An agricultural or rural mortgage can take from 4 weeks to 4 months to complete, or longer in some cases.
Such deals often present a challenge in terms of ‘ticking the right boxes’ for lenders which causes delays and we are seeing lenders scrutinizing applications more closely.
If you need to complete by a deadline, as well as being frustrating, any delay can put your plans at risk and add expense.
David Pilling, who worked as a commercial and agricultural underwriter with a high street bank, gives his 5 tips to ensure your mortgage process runs as smoothly as possible.
- Get professional advice at the start
Before you put in an application, get advice from your accountant, solicitor and property valuer as well as a mortgage consultant – and they must have experience in your sector or type of business.
Your accountant can help you decide how best to structure your business. For example, is it more tax efficient to be a sole trader, partnership, limited company or maybe make a purchase through a SIPP? This will also have implications on the forms of mortgage security required. It could be costly if the wrong security is in place, and from a tax perspective there are potential tax liabilities.
Ensure you have a solicitor with a good track record in an appropriate sector, and has experience of the common issues that may crop up during conveyancing. You should also get a realistic value of your security property from a rural valuer – if you’ve overestimated values in your application and before the lender’s formal valuation, it could jeopardise the deal.
A mortgage consultant or broker will help put your proposal together in a format lenders can work with quickly and easily, and which maximises chances of success. They’ll also know which lenders are most likely to have the appetite for lending to your circumstances.
You should have all your plans clear before putting an application to a lender. Any changes afterwards may mean resubmitting an application or a delay in decision making.
- Prepare your documents
Lenders need to see several documents. These are usually (but not exclusively):
- Bank statements for 6 months for both the business and your personal accounts – this proves income and gives an impression of spending habits.
- 3-year trading accounts demonstrating past performance of the business
- Assets, liabilities, income and expenditure reports to show financial health, net worth and the ability to afford the proposed mortgage.
- 3-year projections with clear assumptions (if you don’t have trading accounts or are making significant changes to the business) - these should show how you will get to the predicted numbers, plus a Plan B if you don’t achieve them.
A mortgage consultant will want to see these documents at the outset, as they will create a thorough business lending proposal to put to lenders on your behalf.
A business plan isn’t essential in all cases, but it gives lenders more confidence that you know who your customers and competitors are, challenges you may face and how you plan to overcome them.
- Disclose all information
Don’t leave anything undisclosed. For example, you may have other business interests, another business partner or hidden personal loans or credit cards. Examples will be case-specific, but assume that everything is relevant and tell your mortgage consultant or your lender about it.
You’ll often only get one chance with a lender. If information is hidden or the underwriter doesn’t like something, it can be very time consuming and difficult to change their mind. Even if you give them new information, they may have already formed an unfavourable view of your proposal.
The more you tell your consultant, the easier it is to package your proposal in the best way to get the best decision.
- Be quick with responses
If an underwriter comes back to you with further questions, respond quickly. Speaking from experience, underwriters assess many cases in a day.
Too long a delay giving the underwriter the extra information, means the underwriter has to find time to review your case file again, and reinterpret the difference the new information makes.
Strike while the iron is hot and your case is fresh in the underwriter’s mind. If good quality responses come back quickly, it minimises delays.
- Pick your lender/bank manager carefully
Whether you have one or not, your bank manager might also cause delays. A case often needs a bank manager, or at least a mortgage consultant, who can see the bigger picture and be prepared to challenge a credit team when appropriate.
There are huge variances in staff attitudes within the same banks across different parts of the country - some individuals will think creatively for you - whereas others won’t.
For land coming to auction and other short timescales
We’d always say plan ahead, but we also appreciate that sometimes you might need to move quickly to grab an unexpected once in a lifetime opportunity such as a nearby land purchase.
For land coming to auction you’ll usually need to complete within 28 days. It helps if you have anticipated such urgent opportunities, and already have an offer in principle.
If you need to move quickly, you may need to go to an alternative lender who can make faster decisions, but you are likely to pay a higher rate. You could get a better rate from a high street or traditional bank, but they may act more slowly, have more criteria and may not be able to meet sharp deadlines.
Understand what is important to you and what you want to achieve.
We’re on hand to help – chances are you may only apply for an agricultural mortgage once or twice in your lifetime… because our consultants do that in an average week (sometimes in a busy day!) we can help keep things on track from the off.
Please remember you’re only a phone call or an email away from professional support from a seasoned expert… and we’re easy to talk to.