1. Is it worth using a broker to understand what kind of funding you actually need?
It might sound obvious, but it is always worth discussing your requirements with a mortgage broker who is familiar with the type pf property you are acquiring and the nature of financing you require. This could save you money in the long term and ensure that you get the best deal that is the most appropriate for your transaction. Here are some possible questions to consider:
- Is the property straightforward? Will the ownership structure be simple?
- What will the property be used for?
- Do you need funding quickly? Will you need bridging financing?
- Are you doing development works? Will you need specific development financing?
- Will you need a more bespoke solution from a smaller, less mainstream lender?
2. What security does the lender require?
Depending on the nature of the lender they may require more than simply a legal charge over the property being acquired. Here are some of the additional security documents that might be required:
- Personal guarantees from directors or shareholders. Most lenders will require that a guarantor be given independent legal advice before signing a guarantee. In which case there will be additional legal fees that will need to be considered. Find out early on what the lender’s requirements are in this regard so you are not caught out.
- Debenture over all assets of the borrower where they are a company.
- Corporate Guarantee from a parent company.
- Charge over a deposit. The lender might require that the borrower deposit a sum with them to be used to service the interest payable or cover any rental shortfall if the rental income is not sufficient.
- Assignment of Rental Income where property will be let on completion.
3. Are there any hidden costs you have not considered
It is not just the purchase price and stamp duty land tax that needs to be paid. You will need to make sure you will have the funds needed to cover the deposit, legal costs, lender’s legal fees, any additional fees payable to the lender, indemnity insurance premiums that the lender might require, legal fees for a guarantor, any cash deposit required by the lender (see above), valuation fees required by the lender and the lender’s arrangement fee. All of these can add up so be sure that the loan will be sufficient to cover everything along with your own funds.
4. Is the lender instructing their own solicitor to act for them?
If the lender is instructing their own solicitor (as opposed to your solicitor acting for both the lender and you) the lender’s solicitor will require an undertaking for their fees so establish what these are early on. If the costs undertaking cannot be given quickly this can hold up matters significantly. Also check whether you will get these funds back if the matter aborts. Ordinarily these would not be returned if the transaction does not go ahead.
5. Does the lender have any requirements that are unusual or more complex?
If a broker is involved, they should enquire about the lender’s requirements as early as possible so that your solicitor can raise further enquiries of the seller’s solicitor if needs be. If there are any particular matters that you need to deal with then make sure they are on top of these to avoid delays.
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Thrings commercial property team helps businesses thrive by providing practical business advice from commercial specialists.
