BTL investors rush to complete purchases by mid-February
A London estate agent and former RICS chairman has observed a growing number of buy to let investors keen to buy by mid-February in order to complete before April 1 and avoid higher rates of stamp duty.
Higher rates of stamp duty land tax (SDLT) announced in the Autumn Statement 2015 for additional property purchases will add thousands to the purchase costs of buy to let properties from 1 April.
Jeremy Leaf, former chairman of the Royal Institute of Chartered Surveyors (RICS), claims that he has
already noticed investors keen to buy before the middle of February in order to avoid the 3% hike, which will apply to the entire purchase price of properties valued at more than £40,000.
Property chains increase the risk of delays
Because of the tight timeframe, there is more risk in buying a property in a chain because of the chance of fall-through of the sale, leaving even less time to complete a transaction, Mr Leaf said.
He advised that landlords instruct a competent conveyancing solicitor to help ensure that deals proceed as quickly as possible.
NAEA warns of 50-day wait for mortgage offers
Mr Leaf has also advised that borrowers consider speaking to an independent mortgage broker, rather than going directly to a lender for finance.
He cited last month’s warning from the National Association of Estate agents (NAEA) that borrowers are currently waiting an average of 50 days for a mortgage offer, increasing the risk of transactions falling through.
Commercial Trust’s own data shows that there is an average of 7.7 weeks (54 days) between submission and completion – the point at which the sale is finalised – for deals submitted in the final quarter of 2015.
How you can prepare for the deadline
Be sure of your purchase and understand how the new regime will affect you
If you do not yet have an application in the pipeline, or are only now in the process of finding a property to purchase, be sure that you are happy to go ahead with the deal.
When you and the vendor exchange contracts, the transaction becomes legally binding. You should understand prior to this point that if the purchase does not complete in time, you will be forced to cover the additional SDLT.
Not all buy to let transactions will be subject to the higher stamp duty rates. To see if the regime will affect you under the current proposals, consult our buy to let guide for 2016.
Have all of the needed information ready
Provide your advisor with all the information requested as early as you can in order to increase the speed at which they can process and submit your application.
The comprehensive guide below lists the documents that you may need for your mortgage application.
Allow sufficient time for the whole process
Though the exchange of contracts is the legally binding stage of a mortgage application, there can sometimes be a number of weeks between exchange and completion.
Chain-free transactions will complete more quickly, but these represent only a fraction of all property transactions in the UK. In the case of a chain, you and the seller may be able to agree on a shorter timeframe.
Using a broker can help to avoid delays
…borrowers can’t afford to hang around, Mr Leaf observed.
…A mortgage broker will help them identify the lenders who can move quickly and get an offer out in time.
If you are confident that you wish to proceed with your transaction and have followed the advice above, then get in touch with us using the number at the top of the screen or apply for a buy to let mortgage today.
This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.