A simple interest-only enquiry turned out to be a £2.7m commercial finance case.
You never know where a client meeting will lead you, even those that don’t seem to hold the most potential. So, it’s crucial you treat every client like the most important of the day – they might just turn out to be.
Just before Christmas I got a referral from a broker to help a client who had come to the end of his interest-only mortgage term, but didn’t have the funds to repay the debt. He needed an extension of the term or a remortgage.
So far, so good.
This is a fairly standard enquiry and it wasn’t complicated. I was a little unsure why the broker had asked me to help his client to be honest. The sum involved was low, in London terms, it didn’t seem like something he couldn’t have handled himself, and it was a bit of a trek out of town. But the broker is a great partner of ours and I wanted to help.
Keeping it real
Off I went to an estate of battered old commercial warehouses and scrapyards somewhere south of Croydon to meet the guy in his 60s, who had a business restoring classic cars. It was 15 miles and a world away from the City of London and the multi-million-pound deals that usually cross our path, but every bit of business is valued.
The client has a house worth £850,000, and owed £250,000 on an interest-only basis, with the term coming to an end. Since he didn’t have the cash to repay the debt I explained his options.
As we got chatting it turned out he also owned some of the warehouses around us. In fact, he had an unencumbered portfolio of commercial assets worth £1.5m, plus an investment property portfolio worth another £3m. His assets and income were more than enough to satisfy his interest-only loan.
He also told me he wanted to buy the warehouse we were standing in.
Although his broker knew about these assets, and the clients plans for the warehouse, like many brokers in the industry he didn’t understand commercial lending or the business opportunity it provided, and so had no idea what to do about it. Yet we have managed to arrange borrowing of £2.7m for the client, raising a commercial loan against his other assets to enable him to buy the warehouse.
Don’t be stuck
The situation was a surprising one and it made two things very clear to me.
Brokers should always look for support to help a client if they can’t do it themselves or simply don’t have time to do it themselves. A lot get stuck when faced with something they don’t understand or have experience in, be it commercial finance, complex income streams, or development queries. You can’t be experts on every aspect of the market.
But don’t turn the business away, because a packager can help your client find a funding solution, and pay you a referral fee for the business. You keep your client happy and loyal to you, boost your income, plus someone else does the work and uses their skills and contacts to your benefit.
Even more importantly, don’t dismiss any case because it doesn’t seem to have potential. Nothing should be too small fry for any broker, because you really never know where a case will lead you.
SimplyBiz Mortgages has today; following an in-depth tender, launched its new ancillary panel of specialist distributors, including TFC Homeloans.
Members will have access to up to firms that can offer a combination of solutions for secured and unsecured loans, bridging, commercial and development finance, complex BTL, including Limited Companies and specialist residential mortgages.
TFC Homeloans is delighted to be part of this panel. A host of launch opportunities, including Masterclasses, webinars, bespoke specialist magazines and literature will take place over the coming months with the aim of providing greater knowledge and understanding of the specialist market for its members.
Commenting on the launch Martin Reynolds, CEO of SimplyBiz Mortgages “We have run successful separate ancillary panels for many years but felt that post MCD it was opportune to review how this was structured. Following a three month due diligence process, we believe that we have created a new panel that will offer members both choice and access to a wealth of knowledge that will enable members to help more of their clients. We also felt that by offering dedicated regional support with local knowledge on the panel would increase the interaction. Mortgages are becoming more complex and using all the resources available to you as an adviser is key as we move forward.”
Nigel Payne, managing director of TFC Homeloans, said, “Partnering with one of the UK’s leading Mortgage Clubs is a fantastic way to kick off 2017. SimplyBiz Mortgages is innovative, robust and totally committed to brokers, just like TFC, and we can’t wait to start working together.”
Make these simple checks to smooth the way for your client’s second charge mortgage, says Ian Scarrott, head of sales at TFC Homeloans.
The quicker a deal goes through the better for your client, and it goes without saying that it’s better for your business.
Getting your cases to completion quickly and avoiding delays means you get paid and can move on to the next case.
But what can you do to help smooth the second charge mortgage process and get the deal through without unnecessary hold-ups?
At TFC Homeloans we see the same issues come up time and again on second charge mortgages, where delays are caused by something that could have been prevented. A few simple checks at the outset can eliminate many of the common delays in the processing of second charge loans and get the deal through quickly.
1. Income doesn't match up
Check the client’s income matches up with what’s been stated on the initial DIP form. In about a third of our seconds deals that don’t go through, the reason is because the income is lower than was initially declared. The borrower has often stated their income incorrectly, rounding up figures or simply guessing at bonus levels and commissions. If the broker confirms the stated income against bank statements or payslips, it could save a delay or the case falling through altogether. The same goes for time in employment or residency. Get the documentation upfront and check it matches what the client has said.
2. Who is the first charge lender?
For most second charges, the first charge lender needs to offer ‘consent’. Check the existing first charge lender, because some are harder to get it from than others. This isn’t the norm, but it’s worth a quick call to a specialist distributor to check if you’re unsure. At TFC we know which lenders will give permission for a second charge mortgage and which will be a bit more difficult, although we will be able to suggest alternative approaches.
3. Is there a flexible facility?
Check to see if the borrower has a flexible facility with their first charge lender account. This may have been previously arranged, never used or sometimes can’t be used, but it still affects a second charge as they may have an obligation to lend registered on the title deeds. The lender will usually need to take the extra charge (flexible facility) off the mortgage before the second can be arranged, or it will need to be taken into account in the LTV calculation. You might ask, why not just use the flexible facility instead of a second? Actually, in some cases the lender won’t now allow it, but the charge technically remains.
4. Choose a distributor that will do the admin
Not all distributors are FCA regulated with full home finance permissions, and some choose to have no contact with your client at all. They will channel the post-app administration and paperwork back through the broker. Others, including TFC, will happily work directly with the client to chase direct debits and other documents. This speeds up the process massively because if we need something we can be in touch with the client in minutes without bothering you. It also saves you, and your admin support, time and allows you to get on with other cases.
5. Harness technology to speed up source
Choose a packager with a sourcing system that compares first and second charge mortgages side by side and gives you an audit trail. You can find out which deals will suit your client’s circumstances quickly and easily, automatically recording the options you have considered. You can then proceed knowing you have the most appropriate deal for the client.