Challenger bank introduces buy-to-let products
By AdminSection: Features
Aldermore Bank has developed a buy-to-let product range across its Mortgage Division, capturing both residential and commercial mortgages, which are specifically aimed at meeting the needs of landlords, breaking the mould of the current lending landscape.
Dubbed a ‘challenger bank’ to the mainstream lenders, Aldermore has stepped in where the mainstream banks have restricted its lending, particularly responding to the resurgence of the rental market. With Aldermore now able to provide buy-to-let mortgages for practically all types of borrowers and property types, Aldermore could now be regarded as the go-to lender for the private rental sector.
Whilst the buy-to-let sector still only equates to around 11 per cent of the overall UK mortgage market, the upward trend reflects the difficulty of obtaining first time buyer mortgages and the rising cost of home ownership.
At Aldermore’s latest annual commercial mortgage broker conference, Managing Director of Aldermore’s residential mortgage business, Charles Haresnape, and its Head of Business Development, Rob Barnard, explained that because of these market conditions, now is the perfect opportunity to fulfil the demand for those opting to rent, as desire and expectation of homeownership begins to dwindle.
The buy-to-let products now on offer from Aldermore are aimed at credit-worthy borrowers and whilst the suitability for the products are assessed on a rules-based system, with a parameter set around what Aldermore will or will not lend on, all loans are individually underwritten and no credit score is relied upon.
At the ‘vanilla’ end of buy-to-let, Aldermore has the following requirements:
Loan size from £25,000 to £1 million;
Minimum security value of £75,000;
Up to 80 per cent loan-to-value;
Maximum of five properties;
Established and new landlords;
Homeowners only;
No minimum income requirements for experienced landlords and min income £25,000 for first time landlords;
Minor credit blips accepted;
85-years old at the end of the term.
The lender is also offering free legals, no fees and unrivalled relationship support with an attractive procuration fee.
Applications are in full online and borrowers have access to underwriting teams.
Larger residential investment propositions and those for flats and HMO’s may also be submitted using Aldermore’s Acumen case submission and tracking system.
Rob Lankey, Aldermore’s Managing Director of Commercial Mortgages, who led the conference, said: “Aldermore has worked very hard over the last 12 months to provide a range of buy-to-let products for pretty much the whole private rental sector market. These products combined with our innovative systems and extensive experience really do set us apart and make us now the ‘go-to provider’ of mortgages to the private rental sector.”
The conference also provided an opportunity for Aldermore’s mortgage credit risk team to advise brokers on how to gain approval for the loan as quickly as possible.
Credit Manager Luke Watson suggested that if a case is on his desk for longer than 20 minutes, it is much more likely to be rejected and a good deal can even fall down if it cannot get a quick, clean sanction: the point being, first impressions mean everything.
The following points, Luke explained, are important to consider:
Adverse information: If something is found out that was not disclosed at the outset, an application may get rejected as loans are offered based on the integrity of the client and supporting information. Brokers must double check everything and adverse credit must be explained in full; Aldermore may even be able to take a view in some circumstances if brokers are up front about the issues.
Tax-efficient applicants: When obtaining a loan for landlords and developers, these applicant types can often show a mixed picture in their financial accounts due to the adoption of tax efficient strategies. It’s important to provide evidence, therefore, of the applicant’s financial situation and, if a developer, their development history so a full picture is visible. Even if the developments are not making any money now, they may do so in the future and so are able to demonstrate the financial viability of the client.
Capital-raising: The purpose of the loan must be fully disclosed and acceptable but, as long as the LTV is right, Aldermore will normally lend, whether the loan is used for business investment or a holiday home in France. Nine out of ten capital raises are for future property purchases leveraging off equity in the charged property. An underlying principle when looking at cash-raising scenarios is that the applicant must retain a meaningful financial stake in the property.
Financials: Aldermore need the full accounts of the applicant in order to process the loan. Abbreviated accounts on Companies House are not enough if the full accounts exist. It may raise suspicion if clients are reluctant to disclose the full documentation.
Brief and relevant: The credit department don’t want to receive years of bank statements which can delay approval. A covering page with a synopsis of the case really helps with evidential material supporting the points in the covering note. Aldermore does not want irrelevant information but may require more specific details in some circumstances.
Matt Smith, Credit Risk Director of Mortgages for Aldermore, says: “We pride ourselves on our expertise and ability to consider and shape a deal for our brokers and their customers. Improved first time approvals and reduced response times will surely follow if our brokers prepare and present a case to us following these tips.”