Property Finance

Help To Buy & Property Finance Options

Sources of Finance

  • Mortgages & Deposits – Advice on what your Bank will take into account

  • Shared Equity – Shared ownership of the property, what does the other owner have right to?

  • Help to Buy – Funding to help you buy, but what are the draw backs?

  • Bridging Finance Open & Closed – Short term finance, so why is this not the norm?

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Finding the finance to buy property today has become a huge undertaking and one which can be complex. Sure your financial adviser can show you the figures and your lawyer will highlight the terms of the contracts. Yet do you really know what you are agreeing to until you are about to buy? Below we have tried to highlight the various considerations you may consider prior to any agreement. Facts to help you ask the right questions of your would be lender/bank.

Mortgages & Deposits

600-banner-template-7Covering the vast majority of transactions. Just remember the deposit, your deposit should come from you! Your lenders will get very anxious if they think that you have obtained the deposit from family or friends. Your bank will certainly balk if you take out a loan or use your credit card to pay any deposit. Your lawyers will be asked to advise the them if you provide deposits from any alternative source that is not your savings. If you read the terms of your loan your offer of loan is subject to  many conditions. 

To this end, we cannot stress enough that you examine your loan terms to ensure that you abide by the terms of your loan. Remember the lenders can refuse to lend or may have to reconsider even lending if you breach any of the terms. This is not a great position to be in on the day you are meant to get the property!

Shared Equity

Shared equity most used to explain that you own the property with another. This could be the case where you you are offered 75% share and a housing association owns the 25% share. Yet is has been the case that the share could be owned by another party such as the builder, or a financier. Obviously you really must look into the rules. Consider the fact that they have the right to do inspections, stop you from letting other stay with you, pets, alteration, the things we see are endless and vary. Yet the most problematic issues are cause by;

1. Your lender may not provide finance if they are not happy with the other party to the deal. You may be asked to cover the costs when you buy for ALL the expenses of the other party and for that matter each time to remortgage or even try to sell.

2. What happens if the other party goes  bankrupt? Who do you now share your property with? This may not be such an issue if its a housing association or local authority but it is worth considering.

HBC-Stamp-FreephoneAgain we are probably guilty of painting a rather bleak picture but we think that its best that you have all the information prior to any decision. 

 

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Help to Buy

Help to buy tend to be the most reported, but for the legal and financial systems the most complex. Unfortunately due to the very political nature of the governments ‘Help to Buy’ schemes. they can time to set up with multiple lawyers representing the interests of … well you, the seller, the bank and the government. You may also have the institution administering the loan wanting its say. All amount to a huge level of documents to be approved by all and signed by ALL concerned. Yip you’ve guessed it …. who pays? Well anyone who says to you that there is no extra costs is painting a poor picture. Yet due to the political nature of ‘Help to Buy’ your lender may have less concerns that they may have for shared equity. In regards to costs they tend to vary dependent on who administers the governments loan terms and who they use as the lawyer.

 

To help you, we only use lawyers who have an extensive working knowledge of the processes, so providing you with accurate time scales and information is guaranteed and on hand.

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Bridging Finance

Bridging Finance is effectively a loan given to you and paid back on the promise of a future event. For instance, if you wish to buy today but you need funds from the sale of your house, yet it is not due to be sold for another month, you can apply for finance to bridge the gap between the dates, i.e. ‘bridging finance’. Now the difference between ‘open and closed bridging is as follows. 

Closed Bridging

This is where you have a concluded contract and therefore you have a fixed date and sum due to you in the future. This type of bridging tends to be more accessible and cheaper than open bridging. Closed bridging is the term used where, most commonly you have a concluded contract to sell your house in a future date. It is therefore easy for your lender to see how you are paying back the short term bridging loan. Your lawyers shall have to undertake several obligations on your behalf to the lender and complete the applications showing the viability of the funding. 

Open Bridging

Open bridging is not so readily available. Only a few main stream banks will undertake this kind of finance. Open bridging tends to be where you have not sold your property yet but are trying to. It is commonly known that is is very expensive and can take considerable time for you, your lender and your lawyer to complete all the documents. So please ensure that you leave plenty of time to set this up. You can imagine that taking a loan out based on paying it back when you eventually sell has its stresses, but the facility is there and people can apply if needed. Each lender has very differing criteria for open bridging and not every lender will readily help.

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