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Borrowing bugbears of property professionals

By Tom Clark, Regional Development Manager, Commercial Mortgages, Shawbrook Bank

After attending a series of property networking meetings recently, I wanted to share the common problems and complaints that I heard from landlords and developers about obtaining finance. I believe that with the right advisor, combined with a specialist lender, the experienced property investor has clear options available to navigate the challenging environment in which professional landlords operate.

Broadly speaking, high street banks are still reducing loan to values, withdrawing interest-only options and limiting their exposure to the number of properties they will finance. It is therefore understandable that some professionals think the landscape looks bleak. In addition, a portfolio landlord can often find him or herself without a lender after a very long relationship if their current bank has decided to move out of the property investment sector. This can leave such borrowers in unknown territory (potentially with the additional pressure of having to refinance quickly).

The following factors can also make the journey towards a purchase or refinance more difficult:

  • Some buy-to-let (BTL) lenders will just not lend to professional landlords
  • Lenders that seem to have a ‘tick box’ lending mentality
  • The minimum income requirements are a major concern for lenders
  • Property loans tend to be restricted to only a few assets with each lender
  • Investors often experience difficulty finding finance for refurbishment projects
  • There are restrictions on refinancing against the market value within six months
  • High street banks aren’t looking to support existing customers on refinance cases
  • The cost of finance is high compared to historically lower rates

These factors mean that the potential borrowers must often spend a considerable amount of time exploring the marketplace before exhausting their options or not knowing where else to turn to. However, there is a significant silver lining to the finance market clouds. There are a number of specialist lenders that have entered the market place, dedicated to the support of professional landlords. Banks like Shawbrook provide the range of products that assist with the above problems, delivering them via the professional broker channel which provides huge benefit to the client in its own right.

Whilst specialist lenders’ rates can be higher than the traditional high street banks, they often offer more flexibility with regard to their lending criteria, while providing enhanced service levels. With access to new lenders via their broker, clients are able to refinance current debt and benefit from further opportunities to build and grow their portfolio. Building strong lender-broker-client relationships is of particular value to us at Shawbrook and therefore we offer an existing customer discount of 0.25% on the margin or arrangement fee on loans up to £750,000.

Typically the commercial mortgage market is accessed via mortgage brokers and professional advice when purchasing and refinancing properties can save a client a considerable amount of time. With expert knowledge of the lenders which may be appropriate for their requirements, brokers make the process quick and simple. Despite the challenges that landlords have faced over the last few years, I believe with the right support and advice, there are specialist lenders present in the market place which will support their requirements. Over the next few years I believe that the availability of finance options for professional landlords will continue to grow.

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