Craig Upton

Craig Upton

Craig Upton has worked with UK Property Finance Ltd for over 18 years writing content for the websites and online finance publications. Craig writes website content, press releases and articles on popular financial brands in the UK. Creating strategic partnerships and supporting data with extensive research in the latest trends Craig is well versed with most products within the financial sector. Craig has worked within the online marketing arena for many years, having worked with British brands such as FT.com, Global Banking Finance and UK Property Finance, specialising in bridging loans and specialist mortgage finance. Craig has gained a wealth of knowledge and is committed to publishing unique content for our readers on various financial platforms supporting the products offered by UK Property Finance.

How Does Development Finance Work?

Embarking on a property development project is an exciting journey, but it often requires substantial financial backing to turn visions into reality. Development finance stands as a crucial pillar in this process, offering a specialised funding solution tailored to the unique needs of development projects. In this blog post, we’ll dissect the question, “How does development finance work?” to provide a comprehensive understanding of the mechanisms behind this essential aspect of property development.

Understanding the basics:

Project assessment 
Development finance begins with a thorough assessment of the proposed project. Lenders evaluate factors such as the project’s feasibility, market demand, location, and the borrower’s experience in property development.

Loan Structuring 
Once a project is deemed viable, the lender structures the loan to meet the specific needs of the development. This includes determining the loan amount, interest rates, repayment terms, and any conditions tied to the release of funds.

Security and collateral 
Development finance is typically secured against the property being developed. The value of the property and the potential profitability of the completed project are crucial considerations for the lender.

Structured drawdowns
Unlike traditional loans, development finance often involves structured drawdowns. Funds are released in stages, corresponding to different phases of the project. This ensures that the capital is utilised efficiently and tied to project milestones.

Professional oversight
Lenders often engage professionals, such as surveyors and project managers, to oversee the development. Regular inspections and progress reports help ensure that the project is on track and aligns with the proposed timeline.

Interest-only payments 
During the construction phase, developers often make interest-only payments. This alleviates the financial burden during the project’s early stages, when the property is not generating income.

Exit strategy 
Development finance is structured with a clear exit strategy in mind. This could involve selling the completed project, refinancing with a traditional mortgage, or another method agreed upon by the borrower and lender.

Risk mitigation 
Development projects inherently carry risks, from construction delays to market fluctuations. Development finance is designed to mitigate these risks by providing flexibility and accommodating unforeseen challenges during the project’s lifecycle.

In conclusion

In essence, development finance is a strategic partnership between the borrower and the lender, with the common goal of bringing a development project to fruition. The intricacies of this financial tool ensure that funds are allocated efficiently, risks are managed, and the development progresses smoothly from inception to completion.

As you navigate the realm of property development, understanding how development finance works becomes paramount. Collaborating with reputable lenders, seeking professional advice, and having a clear vision of your project are key steps towards leveraging development finance to turn your real estate aspirations into tangible, thriving developments.

Do Secured Loans do Credit Checks? Unveiling The Truth

As individuals explore financial avenues to meet their needs, questions often arise about the intricacies of the lending process. One common question is, “Do secured loans do credit checks?” In this blog post, we will unravel the truth behind credit checks for secured loans, shedding light on how this vital aspect of the lending process impacts borrowers.

Understanding Credit Checks for Secured Loans

The nature of secured loans
Secured loans are a category of loans where borrowers provide collateral, such as real estate or valuable assets, to secure the loan. The collateral acts as a safety net for lenders, reducing the risk associated with the loan.

Collateral vs. credit check
While collateral is a key factor in secured loans, it doesn’t eliminate the need for a credit check. Lenders use credit checks to assess the borrower’s creditworthiness, financial history, and ability to repay the loan.

The collateral provides security for the lender, but credit checks offer additional insight into the borrower’s overall financial health.

Secured loans and credit scores
Credit checks for secured loans may not be as stringent as those for unsecured loans. The presence of collateral allows lenders to be more flexible, making secured loans accessible to individuals with varying credit profiles.

However, a positive credit history can still positively impact the terms and conditions of the loan, influencing interest rates and repayment terms.

