What is a property investor hunting licence?
A property investor hunting licence is a flexible, pre-agreed facility, which is secured against your existing property portfolio and creates a pre-agreed ‘facility’ for you to lend against. The funds can be drawn down and repaid as you see fit and are earmarked for you to use to ‘bag a property bargain’.
As the lender is not taking security over the new property, it allows you to buy properties that may otherwise be difficult to borrow against.
Historically, clients have approached us looking to buy a property quickly, under auction conditions. Generally, they use a bridge loan to complete the transaction on time, paying all the fees to do so before refinancing to cheaper debt.
This process is then replicated for each purchase and the client gradually moves forward.
These facilities act as an alternative to frequently taking out new bridging loans, instead acting as secure funding that can facilitate fast completions.
Below are the main criteria points to consider when taking out a property investor hunting licence.
|1||Up to 70% Loan to Value.|
|2||Properties in a poor state of repair can be considered.|
|3||Loans from £250,000 – £1,000,000.|
|4||Pre-agree a facility for up to 3 years.|
|5||Any security considered.|
|6||Interest can be rolled into the loan.|
|7||Loans with no early repayment charges available.|
|8||We will consider any exit route.|
|9||Adverse credit considered.|
|10||Loans available throughout the UK.|
How much can I borrow?
Our funders can secure against your portfolio up to 70% of the open market value on a first charge basis, or 60% on a second charge basis. We currently have lenders who are looking to pre-agree facilities up to £1,000,000, although we may be able to increase this with strong security.
Is it more expensive than a bridging loan?
No, as a matter of fact, as you only pay for the money when it is drawn down and don’t have to keep paying arrangement fees, it often works out cheaper than traditional bridging loans.
How quickly can I complete on a purchase?
As your facility is already agreed and ready to draw down, it is often possible to complete on a purchase in under a week. It is, of course, crucial that the full legal process and other checks are completed to protect yourself, but this will be purely for your own benefit, not the lenders.
Does the lender insist on a survey report for every property I buy?
No, as the security for this sort of product is either your existing portfolio, or a single property with sufficient equity, there is generally no need to complete a valuation report on the new property. Of course, buying a property without may be risky on your part.
The savings can continue as you will only ever be charged standing bridging loan rates, regardless of the condition of the property you purchase and the works you plan on completing.
With standard property refurbishment loans, the cost of borrowing can often increase significantly, something that property hunting licences can protect you against.
Why go for a property investor hunting licence?
A property hunting licence allows you to purchase properties under value, extend and refurbish, or even buy currently unmortgageable properties. This gives you an excellent opportunity to add value to your portfolio, meaning you may well be able to borrow what you originally paid for the property.
Many investors are increasingly using this method to build their portfolios quickly, meaning they no longer have to save up a new deposit every time they want to buy a new property.
Are there any drawbacks to these facilities?
The key drawback centres around the costs of holding an open facility and not using the funds. Although they can save a lot of money when the funds are turned over regularly, they will be more expensive than other types of funding if they remain static.
If funds are to be drawn down and held for an extended period, then you may well be able to borrow funds more economically using a standard bridging loan. If funds are often left unused, then you will be paying a non-utilisation fee for them, which you would not have with other types of borrowing. For longer term projects, a bridge to let mortgage may be a cheaper option.