Administration Fee

This covers the cost of:

1. Processing Money Laundering ID Requirements

2. Obtaining Mortgage & Bridging Finance Clearance

3. Processing Offer/Auction Deposit Payment (Min £ 5,000)

4. Obtaining a Letter of Authority to buy on your behalf.

5. Providing Proof of Funds , if required.

Commitment Fee

This is set against costs that we will have incurred in sourcing, viewing and costing up a property(s) for a Client, who subsequently withdraws prior to Exchange of Contracts.

Deposit

This is held in our Client Account, which is subject to standard Bank Client Account rules, does not attract interest, and is repayable on demand less any outstanding costs or fees.

Example Fee Calculation

Post Refit Mortgage Valuation 60k (see Fee Valuations )

Fee Valuations

There are two methods of valuing a property for buy-to-let mortgage purposes.

The Open Market Value, OMV, which most people are familiar with, as this method is generally applied to Private Residence mortgages.

The Loan to Rent Ratio, LTRR or LTR, where the lender caps the amount of any loan to that which can be serviced by the rent, as determined by the Valuer.

This is similar to the Income requirements that apply to normal residential loans.

Typically lenders look for a rent of £ 130 for every £ 100 of monthly loan payments though the rent requirement is being lowered by some lenders in the current market due to the lower gross yields (the rent as a percentage of the OMV) achievable. In this example the LTR is quoted as a "130% margin".

Most lenders will lend up to 85% of the OMV subject to their LTR requirements, which differ between lenders.

The LTR is driven by both the rent and the interest payable on the loan.

The higher the rate of interest the higher the rent needs to be to meet this margin requirement.

As we have no control over the interest rate that a Client agrees to pay in respect of any buy-to-let loan, or may have to pay in the case of an impaired credit history, we use the OMV valuation when calculating our incentive fee.

When calculating the viability of any investment decision we apply the best rate of interest available at the time.

This can result in an increase in the actual Cash Burn over our Target Cash Burn (cash left in the property following refit & re-mortgage), which is currently 15%, where, for whatever reason, the investor has to borrow at a higher rate of interest.

Money Laundering ID Requirements

Current Money Laundering Legislation requires buyers of property to provide us and our conveyancing Solicitors with the following:

Proof of Identity in the form of a Certified Copy of your Passport or Driving Licence.

Proof of Residence in the form of a copy of 2 utility/council tax accounts relating to your residence, which are not more than 3 months old.

Mortgage & Bridging Finance Clearance

This involves a Credit Check to ensure that there is no adverse entry on your file that could restrict your ability to borrow.

This check does not guarantee your ability to borrow and can change between the date of this initial check and the subsequent check carried out by any lender. Non-payment of even a small Credit Card balance due could affect your ability to borrow.

Offer/Auction Deposit Payment

When buying through Estate Agents you may be required to deposit with the Estate Agent or the Vendors Solicitors 10% of the Offer Price, when buying at Auction you are required to pay 10% of the bid price following "fall of the hammer".

Both payments can be made by Personal Cheque and, in the case of Auctions, may be made by Credit Card dependent on the Auctioneer.

Subject to the amount required, this Offer/Auction deposit can be paid out of the funds we hold on your behalf in our Client Account.

Letter of Authority

When buying at Auction the property is bought in the name of the Client and the Auctioneers require that we hold a "Letter of Authority" authorising us to bid on your behalf.

This letter is in general terms and not property specific.

Proof of Funds

When buying through Estate Agents we are often asked to provide "Proof of Funds" particularly in the case of repossessed properties, or when mending chains, in order to show that we could proceed to Exchange of Contract on a cash basis if that is a condition of the sale.