Off-plan property mortgages need kid gloves
As we saw in our last investment blog post, off-plan property contracts are complex documents. An experienced and competent solicitor is a must-have. So too is a good mortgage broker. The right off-plan property mortgage could be the difference between positive and negative cash flow. It could be the difference between relying on capital growth and making a net profit from your rental income.
In this post, you’ll learn what a mortgage broker does in the weeks between you putting down a reservation fee and exchanging contracts. I’ll also explain what a mortgage broker can do to iron out certain financing difficulties when you buy off-plan property.
When to speak to your mortgage broker
The earlier you speak to a mortgage broker about your plans, the better. They will be able to advise you when you should apply for the mortgage. They will also be able to give you an indication of whether a mortgage is likely to be available on the off-plan property you are planning to buy.
Generally speaking, you’ll be able to start the mortgage application process around four to six months before completion is due.
What you can expect your mortgage broker to do
You can expect your mortgage broker to contact you when the mortgage process can begin. They’ll discuss the different off-plan mortgage products on the market. They’ll bring you up to date with current requirements.
You’ll be expected to complete a fact find to help the mortgage broker find the best product for you. It is usually completed over the telephone, or by filling in a form.
Once in possession of the completed fact find, the broker can start searching for a suitable mortgage to finance your off-plan purchase. At this time they’ll also need to order a valuation and check that it is satisfactory.
The value of a good mortgage broker
In most cases, the value at completion is higher than the contract price. It is one reason why off-plan property investment can be so lucrative. Now and again, though, something may go awry.
For example, the bank may have changed its lending policy between the time that you paid the deposit and completion. You may not be able to borrow the amount you had hoped. A good mortgage broker will have told you about this possibility. If so, you will probably already have a contingency plan in place.
In poor market conditions, your valuation may be below expectations. The mortgage broker may be able to arrange a second opinion. Alternatively, they may be able to work with estate agents to challenge a low valuation.
Finally, if anyone has access to the funding you need, it is likely to be your mortgage broker. Your mortgage broker will be able to use their contacts and market knowledge to reassess your options. They’ll try to get an alternative off-plan mortgage for you. This funding might come at a slightly higher rate of interest in these circumstances, but you will have allowed for this in your cash flow calculations.
If you don’t have a mortgage broker with specific off-plan experience, contact Gladfish today on +44 (0)207 923 6100. Our Progressions Team works with a number of brokers with years of expertise in dealing with off-plan property investment.
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