Loan amount and terms
The results of a credit check can influence the loan amount a borrower is eligible for and the terms of the loan. Individuals with higher credit scores may have access to larger loan amounts and more favourable interest rates.

Impact on approval
While a credit check is part of the evaluation process, having a less-than-perfect credit score doesn’t necessarily mean automatic rejection. Secured loans are designed to provide a pathway for individuals with varying credit histories to access financing by leveraging their collateral.

Alternative lenders and credit checks
Depending on the lender, the stringency of credit checks can vary. Traditional banks may have more rigid credit requirements, while alternative lenders, including online platforms and credit unions, may offer more flexibility.

In conclusion

In conclusion, secured loans do involve credit checks, but the impact of the credit check on the loan approval process is different compared to unsecured loans. The presence of collateral provides a layer of security for lenders, allowing for greater flexibility in lending decisions.

As borrowers navigate the world of secured loans, it’s essential to be aware of the relationship between credit checks, collateral, and loan terms. Seeking guidance from financial advisors and exploring options with lenders who specialise in secured loans can help individuals make informed decisions aligned with their financial goals and credit profiles.

 

BTL Remortgage Declined

Remortgaging a Buy to Let property can be a surprisingly simple yet affordable way of raising funds for almost any project or purpose. That said, refinancing a Buy to Let property is not the same as remortgaging the home you live in.

As a Buy to Let property is technically a business investment, it is viewed somewhat differently by most banks and lenders. The fact that the applicant may already have an extensive portfolio of properties and loan products may factor into their eligibility checks.

Reasons for Buy to Let Refinance Refusal

Application rejections are always disappointing, though can always be attributed to one or more important issues. As with most mortgages and remortgage deals, general ‘stress tests’ and background checks will be performed on landlords looking to refinance Buy to Let properties.

Examples of which include credit history tests, assessment of current debts and outgoings, income and affordability checks, total combined equity owned and so on. Should one or more of these checks return a ‘negative’ result, it is unlikely the respective application will be accepted

Alongside these more typical grounds for rejection, there are also several surprisingly common issues that can stand in the way of a Buy to Let refinance application. Mainstream banks and lenders are scrutinising Buy to Let remortgage applicants where one or more of the following apply:

1) Buy to Let Properties with Flat Roofs
This is by no means guaranteed grounds for refusal, but can nonetheless make it more difficult to qualify for a competitive refinancing deal. Irrespective of the quality or structural integrity of the property, flat roofs are considered higher-risk than more ‘conventional’ roofs and often require more maintenance. It is therefore assumed by many lenders that flat roofs can make properties more difficult to sell out, which is why they can show reluctance to lend against them.

Where all types of non-standard properties and property configurations are concerned, it is essential to consult with an independent broker if considering refinancing.

2) Late-Night Businesses and Premises Nearby
The most obvious examples to illustrate this point would be bars, pubs and nightclubs in proximity to the property in question. Properties positioned too closely to late-night businesses and certain types of premises could be considered difficult properties to sell, given the disruption a nuisance caused by their neighbouring properties. If there is a chance that late-night revellers could keep the occupants of the property awake, a lender may consider it a high-risk property to lend against.

The same may also apply (though to a lesser extent) to properties located near busy railways or directly under flight paths.

3) Undesirable Odours
Another factor taken into account by many refinance specialists is the presence of restaurants, cafés and takeaways in proximity to the property in question. Taking into account the preferences and potential objections of future buyers, any Buy to Let property exposed to undesirable odours of any kind may be considered to have diminished future sales potential. The most obvious examples of which being flats located directly above or adjacent to chips shops, kebab shops, curry houses and so on.

Even if you have no objections to these kinds of fragrances personally, they may be considered an issue by your lender.

4) Japanese Knotweed
This problematic plant continues to represent a thorn of thousands of property owners across the UK. In almost all instances, mainstream residential mortgage lenders will immediately close their doors where the word ‘knotweed’ comes into the equation. The presence of knotweed isn’t something that can (or should) be covered up, as to do so could land you in serious trouble at a later date.

If you suspect one or more of your properties may be affected by Japanese knotweed, it is essential to organise its destruction and removal at the earliest possible stage. Otherwise, you may find it difficult to refinance the property in question and impossible to sell it at a later date.

