What is it that specialist lenders do differently?

Put simply, specialist lending is arranged using a ‘specialist lender’ as opposed to a high street bank or building society. The reason your client might opt for this solution comes down to their financial circumstance at the time of application and their specific mortgage requirements.

Specialist lenders often adopt a more flexible approach to their lending. They tend to assess on a case-by-case basis, and this helps to eliminate the dreaded ‘the computer says no’ response that your client might otherwise receive from a high street lender.

Specialist lenders will carry out credit checks rather than credit scoring. This can be a redeeming feature for any would-be mortgagor with blemishes on their credit file. Adverse credit will show up on a credit report for six years before it ‘drops off.’ Often the underwriter will ask for an explanation as to how the blemishes came about in the first instance. This allows the borrower the opportunity to provide some background to their current credit status – sometimes it genuinely isn’t their fault that the blemishes exist.

Reasons why a specialist lender may be more suitable:

  1. Property is non-standard e.g., has deck access, timber framed construction, or concrete panels
  2. Adverse credit e.g., CCJs or recent defaults (high values)
  3. Age at the time of completion e.g., 75 – 85 (into retirement)
  4. Number of applicants e.g., three or more
  5. Income type e.g., includes certain benefits
  6. Location of the property e.g., Outer Hebrides (Scotland)
  7. Type of employment contract e.g., agency workers

This list is by no means exhaustive, but it shows the kind of range that can apply. There are many more reasons why a specialist lender can be the best solution for the client.

Higher rates and fees

Specialist lenders tend to offer higher rates and will likely charge higher fees – this risk-based mortgage pricing is used to protect the lender against default. The higher interest rate charged to borrowers with lower credit quality makes up for the increased risk of lending them money. In theory, this practice benefits borrowers with a better credit history because it allows them to obtain mortgages at a lower price – many specialist lenders offer a tiered range of products to reflect this.

Specialist lending solutions

Bridging loans

Bridging loans are a great short-term solution if there are time constraints involved. Auction purchases where the sale must complete within a short period, are a great example. The ‘bridge’ is designed to bridge the gap and make the purchase possible in the short term. The ‘bridge’ is then paid off with a standard mortgage, thereafter.

Bridging loans are more commonly used to purchase a BTL property that is not in a lettable condition.

Commercial and semi-commercial mortgages

Commercial mortgages are suitable for many types of properties where business interests exist. The mortgage is secured by a first legal charge on your business premises. This can be anything from a small timber lodge to a shopping centre. The specialist lender will also offer commercial investment mortgages for a property that will be let out.

Complex buy-to-let applications, HMOs & MUFBs

Portfolio landlords with more than 4-15 properties either held in their name or within their limited companies, will often need to apply to a specialist lender.  Whilst some high street banks place restrictions on the number of properties your client can have in total, others won’t cater to portfolio landlords at all.

Mortgages for holiday lets

Holiday lets present too great a risk for most high street lenders. These lenders prefer to ‘stress test’ using annual returns generated via ASTs (assured short-term tenancy agreements). Income associated with a Holiday Let can be more erratic and unstable – that said, there is often the potential to generate more income annually with good seasonal occupancy levels and higher accommodation fees.

If you feel that your client’s circumstance is unique, specialist lending is the likely solution! contact Evolve Commercial Finance and one of our specialist advisers will be happy to help.

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    It is our intention to provide you with a high level of customer service at all times. If there is an occasion when we do not meet these standards and you wish to register a complaint, please write to: Compliance Department; Connect IFA Ltd, 39 Station Lane, Hornchurch, RM12 6JL or call: 01708 676110. If you cannot settle your complaint with us, you may be entitled to refer it to the Financial Ombudsman Service

    www.financial-ombudsman.org.uk

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    Warrington, WA3 6AE

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    Evolve Commercial Finance Ltd t/a Evolve Commercial Finance is an appointed representative of Connect IFA Ltd 441505 which is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register under reference number 994265

    The FCA does not regulate some forms of Business Buy to Let Mortgages and Commercial Mortgages to Limited Companies. The information contained within this website is subject to the UK regulatory regime and is therefore targeted at consumers based in the UK.

    Your property may be repossessed if you do not keep up repayments on your mortgage.

    There will be a fee for mortgage advice, the precise amount will depend upon your circumstances. Your Consultant will confirm the amount before you choose to proceed but we estimate it to be £199 on application and 0.5% of the loan on receipt of a Mortgage Offer.

    Evolve Commercial Finance Ltd Registered Address: Suite G15, Chadwick House, Birchwood Park, Warrington, WA3 6AE Registered in England and Wales No: 14583731

    We are a credit broker and not a lender. We have access to an extensive range of lenders. Once we have assessed your needs, we will recommend a lender(s) that provides suitable products to meet your personal circumstances and requirements, though you are not obliged to take our advice or recommendation. Whichever lender we introduce you to, we will typically receive commission from them after completion of the transaction. The amount of commission we receive will normally be a fixed percentage of the amount you borrow from the lender. Commission paid to us may vary in amount depending on the lender and product. The lenders we work with pay commission at different rates. However, the amount of commission that we receive from a lender does not have an effect on the amount that you pay to that lender under your credit agreement.

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