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  • Mortgages & Finance

    Refurb Mortgages

    Hi Jerry,
    yes on SP iirc?
    Without seeing the property or valuers report it's hard for me to say really. If the property was truly inhabitable then it seems you may have a case but lenders have to go on valuers opinion at the end of the day.
    I don't however believe you have a case with regards to TMW saying this product is aimed at a light refurb as that has always been very explicitly stated in their T&Cs which are available to brokers. When the product was first launched I was sent a pretty comprehensive outline of how the product was to be used, submitted etc as were all other brokers I assume. 
    I am always thorough in discussing this product with clients before using it as the property/refurb/numbers do have to all come together.
    We have had a few issues with valuers not valuing on the basis of this product but other than some extra phone calls and a few delays it's not affected things and I find it a very successful product on the whole.
    I've got one with an issue right now but that's more as a result of the valuers comments rather than the product itself.
    This type of product didn't exist previously so I personally am glad to be able to offer it as an alternative to bridge/remo and the issues we've had don't outweigh the value of the product.
    I am aware of some other investors on a private forum who have had similar issues to you but I also said that I would not have used this product on certainly one of the deals they described. It is not a BMV product it's a light refurb product.
    KR, Lisa

    Jerry Jones said:
    The question of being in lettable condition works in exactly the opposite way to that you you describe, if you are talking about The Mortgage Works. I am nearing the end of a formal complaint process with them, and shall shortly be taking the case to the Ombudsman. They say that being, in their opinion, already in a lettable condition before refurbishment disqualifies a property from a Light Refurbishment mortgage. My arguments with them are, firstly, that this was a concealed criterion when I applied and, secondly, that the property was most definitely NOT of a lettable (or, indeed habitable, standard on purchase. Add to that their claim that the purchase price was fair and that a £15k refurbishment has added no value to the property and you can see why I am far from gruntled. Lisa: We have discussed this elsewhere - have you come across anyone else falling foul of this yet?
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    Lisa All comments are for education and information purposes only and do not construe as advice or a financial promotion. No liability is accepted for comments made. If you wish to receive information in an advisory capacity then please contact me about becoming a client. www.keys-mortgages.com

    Hi Fernando
    1. Depends on the initial product. If it's the light refurb then max 70% on end value. If you purchased on a standard buy to let then the further advance with TMW could be up to 80% LTV subject to val and rental coverage. Other lenders max 60/65/70/75% usually.
    2. Purchase price 70k
    LTV 70% = £49k
    Deposit = £21k
    End value = £100k
    70% = £70k
    Retention drawdown £21k after works subject to rental coverage.
    Let's assume an alternative example too:-
    Purchase price = £100k
    Deposit = £30k
    End value = £150k
    70% LTV = £105k
    So while there's a potential £35k in this you could only drawdown £25k subject to rental coverage.
    Lisa
    Fernando Duzaza said:
    Hi Lisa,
    Thanks for your reply to the above.
    2 Questions: 1]on the further advance is the maximum only 70% of the end value and not 75%?
    2] How does the Mortgage Works rentention work in reality: so Current value 75k, but purchase price is 70k, other comps worth 100k, how does it work, can you give me an example please like ltv on the pp of 70k then LTV on the 100k?
    Thanks
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    Lisa All comments are for education and information purposes only and do not construe as advice or a financial promotion. No liability is accepted for comments made. If you wish to receive information in an advisory capacity then please contact me about becoming a client. www.keys-mortgages.com