5) Lease Coming to an End
Another factor considered grounds for refusal by many lenders is when the applicant’s lease on their property is coming to an end. As a general rule of thumb (though not always the case), any Buy to Let property with less than 70 years remaining on its lease could be extremely difficult to refinance or sell. This is because it is considered to be a depreciating asset, which could present future complications as the lease draws closer to its conclusion.

Issues surrounding lease expiration can be complex to address, which is why it is important to take action at the earliest possible stage.

Consult with an Independent Broker

Whether you are seeking clarification with a rejected application or simply looking to ensure you get the best possible refinancing deal, consulting with an independent broker is the way to go.

Issues surrounding lease expiration can be complex to address, which is why it is important to take action at the earliest possible stage.

Irrespective of your requirements and the extent of your property portfolio, an experienced broker can help you understand the available options and get the best possible deal from a specialist lender.

Common Mistakes to Avoid When Applying for a Mortgage Loan

Those of you who have applied for a mortgage know it can be a challenging process, and it is easy to make mistakes that can have a negative impact on your financial future. At UK Property Finance, we have found some common mistakes to avoid when it comes to making sure you find the best mortgage rate and terms possible:

Not checking your credit score

Lenders use credit scores to assess your creditworthiness, or how likely you are to repay a loan. A higher credit score generally means a lower interest rate, which can save you thousands of dollars over the life of your mortgage. If you are unsure of your credit score, you may well be missing out on the best rates and terms that are available to you! Before you apply for a mortgage, always make sure to check your score and ensure there are no errors. A low score may impact your ability to get the best rates, so always work hard to get the best score possible before applying!

Not shopping around for the best rate

Just like with any other major purchase, it pays to shop around for the best mortgage rate. Don’t settle for the first offer you receive; always compare rates and terms from multiple lenders to find the best deal. Even a small difference in interest rate can add up to thousands of pounds over the life of the loan.

Overlooking disbursement costs

In addition to the mortgage itself, you’ll also be responsible for paying disbursement costs. These can include an online ID fee, a local authority search, a water and drainage search, an environmental search, a land registry fee, and a stamp duty land tax. Make sure you understand exactly what you’ll be paying before you apply for a mortgage loan, and factor those costs into your budget.

Borrowing more than you can afford

It can be tempting to borrow as much as possible to buy your dream home, but taking on too much debt can be a recipe for disaster. Before you apply for a mortgage loan, create a realistic budget and make sure you can afford the monthly payments. Remember that you’ll also be responsible for council tax, insurance, and maintenance costs.

Failing to disclose information

It’s essential to be honest and upfront when applying for a mortgage loan. If you fail to disclose important information, such as your income or debts, you could be committing mortgage fraud. This could result in legal consequences and damage your credit score.

Changing jobs before closing

Lenders want to see stability in your employment history. If you change jobs before your loan is approved, it could raise red flags for lenders and potentially delay or even cancel your loan. If you must change jobs, try to wait until after your loan is approved.

Making major purchases before closing

Before your loan is approved, it’s important to keep your finances stable. Avoid making major purchases, such as buying a new car or taking out a large loan, as this can negatively impact your credit score and debt-to-income ratio. This could result in a higher interest rate or even a denied loan.

Not getting pre-approved

Before you start house hunting, it’s important to get pre-approved for a mortgage loan, otherwise known as a mortgage in principle. This will give you an idea of how much you can afford to spend on a home and will also show sellers that you’re a serious buyer. Without approval in principle, you may miss out on your dream home to someone who is already pre-approved.

To sum up, applying for a mortgage loan can be a complex process, but avoiding these common mistakes can make it easier and more successful. Remember to:

  • Check your credit score.
  • Shop around for the best rate.
  • Factor in legal costs
  • Stay within your budget.
  • Disclose all information.
  • Maintain employment stability.
  • Keep your finances stable.
  • Get pre-approved

By doing so, you’ll increase your chances of getting the best mortgage rate and terms possible and ensure a smooth home-buying process.

100% Mortgages Now Available For the First Time in 15 Years

A new 100% LTV mortgage for UK homebuyers has been dubbed a potential game changer, but how exactly does the country’s first no-deposit deal since 2008 work?

