (CCJs), and missing mortgage payments may.


It’s also a good idea to stay away from payday loans. Lenders dislike this kind of financing since it implies that the customer isn’t managing their money wisely or has a little reserve of cash accessible in the event of a worst-case situation.


If you want to build a property portfolio using mortgages or other types of lent funding, be sure your credit file is in order.


2 Points on Buy-to-Let Mortgage Eligiblity

Minimum Wage

A minimum income of £25k will be necessary to be able to pick from the majority of BTL lenders. There are lenders that will deal with people on a smaller income, and others have no minimum income criteria at all, but a £25k income will guarantee you have access to the bulk of the market.


How Many Properties You Already Own

The amount of mortgaged buy-to-let properties you possess may influence which lenders are willing to lend to you. Some lenders, for example, may reject an application from a landlord who already has 10 buy-to-let mortgages.


Because this amount varies from lender to lender, the best thing to do is get assistance from a seasoned mortgage broker.


buy-to-let mortgage


What is the maximum amount of money you can borrow?

The amount you may borrow with a buy-to-let mortgage is determined by the rental return. In other words, the amount you may borrow is determined by how much the lender believes you will make.


How do lenders figure out what the rental income will be?

So, as a borrower, do you need to demonstrate what your rental return is expected to be based on market comparisons? Will the lender do their own market research to estimate the probable or customary rent?


The following is how it works:


In most situations, lenders calculate the monthly payment by multiplying the amount borrowed at a preset rate of interest (5 percent in most circumstances, independent of the real interest rate of the product) by 125 percent (in most circumstances), and the rent must be more than that number.


Example of a Calculation
With a £75,000 loan with 5% interest, the monthly payment is £312.50. This is then multiplied by 125 percent to get £391. In this case, the monthly rent would have to be at least £391 to qualify for a loan of $75,000. The lender would have to be convinced that such a loan could be as near to guaranteed as feasible.


Insurance for Renters’ Protection

Buy-to-let building insurance is required to qualify for a BTL mortgage. Normally, this will be the only kind of insurance that you will need.

So, though rental protection insurance isn’t required, it’s a good idea to have it.


Mortgages with no monthly payments (Interest Only)

All buy-to-let lenders offer interest-only mortgages, which are quite popular.


Buy-to-Let Advice for Everyone

You should always retain a feeling of distance from any possible buy-to-let property as an investment. You aren’t purchasing it to live in; rather, you are purchasing it as an investment. However, it is both a cash-flow business and an asset.


The difference between the purchase price and the rent you can get is crucial, and it’s what buy-to-let mortgage lenders are looking for.


For example, instead of spending £140k on one semi-detached property that would only rent for £650 per month, it could be preferable to invest £70k on two terraced houses that would rent for £550 per month each.


You must carefully control your spending if the home requires renovations. Keep it as basic as possible, and avoid expressing your particular interests in the décor. All that is required are Magnolia walls and a functional kitchen and bathroom.


An investor must also think about the sector in which they want to invest – perform your study and due diligence. Get to know the local market as well as you possibly can. Consider the following points:


  • – What is the rental yield potential?
  • – What is the relationship between the yield and the buying price?
  • – Is there a steady demand for rentals in the area?
  • – Is there room for capital appreciation?


Before making any choice regarding a property, you must thoroughly research the region, analysing historical data such as sales, typical rentals, market improvement, and price increases.


That way, you’ll be able to tell whether your objectives are realistic.



The main message here is that buy-to-let mortgage lenders prefer to deal with candidates who have an excellent credit history and are looking for a secure investment with high returns.


So, if you want to get started investing in real estate, keep it basic and you won’t go far wrong.

Bridging Loans: 5 Things You Need To Know

Over the previous five years, the number of bridging lenders has expanded significantly, making Bridging Loans up to £2 million more accessible and elevating bridging financing from a last option to a must-have instrument in your development arsenal.


However, if you require a substantial Bridging Loan exceeding £2 million to fund transitory assets or release equity from a house, your alternatives narrow drastically, and you’ll almost certainly need to explore outside of the major lenders.


We’ve compiled a list of five things you should know before diving into the big world of large Bridging Loans.


1. The use of large bridging loans is becoming more prevalent.

It is feasible to acquire jumbo loans if you have the necessary connections and experience to negotiate customised solutions. For an international property investor, we recently acquired a £25 million bridging loan. He intended to borrow £28.5 million to buy a new home and use his present home, worth £19.1 million, as a co-signer on the loan. Borrowing against two “trophy” houses resulted in a narrow pool of interested lenders, but we overcame a slew of obstacles and closed in four weeks, allowing the client to move into their new home.


2. They aren’t as pricey as you may believe.

Even among seasoned property developers, there is a widespread belief that bridging loans, particularly large ones, are too costly. However, as the industry grows in popularity, there are more lenders to choose from, which leads to better pricing. Furthermore, if obtaining a substantial Bridging Loan allows you to purchase the property that is perfect for your portfolio at the correct price and in a timely manner, you will save money in the long run.


bridging loans


3. It’s all about who you know.

You should go outside the traditional banks to specialised lenders for substantial bridging loans. The bigger the loan, the fewer lenders you’ll have to choose from, so do your homework and shop around for the best options. Because they may be difficult to come by, contacts are more important than ever when it comes to large bridging loans. Using a broker may help you not only search the whole market, but also connect you with people who are ready and competent to deal with unusual development scenarios.


4. They’re a fantastic way to get into development.

Large bridging loans may turn development sites that were once deemed to be impossible into a reality. With a stub-lease and allowed development rights, we assisted a client wanting to acquire a retail unit and offices. He intended to lease the property for two years before turning it to residential or redeveloping the whole property. The lender needed more confidence about the expected construction costs and GDV. We were able to get a substantial Bridging Loan of £8.4 million at 70% LTV by working closely with all stakeholders, and the lender agreed to paying 100% of the planned construct costs, subject to QS reports and valuations.


5. Bridging loans are a kind of development exit finance.

Development Exit Finance is a short-term loan used to discharge remaining debt owed on a property development project after it has been completed. It’s an excellent tool to have on hand if your current financing is coming to an end and your sales aren’t going to be finished on time. Reduced risk means it costs less than Development Finance, buys time and eliminates the need to slash prices for rapid sales, and frees up equity to finance your next project, making it a win-win situation.


If you’re considering a bridging loan and are looking for advice, contact us for a no obligation chat.