Investors trying to expand their portfolios can avoid delays caused by residential buyers taking advantage of the Chancellor's stamp duty extension by using four 'buy-to-let hacks', according to broker Mortgages for Business. In this tips piece, the company reveals more.
The stamp duty holiday first announced in July helped drive up the number of owner-occupier transactions to the extent that the extra business inundated some lenders. Landlords and investors - who are still obliged to pay the 3% levy on purchases and have, therefore, been less affected by the stamp duty incentive - have found their own deals delayed as demand from owner-occupiers has swamped some lenders.
On Wednesday, Rishi Sunak extended the stamp duty holiday through to October - meaning there is unlikely to be an immediate fall in transaction volumes or the time it takes for buy-to-let mortgage deals to complete.
Jeni Browne, director of Mortgages for Business, said: "On the one hand, we’re not going to see another stampede of owner-occupier activity that we did last summer - the delays landlords and investors are experiencing are unlikely to get longer than they already are. On the other hand, as a result of the Chancellor's announcement, the hold-ups aren’t going to be cleared up swiftly now either."
She added: "Lenders, conveyancers, valuers, and local authorities still have a lot of work to get through. There's a big backlog and things are going to continue to be slow. As a landlord, if you want to reduce the time it takes to get a purchase sorted out, you need to take certain steps."
Mortgages for Business is offering landlords and investors four key pieces of advice to help them complete purchases faster:
- Be prepared to rethink location
- Choose a broker offering a portal
- Consider the type of property you are investing in
- Select the right lender
The buy-to-let specialist says if landlords and investors consider these factors, they could get their transactions completed in spite of the prolonged chaos affecting the market - as a slick purchase could take just 53 days to complete.
Look at location
Mortgages for Business says even lenders still capable of doing deals in sensible timeframes are struggling to get mortgages approved where local authorities are dragging their feet. The slowest local authorities are now taking more than 100 days to undertake property searches, a key element of the conveyancing process, as the surge in transactions coincides with pandemic-related staff shortages.
Mortgages for Business highlighted Hackney Borough Council (180 working days), Bedfordshire Council (65 working days), Caerphilly County Borough Council (60), Cambridge City Council (50), and North Warwickshire (50) as the worst performers.
Jeni Browne said: “Landlords and investors who just want to get a purchase done are sick of the stamp duty rush. If you have the option, you should consider the effect that the local authority you are dealing with could have on your purchase. One search we ordered recently took 145 days to complete. If you are considering purchasing a property in Hackney before the turn of the next century, you may want to rethink.”
The importance of portals
Data from Mortgages for Business’s landlord portal shows that it takes less time to process applications if they’re done via portals with average deadlines shortening by 20 days, from 73 working days to 53 - cutting down the time it takes to process a transaction by 27%.
Jeni Browne said: “Portals offer clients a space with clear to-do lists, including which documents are required to move the application forward, and the ability to upload all documents quickly and securely, there and then. While this research is based on our data, I’m sure we’re not the only broker with a good portal.
My advice to landlords and investors looking to take control of their own destiny is to use a specialist buy-to-let broker with portal technology. It is a very simple way to shave a couple of weeks off a buy-to-let property transaction.”
Choose the right property
Mortgages for business says not all property purchases are created equal and that transactions can take 11% longer if the property in question is a flat, rather than a semi-detached house.
Jeni Browne said: “Even if you’re not trying to hit the stamp duty deadline, you may well find that your deal gets caught in the crossfire. Picking a semi-detached house, rather than a flat will help smooth the way.”
Select the right lender
The specialist buy-to-let broker also took the opportunity to warn landlords that more than half the BTL lenders who are actively lending at the moment are capable of doing a deal within the usual industry average. Those purchasing vanilla properties can expect an estimated normal eight week completion time.
Jeni Browne said: “Most lenders are still quoting application-to-offer times of about three weeks which doesn’t sound too long. But the reality is that these timeframes are not being met. To get deals down relatively quickly, you need to avoid lenders that are dragging their feet.
While we’re not lenders in our own right, we can ensure landlords and investors are using the right lender. Go to the wrong one and you could find yourself dealing with a lender that is taking weeks to respond to enquiries."
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