If you are interested in applying for a zero-deposit mortgage or would like to learn more about how the facility works, call UK Property Finance today for an obligation-free chat.

The cost of purchasing a property has always been a significant issue in the UK, especially for first-time buyers. Unable to come close to meeting prohibitively high deposit requirements, almost an entire generation of would-be home buyers has been confined to overpriced private rentals.

But this is something that could be set to change over the coming months and years as a new 100% LTV mortgage is introduced. The first no-deposit product to be offered in 15 years, experts are optimistic that the new deal could be a game-changer.

At UK Property Finance, we are delighted to have added the UK’s first zero-deposit mortgage in over a decade to our product range. If you are interested in applying or would simply like to discuss your eligibility in more detail, our team is standing by to take your call.

What is a 100% LTV mortgage?

For decades, the biggest barrier to homeownership for UK residents has been the deposit required for a mortgage. In some parts of the country, particularly in London and the South East, the average deposit required can be as much as £80,000 – a completely insurmountable cash payment for most.

By removing the need for a deposit entirely, a 100% LTV mortgage could open up the possibility of homeownership to a whole new group of people. Those who would have never otherwise been able to afford to buy their own home (despite being able to comfortably cover average monthly mortgage repayments) may finally be able to get on the property ladder.

Importantly, a 100% LTV mortgage could help many thousands escape the vicious cycle of renting, where the largest proportion of earnings goes towards paying rent every month with no prospect of ever building equity in their own home.

Who can qualify for a no-deposit mortgage?

For the most part, the UK’s first no-deposit mortgage since 2008 works similarly to a conventional home loan. The product is available as a five-year fixed-rate deal, for which a series of general eligibility requirements must be fulfilled.

Examples of these include:

  • Applicants must be first-time buyers aged at least 21 years at the time of their application.
  • Evidence must be provided of a minimum of 12 consecutive months of rental payments, with no late or missed payments during this period.
  • All household bills must also have been kept up to date for a minimum of 12 consecutive months, such as council tax and utilities.
  • No defaults regarding any other repayments should be present on the applicant’s credit report from the past six months, such as mobile phone payments or TV subscriptions.

It is worth noting that each of the requirements above applies to all applicants named on the application, not just the main applicant.

For more information on eligibility requirements or to submit your application for a 100% LTV mortgage, contact the team at UK Property Finance today.

How much is available with a no-deposit mortgage?

All the usual eligibility criteria apply where maximum loan sizes are concerned, based on the general financial status and income level of the applicant.

However, there is an additional restriction with the new 0% deposit mortgage: applicants are only able to borrow up to the equivalent of their monthly rent. For example, if your current monthly rent repayment is £800, you will only be able to take out a mortgage with a maximum monthly repayment of £800.

Here is a brief overview of how much is available with a 100% LTV mortgage, based on the applicant’s current monthly rent:

Monthly rent Maximum mortgage
£500 £81,000
£750 £123,000
£1,000 £163,000
£1,250 £204,000
£1,500 £244,000
£2,000 £325,000

These figures represent the maximum mortgage loans available; actual offers will vary significantly based on lenders’ usual financial stress tests.

Cautious optimism

While there has been some scepticism from economists regarding the potential risks associated with high-LTV mortgages, the vast majority have welcomed the new product with cautious optimism.

Martin Lewis, founder of MoneySavingExpert.com, said that while he has mixed feelings about 100% mortgages, there is no disputing the fact that they address a problematic and long-standing gap in the market.

“Having campaigned for years to try and help mortgage prisoners locked in at hideous, unaffordable rates, the spectre of 100% mortgages returning leaves me with mixed feelings,” he said.

“Years of property-porn TV shows have spouted the idea that you must buy a house as soon as possible, as big as possible – actually, the real priority is not to overstretch your finances. Before the 2007 financial crash, banks would simply throw mortgage loans out to anyone walking past a branch window; now we need to be more careful.”

“The criteria of requiring a good rental track record to prove someone can make mortgage payments is sensible, and so I cautiously welcome it, done carefully, after advice, as an option for some.”

