Applying for specialist property finance - how long does it take, what information is needed, and what are the costs associated?

In this blog, we detail the application process, all the way from establishing initial contact with a lender right up to management of the loan after completion.

As we outlined in our previous article regarding the different types of lending options, there is a large market of lenders in the UK, each with different propositions and application processes. So, which lender should you approach to apply for a loan, and what steps do you take?

Step 1: Making contact

There are generally three ways to establish contact with a lender:

Cold: Searching for a lender's contact details online and reaching out by phone or email.
Warm: Someone in your network already holds a relationship with the desired lender and can make a ‘warm’ introduction for you.
Intermediary/broker: You can utilise the network of a specialist finance broker to put you in touch with a suitable lender, but keep in mind this always comes with an additional cost.

It is generally considered a good idea to apply for a loan from more than one lender at a time during the initial stage, as this provides the best chance to find the most suitable loan for you. Personal costs are not normally incurred at this point.

When establishing contact with lenders, it is vital you have decided exactly what you are requesting - at the very least, know what loan amount, the term (time duration), and the repayment plan you are seeking. This will help in two areas - firstly, by speeding up the process and secondly, by helping to provide a more accurate indication of the loan terms available to you.

Step 2: Credit Underwriting

Once you have received these indicative terms and have chosen a lender to proceed with, the lender will then ask you for all information pertinent to the property you’re seeking funding for. This can include detailed cost analysis, asset and liability statements, CVs, personal identification, and so on. This stage is typically described as the ‘underwriting’ stage of a transaction and involves the lender analysing all available information to ascertain your ability to repay the loan requested.

Once the lender is satisfied that you have the capability to repay the loan, it will issue you with ‘formal credit terms’. The formal credit terms establish the structure of the loan that the lender will commit to honouring within an agreed time period (usually 3-6 months). If the terms aren’t to your liking, you still have the ability at this stage to negotiate the terms or reject them. This is a crucial stage of the loan application, as once you have accepted the terms provided by the lender, you can expect to start incurring personal costs as you proceed to loan completion. These costs usually include but are not limited to - valuations of security items, arrangement fees, and the instruction of legal representation.

Step 3: Progressing to loan completion

Once a valuation on the target property has been completed, paid for, and approved by the lender, the next stage is instructing legal representation (a firm of solicitors) to draw up the loan paperwork that is required for both the lender and the borrower (you) to review and sign.

Once again, there is an additional layer of cost associated with this stage, as the borrower will ordinarily pay for both their legal representation and the lenders. This is why it is vital at the early stages of a loan application to understand the potential costs associated later down the line and ensure you have the cash available to pay for it.

The critical element of this stage of the application process is signing the loan agreement. Once all the necessary documentation is produced, signed, and executed (a legal term for completing documentation), the lender and the borrower will agree on a ‘date of completion’, which is the day the funds will be transferred from the lender to the borrower, and the loan becomes active.

Step 4: Management of the Loan

At this stage, the onus is on the borrower to deliver on the agreement they’ve signed, meet all pre-agreed repayment dates, comply with any loan covenants and conditions, and keep regular communication with the lender to update them on progress and advise of any potential changes.

This stage is predominantly led by the type of loan the lender has provided, as the requirements for a development finance loan will be different to that of a bridging loan, for example.

Onyx Property Finance are experts in providing financial solutions for property developers. We are dedicated to keeping on top of market trends and ensuring our customers are kept informed of any changes that might affect their borrowing, projects, and investments – see our blog for all the latest insights.

Speak to an expert today and get up to 100% of your purchase and build costs with fixed interest rates for the lifetime of your loan: info@onyxmoney.co.uk.