Keeping it simple with LendInvest Appetite Statements

Andy Virgo, Director for Buy-to-Let, LendInvest
Article originally published in Bridging and Commercial.
It’s safe to say that the housing market is experiencing a mini-boom following the loosening of lockdown measures across the UK. And it’s not just been residential homebuyers that have rushed back, but property investors too.
We know that landlords are keen to buy. The latest data on the ESIS generated through the Mortgage Brain sourcing systems show that buy-to-let purchase ESIS have sat at around 9% higher than the levels seen before Covid-19, for nine weeks in a row. And brokers using the Cherry forum have reported seeing sharply increasing demand levels from landlords for buy-to-let mortgages.
Property professionals are well aware that the fundamentals of the market haven’t changed, and that property remains a phenomenal asset class, even if the world has been shaken by a pandemic. As such, they see an excellent opportunity to expand their portfolios.
But one thing that borrowers and their brokers do need right now is some certainty, a more solid understanding of precisely what funding is going to be open to them. And that’s something we are trying to provide at LendInvest through the launch of our new appetite statements.
What are your plans?
An appetite statement outlines to landlords what sort of funding LendInvest would be happy to provide them with, not just for their current case but for future purchases and remortgages across their entire portfolio.
When applying for a buy-to-let mortgage, the borrower can request an appetite statement. This essentially adds an extra step to the underwriting process, where they have a discussion with the underwriter about their experience as an investor and their plans for the future, such as the areas they are looking to invest in and what sort of investment properties they are focusing on.
It’s not about asking investors to present a business plan, or put some form of presentation together, but rather get an informed insight into their aspirations, their mode of operating, and what sort of prospect they are likely to be.
The underwriters can then put together an appetite statement, detailing what sort of funding we would be prepared to offer that borrower across their portfolio, and at what sort of loan-to-value. Those appetite statements are then checked every six months, to ensure that they remain accurate.
We believe that appetite statements will make a significant difference to borrowers, providing a helping hand when it comes to planning out their financial strategy for their portfolio, whether that’s adding new investment properties or refinancing on existing ones. If they want to purchase a new investment, they know from the very outset what sort of funding facility is open to them if they use LendInvest ‒ from there it’s simply a matter of choosing the right product.
Reducing broker workloads
There are clear benefits to appetite statements for brokers too. Brokers know only too well that one of the first questions they have to deal with from clients, whether they are first-time borrowers or have a large investment portfolio, is ‘how much can I borrow?’.
These appetite statements answer that question, not just for right now but potentially for the months and years to come as well. Not only will the broker have a good idea of how likely an application from the client is to be approved, but they will also be in a more informed position on precisely how much can be borrowed, allowing the adviser to focus their efforts on identifying the right product for the client.
What’s more, having gone through that initial interview with the underwriter, the application process once an investment property is identified later on is going to be more straightforward as the team understands the borrower and their intentions.
We also believe that appetite statements will help brokers become more familiar with our lending processes. Advisers are only too aware that each lender has their own, unique way of working, and switching between those different processes for different clients takes time and effort. But as these appetite statements will help drive familiarity with our processes.
Keeping things transparent
It’s been a tricky few months for brokers and their buy-to-let clients. While the demand is clearly still there from investors, advisers have had to navigate uncertain waters, with lenders pulling products swiftly and taking a more cautious attitude towards their activity.
But for any lender that values the intermediary community, transparency is key. Brokers want to deal with lenders they can trust, and who make dealing with them as simple as possible. It’s something we strive for in everything we do, and we believe that appetite statements are an innovative way to bring that transparency to brokers and borrowers alike.