Twenty-two brokers registered for the seminar which saw Roger Morris, Director of Sales at Precise, depict where the buy-to-let market is going, how brokers’ clients can reap the benefits of attaining loans using equity within existing portfolios and how this transfers to its new Bridge-to-Let proposition.

Towergate Insurance was on hand throughout the day to describe its streamlined process, wide range of commercial insurance products, its National Association of Commercial Finance Brokers (NACFB) partnership, and how to ultimately maximise insurance income.

BTL Market Growth

Roger spoke about how internationally, “liquidity is back into the markets, but the world has changed”. He added: “It will be another three to four years until there is some sort of normality with the high street.”

CML data has shown how the mortgage lending market has taken a big hit over the past five years, falling by 36 per cent from lending £363 billion in 2007 to £130 billion in 2012.

Roger outlined how Precise Mortgages estimates that this total will rise to £145 billion this year, with £18-£19 billion of that figure coming straight from the buy-to-let sector: “The only part of the market that is expected to experience substantial growth is BTL.”

BTL has accounted for circa 11 per cent of gross lending, circa £15.5 billion but importantly 50 per cent of this has been remortgage versus 34 per cent in the overall market indicating a more active BTL lending sector and showing the effects of portfolio limits imposed by main lenders.

He added: “The only real positive thing in the market today is the buy-to-let story.”

At the workshop, Roger revealed a BTL matrix he has created, which showcases that there are 60 buy-to-let lenders in the market at the moment.

He was quick to point out to the brokers that it is vital for them to know what these lenders actually do. The BTL matrix highlighted the different tenant types, such as lease extensions, converting a Victorian property into three or four flats, HMOs, student lets, and for one-bed self-contained flats.

There was only a couple of lenders in the matrix which have an appetite to lend in Northern Ireland, while there are only four to five lenders which will consider LTD company deals.

Last week, Precise Mortgages chopped its buy-to-let rates by up to 1.25 per cent, with the average reduction across the range being 0.5 per cent.

Its 80 per cent LTV products now start from 4.49 per cent, while its 75 per cent LTV range starts from 3.89 per cent.

Bridge-to-Let

Two weeks ago, B&C broke the news on how the intermediary-only lender launched a bridge-to-let product with terms of up to 30 years, a product which allows borrowers to switch their bridging loan into a buy-to-let after four months.

Roger, who has built up his own property portfolio using equity, outlined the following case study to emphasise how it works.

Case Study

Customer Scenario:

•    Buying a property for £100,000;

•    Unable to get a Buy-to-Let Mortgage due to the property condition (property requires a bathroom and kitchen).

Property Overview:

•    £10,000 to cover refurbishments for a new kitchen, bathroom;

•    Total  funds required = £110,000
(£100,000 purchase price + £10,000 refurbishment costs);

•    End value in four months would be £150,000.

Funds needed:

•    Max LTV 70 per cent of current value £70,000 on a short term loan/ bridging finance. Need £30,000 deposit and £10,000 to fund refurbishments;

•    Funds can come from investor’s own funds or from using equity in existing property portfolio by cross charging.

The Solution:

•    £100,000 property to purchase needs £10,000 to refurb - add a kitchen and bathroom – with no cash available. End value is £150,000;

•    Deposit and refurbishment funds are sourced from equity in existing property portfolio, which can be a residential or a buy-to-let;

•    In this case study the property value in the existing portfolio is £400,000, with an existing first charge of £50,000, which makes 87.5 per cent of equity, worth £350,000, available;

•    There is a profit of a minimum of £35,000 after four months.

The Exit:

•    At the end of the transaction, remortgage onto the exclusive Precise Mortgages BTL; £70,000 plus interest plus £40,000 to repay second charge and £2,500 cash back;

•    Exiting on BTL with free legals and free valuation;

•    £150,000 (25 per cent equity) and £112,500 loan (first charge);

•    Clients end up owning a BTL that has not used any capital by cross charging. Repaid the second charge, refurbished the property and have a rental income of £650 pm.

Roger concluded: “Precise Mortgages’ aim was to truly educate the broker. Make him/her have a clearer view of the BTL market and its 60 lenders. Show the USPs and angles; why we do first time landlords and no minimum income and also Bridge-to-Let. It’s designed by brokers for brokers.

“We showed them how to grow their business, generate new professional introductions and maximise the income in all areas from this. We showed how to develop letting agents, how to make the initial approach and then structure the way forward.

“How to develop landlords and the ability to truly understand cross charging that will allow you to grow a portfolio without using much-needed cash.

“I spend my time going throughout the UK educating brokers and giving them something extra. No other lender even tries to do what we do. Lenders only talk about what they do; what brokers want lenders to do is talk about what brokers should do.”