The UK’s only 100% LTV mortgage is currently available at a five-year fixed rate of 5.49%, with no arrangement fees or processing fees.

For more information on any of the above or to get your no-deposit mortgage application underway, contact a member of the team at UK Property Finance today.

Downsizing: Bridging the Gap

Downsizing to a smaller home should be a simpler task than moving into a larger home or buying your first property. Your current home may have a much higher market value than that of your target home, putting you in a great position to relocate and have plenty of extra money left over.

Or at least, this is how the whole thing should work on paper. In practice, it rarely works out quite so straightforwardly.

Having built up plenty of equity in a home is all well and good, but converting this equity to cash to buy a new home is not always easy. Prior to purchasing your next home, you first need to find a buyer for your current home. A process that means not only finding an eligible buyer but waiting for their mortgage application to be processed (assuming it is successful at all).

In the meantime, the risk remains of being beaten by a competing bidder. If another interested party is able to buy your target home faster than you, chances are that is exactly what they will do. Likewise, if you have lined up a buyer for your current home who backs out at the last minute, you are back to square one.

Breaking the chain

This risk of a broken property chain does not apply exclusively to more standard moves or when upgrading to a larger home. Even if you plan to move to a home that is significantly smaller and lower in value, you still face the prospect of being beaten to the finish line.

In fact, the growing demand for smaller homes that are affordable to run has resulted in a situation where competition for these types of homes is growing at a much faster rate than competition for larger homes. The more people there are bidding for the select properties available, the higher the chance of a broken property chain.

But there is a way to almost entirely eliminate the risk of a property chain crashing down at the worst possible time. Increasingly, homeowners are setting their sights on short-term bridging finance to ensure they are at the front of the queue. With bridging finance, it is possible to tap into most (up to 80%) of the equity you have in your home in a matter of days.

A flexible and affordable solution

Bridging finance is issued in the form of a short-term loan (usually over a term of no more than 12 months), secured against the home of the applicant. With all the essential paperwork in place, the funds can often be accessed within a few working days.

This money can then be used to purchase a smaller home for cash while their previous home remains on the market. When their former home sells for its full market price, the loan is repaid in full, and the remaining proceeds are retained. Charged at around 0.5% per month or less, overall borrowing costs on a bridging loan can be extremely low.

As cash buyers are often afforded significant discounts on property prices for fast transaction completions, the savings made could augment the costs of the facility in its entirety.

Best of all, bridging finance eligibility requirements are far more relaxed than most comparable products. You simply need sufficient equity in your current home to cover the costs of the loan and evidence that you will be able to repay the loan by the agreed-upon date (exit strategy).

Once a financial product used nearly exclusively by property developers and investors, competition in the housing market has propelled bridging finance into the mainstream lending sector.

Second Charge Borrowing Hits New High in November

Despite the lingering economic uncertainty that has maintained a tight grip on the UK throughout 2022, second-charge lending has once again seen a bumper year. A minor slowdown in lending volumes was recorded over the past two months, but the overall picture for the year was one of record combined loan values.

According to the latest Secured Loan Index published by Loans Warehouse, total year-on-year second charge lending for 2022 was up by almost 37% in November, coming out at a total of £1.6 billion in loans issued. This marked the sector’s best performance since 2007, even with the figures having been released with two months still to go until the end of the year.

The figures from Loans Warehouse indicated a significant decline in the number of high LTV loans being issued in November, with 85% or higher LTV products accounting for just 13.7% of loans issued. In addition, average loan terms have increased by approximately one year, suggesting that more borrowers are looking to spread the costs of their purchases and projects over a longer period of time to compensate for the escalating living costs crisis.

“The average term of a secured loan has increased by 12 months, potentially linked to lenders’ affordability being stretched more than ever before in recent times,” commented Matt Tristram, managing director of Loans Warehouse.

“Finally, many lenders have significantly improved their completion time, likely a result of a dip in the record-breaking lending levels seen across the summer months.”

What is second-charge borrowing, and how is it used?

Second-charge borrowing refers to a type of loan that is secured against a property that has already been used as collateral for another loan. The term “second charge” refers to the fact that the loan is considered a secondary priority if the borrower defaults on their payments and the lender needs to sell the property to recover their money.

