The Best Lenders To Refinance Your Property Portfolio
Understanding the different types of property lenders available to the UK market
Get to grips with the different types of property finance available to investors in the UK - and understand their criteria when it comes to refinancing your Property Portfolio.
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Property is one of the world’s most popular and sought-after investments.
In the UK, the property market continues to surge despite uncertainty in other market sectors, with half of all UK property investors planning to increase their investment by 50%.
Having a property portfolio is a great asset to have - but not without its challenges. Right now, some investors are more hesitant due to fears over recent interest rate increases – with as many as 23% of investors who own less than five properties saying they would sell off property if rates rise.
In both scenarios, whether you’re an optimistic investor or worried about rates, refinancing your property portfolio may be able to help you.
Refinancing can bring lots of benefits, including
- An injection of cashflow by leveraging existing equity in your properties
- Consolidating payments across multiple properties
- Choosing a more supportive lender
- Fixing your interest payments
- Accessing better interest rates
But with so many different competing lenders on the market, how can an investor make a smart choice? Rangewell provides an independent service guiding lenders just like you through the lender’s market, identifying the right options and negotiating the deal on your behalf – all at no cost to you.
Before you speak to our team, here’s an overview of the main lending options currently available and how they may or may not suit your goals.
High Street Banks
The classic first stop for many property investors is that of the big name, high street banks.
These lenders - such as Lloyds, HSBC, Barclays and Nat West are perceived as the most dependable and secure option, with added benefits usually coming in the way of access to face-to-face customer service and robust financial support.
Perhaps surprisingly in regards to their name recognition, high street banks also tend to be the ‘cheapest’ lender in terms of rates and fees – but this comes at a different cost.
Mainstream banks tend to favour "plain vanilla" types of property investment and have more exacting criteria over who they lend to and what projects they’ll support. You’ll often need to have a strong credit history and evidence of previous property investments. You may struggle if your portfolio consists of different properties or you’re new to the industry and looking to get started.
Challenger banks tend to mimic high street banks in their offers and approaches but generally provide more flexibility around what type of property investment they will support.
In many cases, a challenger will happily finance a less usual property investment provided you can offer a strong business plan and securities.
Challenger banks like Metro Bank, Virgin and Handeslbanken may be competing with larger banking brands, but they will rarely offer a cheaper deal. Instead, they aim to provide other benefits, such as a superior digital banking experience or high levels of customer support.
Each challenger is different and requires more insight before you make a decision.
If you are going to be approaching Challenger Banks for lending, be aware than many of them do not have a large branch network and so you are often better placed by going through a financial intermediary like Rangewell if you want to quick and effective responses to your finance needs.
For property investors with portfolios spread mainly in one region, building societies can be a good finance provider as they favour working with local projects.
They’re often more selective over the properties you can finance and will have very specific stipulations around property value, loan amounts and the total number of properties.
Building Societies can be very good lenders in the markets that they operate in, but again, difficult to contact directly or get in contact with the current people - if you have the time it's worth persevering, otherwise intermediaries like Rangewell can be used to make quick and efficient contact.
The term ‘specialist lender’ applies to any lender that supports specific sectors or industries.
These lenders have in-depth expertise and insight into different industries and property sectors (eg Care homes or Purpose Built Student Accommodation) and any financial decisions will be made with that knowledge in mind.
While you may not have considered specialist lenders, they can actually be extremely valuable if you have certain types of property in your portfolio or you want to acquire them. Specilaist properties such as houses in multiple occupation (HMO), hotels or student flats, for example, may be of interest to specialist lenders.
As with many niche sector-driven contacts, it’s best to approach specialists with our team on your side. We can walk you through the options, discuss which lender may be right for you and negotiate the deal on your behalf.
Niche lenders offer finance (often sourced from hedge funds or private equity investments) on a case-by-case basis, assessing each individual property investment and providing a more bespoke offer.
Depending on your circumstances, this can be a good or bad thing – they’re often unable to compete with larger lenders in terms of total loan amounts or rates, but they can offer more personalisation in the offer itself.
For example, if you were to have a poor personal credit history, a niche lender may be willing to finance you provided you can explain the circumstances behind the bad credit and show you’re in a better position now.
‘Bridging’ loans are short-term finance options usually reserved for opportunistic investments such as property auctions.
Bridging finance may be useful to you if you’re buying property at auction or you need to raise cash quickly, providing what is usually a very fast offer and payout but a more restrictive rate and demanding term.
Some bridging lenders support property investment portfolios even further by offering 100% loans for new investments provided you leverage your existing property with them.
Of course, this option is a risky one and you should always consult a financial expert before you accept an offer like that.
Mezzanine finance could be confused with bridging finance due to its role as a ‘bridge’, offering finance meant to ‘top up’ loans that fall short of a larger lender’s loan amount and the property’s value. They’re ideal for purchasing property when you don’t have a large enough deposit or a larger lender won’t offer a good LTV. Mezzanine finance is best used in a selective and tactical way to reduce your deposit amount, but you need to plan it well to avoid making large repayments to multiple lenders.
If you’re considering building property rather than buying an existing property, or you intend to expand or convert your existing buildings, development finance is a strong option.
Development lenders are only relevant when you’re performing significant restructuring works to a building, such as major extensions or change - for example under permitted development from an office to a residential block.
Development lenders are expert lenders and you should expect that they will scrutinise every aspect of your project and background.
They’ll want to see experience either from you, the borrower, or the team you appoint for the project.
Finance is usually offered in two ways, where it is either based on the bricks-and-mortar value of the finished structure or on the projected value of the development. In many cases, negotiating which type of deal you get offered can be the difference between getting your project off the ground or not.
The main role of international banks in the property investment world is to offer finance for overseas individuals or entities looking to invest in UK properties.
They are selective in criteria and work with select clients to help them acquire and expand property portfolios.
While you may be able to secure finance with an international, you’re generally better off choosing a domestic provider if you’re based in the UK unless you have specific circumstances where it would be beneficial.
Where you have complex SPV's based off-shore or international Ultimate Beneficial Owners (UOB's) then International Banks are best place to understand your requirements and provide finance. Speak to our team to learn more.
Private Lenders / Crowd Funding
Private lenders are as varied as individuals can be, with each offering bespoke finance that is entirely based on a case-by-case basis.
Private lenders can be groups of investors acting as one, or individuals. They are less reliable than more established banks or other types of lender, but may be the best option for some people who struggle to fund projects in any other way. Again, the team at Rangewell are happy to help talk you through the private lending market and help you understand the pros and cons.
Equity providers will fund 100% of the value of the property but at the most expensive cost in terms of repayments.
This makes them an excellent choice if you want to avoid a deposit and can afford the repayment plan – such as when you’re buying a proven residential lettings property where the income has been pre-calculated to offer more than you need to repay.