    Hey Lisa
    That makes sense: so in reality if the property requires work as above you would only get back the deposit and not the refurb fees on the 70% LTV on the end value. And even as above you got a bigger discount the drawdown is only limited to £25k!
    So the only way you could do this is try and buy a property already in a lettable conditon say worth £85k on a standard BTL with no ERC, & you negotiated the price to 70k. Comps worth 100k.
    70% of 70k = 49k Deposit = 21k
    Do some work
    Refinance to 75% 6 months later at 75% of 100k = 75k
    75k - 49 - 21 = 5k cash out which could be part of your refurb cost/legals.
    Your thoughts are as always welcomed.
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    Lisa: Have you ever used the LR product on a property that was grotty but arguably in lettable condition pre-refurb, or only on props that were definitely not lettable? Neither I nor my broker ever saw anything to say that a lettable prop would not qualify for it, and their own sales people confirmed that lettability was not an issue (their records of that call are conveniently missing but I have my contemporaneous notes).
    I'll cheerfully mail you an illustrated report on the before and after refurb condition if you like.
    I'll start a new thread to ask for people's experiences
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    Hi Fernando,
    Assuming you buy at 70k and put in 30% deposit then your loan is £49k.
    You then further advance or remortgage based on 100k to 75% which is a loan of 75k so you pull out £26k. If you’re effectively saying you get your 21k deposit back then 5k on top yes you’re right.
    But a few things to point out; if the property is lettable day one how are you going to justify an uplift in value based on works done – most lenders would not accept this as the valuer will have commented on the property initially.
    If it needs work it needs work and go the refurb route, if it doesn’t need work then don’t do work for the sake of it to try to create an uplift in value – that won’t work.
    If you’re going for a straight buy to let you could borrow up to 80% initially (as long as you’re not a first time landlord) and potentially up to 80% on the refinance/further advance. Obviously depends upon the product and rates you want.
    The refurb product however is limited to 70% of initial purchase price and 70% of end value.
    You can’t combine the two initially. You can however take a further advance after 6 months if you wished to try to eke out any more equity and could then go to 80% BUT I wouldn’t recommend this as I don’t think it would be successful.
    Long and short – if you get a deal speak to a broker! Buy to let finance is no longer cookie cutter where anything will fit; you need to asses each deal in its own right and discuss your plans with it now and in the future to determine the best mortgage product available.
    Lisa
    https://www.keys-mortgages.com

    The above comments are for discussion purposes only and do not constitute advice - except the bit about speaking to a broker!


    Fernando Duzaza said:
    Hey LisaThat makes sense: so in reality if the property requires work as above you would only get back the deposit and not the refurb fees on the 70% LTV on the end value. And even as above you got a bigger discount the drawdown is only limited to £25k!So the only way you could do this is try and buy a property already in a lettable conditon say worth £85k on a standard BTL with no ERC, & you negotiated the price to 70k. Comps worth 100k.70% of 70k = 49k Deposit = 21kDo some workRefinance to 75% 6 months later at 75% of 100k = 75k75k - 49 - 21 = 5k cash out which could be part of your refurb cost/legals.Your thoughts are as always welcomed.
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    Lisa All comments are for education and information purposes only and do not construe as advice or a financial promotion. No liability is accepted for comments made. If you wish to receive information in an advisory capacity then please contact me about becoming a client. www.keys-mortgages.com

    Hi Jerry,
    Hard for me to say because I haven’t seen any of the properties I have to go on what my clients tell me but I do warn them that if it’s not suitably bad then it will likely be refused. The typical scenario is new kitchen, new bathroom, redecorating and new flooring throughout. Nothing major or structural.
    There is now a new refurbishment plus product which is aimed at a higher level of works and will release up to 40k but again the level of works must be escalated accordingly to justify the discount, the cost of works, the uplift in value and the release of the retention.
    I can’t stress enough this is NOT aimed at getting discounts out of property it is aimed at releasing the costs of works.
    I’m afraid I disagree with your comments however as the information regarding the property condition and what constitutes the light refurb has always been on TMWs intermediary site and in the information they emailed out to brokers upon its launch.
    Regards, Lisa
    https://www.keys-mortgages.com
    The above comments are for discussion purposes only and do not constitute advice.