This subsequently means that the original first charge loan on the property (such as a mortgage) would be repaid first in the event of repossession, followed by the second charge loan.

There are countless different uses for second-charge borrowing, which can technically be used for almost any legal purpose. Some of the most popular applications for second-charge products in the UK are as follows:

  • Home improvements: One of the most common reasons for taking out a second-charge loan is to fund home improvements. This can include things like renovating a kitchen or bathroom, adding an extension, or updating heating and electrical systems.
  • Debt consolidation: Second-charge borrowing can also be used to consolidate multiple debts into one single loan with a lower interest rate. This can be particularly useful for individuals who have multiple credit card debts or other high-interest loans.
  • Business use: Some borrowers use second-charge loans to fund business ventures or expansion projects. This can include things like buying new equipment or hiring additional staff.
  • Funding education: Second-charge loans can also be used to pay for education-related expenses, such as tuition fees or the cost of relocating to a university.
  • Unexpected outgoings: In some cases, individuals may take out a second charge loan to cover unexpected expenses, such as medical bills or car repairs.

It is important to note that while it can be an affordable facility, second-charge borrowing is not suitable for everyone. Lenders typically require borrowers to have a good credit score and sufficient equity in their property to qualify for second-charge loans. Additionally, second-charge loans are generally more expensive than first-charge loans, as the lender is taking on more risk by providing the loan.

However, some secured loan specialists are willing to issue second-charge loans to applicants who do not fulfil the ‘mainstream’ criteria set out by banks in general. For example, you may still be able to qualify for a competitive second-charge loan with poor credit, but you will need to target a specialist lender with your application.

Rapid Lender Criteria Changes Create Problems for Brokers

Increasingly, mortgage brokers are experiencing difficulties keeping up with the continuous changes in lending criteria introduced by the lenders they represent.

A poll conducted by Smart Money People suggests that the majority of brokers are struggling to keep track of lender eligibility requirements and general qualification criteria due to the speed and regularity with which they are being amended.

Of the 751 brokers polled, almost half (43%) said that they relied primarily or exclusively on emails (and similar communications) from lenders for information on lending policy updates. Brokers said that while technology is simplifying the process of keeping on top of lender policy shifts, no current systems are enabling them to respond to lenders’ policy changes in real-time.

As a result, brokers face the prospect of more complex and time-consuming application processes or the risk of providing their own clients with inaccurate information.

“The findings we’ve published today indicate the extent to which mortgage brokers have found it difficult to stay on top of all the movement in lenders’ product offerings, brought about by the recent economic turmoil,” commented Jacqueline Dewey, CEO at Smart Money People.

“Brokers are certainly frustrated that some lenders are changing rates on a Friday evening or Sunday, making them feel they need to work out of hours.”

“With so little notice, it’s adding a lot of extra pressure to already stressed brokers.”

Major shifts in lending policies

The significance of the issue is highlighted by the number of high-street lenders that have made sweeping adjustments to their lending policies over the past few weeks.

As lenders become increasingly reluctant to hand out high LTV mortgages in the current financial landscape, data from Moneyfacts suggests that around 65% of all mortgage deals with a 5% deposit requirement have been taken off the market entirely.

This is likely to cause a major concern among prospective homebuyers on low incomes, who may be entirely unable to come up with the typical deposits needed to qualify for a mainstream mortgage.

“First-time buyers are some of the lowest income-earners in the UK, and when house prices are up to 10 times the national average of wages in some areas, it has proven extremely difficult to obtain a mortgage,” said James Miles, of The Mortgage Quarter.

“The good news is that lenders are still lending and there are enough loans, but we are seeing mortgages being taken over a longer term to ensure payments are affordable for first-time buyers.”

“I would expect this to continue until the UK can get inflation under control, which will then have a knock-on effect of rates coming back down.”

Analysts remain confident that average interest rates will not be quite as high as predicted during the first half of next year, which may come as some comfort to those already paying around 6% on their home loans.

But with further house price growth on the cards for the foreseeable future, there is no immediate light at the end of the tunnel for those who have found themselves priced entirely out of the market.