Clydesdale Bank unveiled some great news this week, with the announcement that it will now cater to contract reassignment mortgages for new build properties, which has historically been a very difficult mortgage to obtain given the nature of the process.
When it comes to buying a new build property the contract always comes with the purchase, meaning that a contract reassignment is necessary if the buyer decides to sell the property on. Many lenders withdrew their products from this market in 2006, predominantly due to general prudence for the emergence of more and more new build properties. Lenders also imposed restrictions on lending exposure to any one development alongside this.
This caution for dealing with contract reassignments stems from the difficulty of valuing new build properties while predicting appreciation or depreciation of the asset. New build property can sometimes be like driving a new car off of the forecourt – the value drops instantly. Sometimes the reverse is true! Add the fact that foreign investors often purchase and re-sell new build properties very quickly for investment purposes and you start to see the problems for valuers.
Because of this, contract reassignments have required an initial bridging loan to secure the property and a subsequent remortgage after 6 months, as the majority of lenders do not accept a remortgage for a cash purchase until a certain amount of time has passed. Mainstream contract reassignment products are available through various lenders, although this is generally a very expensive option for a client, as it comes with multiple arrangement and monthly fees, while drawing out a much lengthier process before the remortgage is possible.
Clydesdale’s latest offer comes with a maximum loan to value (LTV) of 70% based on original exchange value, for UK clients on the first re-assignment.
Aside from this news, Clydesdale has already been busy applying changes to its fixed rate buy to let and residential range. The bank has increased its maximum lending amount to £500,000 on selected 2 and 5 year fixed rates, as well as reducing rates on selected buy to let and residential offers, including 2 and 5 year buy to let fixed fees at 75% with a rate of 3.59% and 4.59% respectively, as well as a 5 year fixed fee at 3.99% for buy to let.
The bank’s new offer allows for re-contract assignments, which essentially cuts out the need for a bridging loan at all. This not only removes the expensive additional fees but allows for a much quicker process for everyone involved.
After an increase in new build sites and an influx of foreign investment throughout London, Clydesdale is still one of very few lenders to have opened up the options available in this space. Offering an exclusive deal for new build purchases, which the general public would not normally be aware of, this is an exciting opportunity that we at Enness have access to. If you would like to explore your options within the new build investment market, you can speak to us anytime.