    Jerry Jones said:
    Lisa: Have you ever used the LR product on a property that was grotty but arguably in lettable condition pre-refurb, or only on props that were definitely not lettable? Neither I nor my broker ever saw anything to say that a lettable prop would not qualify for it, and their own sales people confirmed that lettability was not an issue (their records of that call are conveniently missing but I have my contemporaneous notes).I'll cheerfully mail you an illustrated report on the before and after refurb condition if you like.I'll start a new thread to ask for people's experiences
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    Lisa All comments are for education and information purposes only and do not construe as advice or a financial promotion. No liability is accepted for comments made. If you wish to receive information in an advisory capacity then please contact me about becoming a client. www.keys-mortgages.com

    I took "would benefit from improvements" to mean that it would benefit from, rather than required the improvements before letting. Did my broker and I miss anything in the criteria last December that says scruffy but lettable (to rotten tenants, I'd imagine) props don't qualify for the LR product? I note that the wording is now "(Property requiring minor improvements prior to letting)" on the 6/10/10 product guide, although TMW claim in their letter to me that there has been no change of wording.
    This particular property had a sheet of corrugated iron nailed to the living room wall as a hood over the (torn open) fireplace, foul decor and carpets and a pestilential bathroom. I'd have wanted a good wash after taking a bath in there! The kitchen was marginal but filthy and I like my props to be of an exceptionally high standard for the areas where they are. I have therefore redecorated throughout, installed new carpet and ceramic tiles in the kitchen and bathrooms, new kitchen and bathroom, made the wasteland of a garden into a nice low maintenance one, replace aluminium windows with uPVC - exactly what was suggested as a typical light refurbishment, in fact.
    So even if the criterion is valid the prop was not lettable, as confirmed in a letter by my letting agent. We shall see what the Ombudsman says.
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    I sympathise Jerry I do and I see what you’re saying about the property. Did you attend the valuation and discuss the property with the valuer? I recommend this in every case and it does help matters. In a recent example the agent forgot to tell the investor and we have had some problems as the valuer went alone and they simply don’t 'get' this product.
    FWIW the criteria upon launch of this product stated the exact same thing; I have checked.
    Lisa


    Jerry Jones said:
    I took "would benefit from improvements" to mean that it would benefit from, rather than required the improvements before letting. Did my broker and I miss anything in the criteria last December that says scruffy but lettable (to rotten tenants, I'd imagine) props don't qualify for the LR product? I note that the wording is now "(Property requiring minor improvements prior to letting)" on the 6/10/10 product guide, although TMW claim in their letter to me that there has been no change of wording.This particular property had a sheet of corrugated iron nailed to the living room wall as a hood over the (torn open) fireplace, foul decor and carpets and a pestilential bathroom. I'd have wanted a good wash after taking a bath in there! The kitchen was marginal but filthy and I like my props to be of an exceptionally high standard for the areas where they are. I have therefore redecorated throughout, installed new carpet and ceramic tiles in the kitchen and bathrooms, new kitchen and bathroom, made the wasteland of a garden into a nice low maintenance one, replace aluminium windows with uPVC - exactly what was suggested as a typical light refurbishment, in fact.So even if the criterion is valid the prop was not lettable, as confirmed in a letter by my letting agent. We shall see what the Ombudsman says.
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    Lisa All comments are for education and information purposes only and do not construe as advice or a financial promotion. No liability is accepted for comments made. If you wish to receive information in an advisory capacity then please contact me about becoming a client. www.keys-mortgages.com

    It was for precisely that reason that I arranged Meet The Surveyor to attend, but the valuer got the keys from the estate agent and went in a day early than agreed. There seemed to be huge confusion at Valunation as to precisely what basis they had been asked to value on when I followed up with them afterwards and I suspect that your comment about valuers "not getting" it is very true, and was even more so back in December. As far as I am concerned this product was tailor-made for exactly this kind of prop.
    I have checked criteria again and you are right about them not having changed - it was "will benefit" in the Lending Criteria section of the product guide and "requires" in the heading above the rates table section. Interestingly, the website still says "will benefit" even today at https://www.themortgageworks.co.uk/conten...-refurb... while the format of the product guide has changed and it no longer appears to have a lending criteria page.
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    Ombudsman now ruled. They won, I lost so I'm moving on, probably with a further advance from TMW! Hope their valuer is sensible.
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