In This Article
What are specialist mortgage lenders?
Specialist mortgage lenders are lenders that are usually not part of the High Street.
For example, the larger lenders tend to be large banks and building societies. These types of large lenders often have a certain type of business that they try to attract.
Due to the volume of applications that they receive daily, it can be hard for them to be flexible around their criteria.
Specialist mortgage lenders can sometimes accept applications that large banks and building societies would not be willing to accept.
This may be down to how someone’s income is made up, their property perhaps not being acceptable for most lenders or, even their credit history.
Although some large High Street lenders can be flexible at some times in all of these areas, specialist lenders can often be even more so but may charge a premium for doing so.
A mortgage adviser would assess your full situation to work out whether you would need a High Street lender or a specialist mortgage lender.
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When would I need specialist mortgage lenders?
There are many scenarios where you may need a specialist mortgage lender, rather than from the High Street.
For example, the construction of a property may mean that you would need a specialist mortgage adviser.
For example, if the property was a barn conversion, and elements of the build were not up to standard with most High Street lenders, it may be that a specialist lender is willing to accept the application.
Like any property, it would also be down to the surveyor’s opinion of the property, but a specialist lender may be more able to be flexible around what the report says.
Another example of when someone may need a specialist lender is when they have bad credit.
Although some High Street lenders can accept bad credit, they are often not as flexible as lenders that specialise in bad credit.
There are lenders out there that charge higher rates and fees and, as a result, know that they are not getting the majority of standard mortgage applications on a day to day basis.
They may, however, have a much more flexible policy around certain credit backgrounds that High Street lenders would not be willing to accept.
In a case like this, it may be that a broker recommends a specialist lender for some time while somebody’s credit file is repaired.
After that time, they could perhaps look at re-mortgaging to a High Street lender.
Do you get buy to let specialist mortgage lenders?
Absolutely, you get buy to let specialist mortgage lenders.
In a situation where someone may need a buy to let specialist mortgage lender, maybe for the property itself. For example, this could be a flat above a food outlet.
Not every lender would be willing to lend on a flat above a restaurant or takeaway, so it may be a case that a specialist buy to let mortgage lender would be required to lend on this property.
The lender may have their own rules around maximum loan to value and the rate may be higher to reflect the additional risk in lending on such properties.
Another reason that a specialist lender may be required for a buy to let transaction may be tenants in the property if the property attracts a lower rent than normal or the tenants are unacceptable to various High Street lenders.
For example, if they are on DSS payments, a specialist buy to let lender may be needed.
When you speak with your mortgage adviser about your buy to let situation, inform them of the full details of the property and the tenants, along with your full situation, so they can decide whether a specialist buy to let lender would be needed, or not.
I have adverse credit, would I need to use a specialist mortgage lender?
It is possible, if you have adverse credit, that you may have to use a specialist mortgage lender.
This will not be the case in every situation as some High Street lenders are willing to consider people with bad credit.
It will, however, depend on the level of deposit that you have and what the bad credit was. For instance, when a mortgage adviser assesses somebody with bad credit, they are looking at what the bad credit was.
They will also need to understand when the bad credit took place, who the bad credit was to and whether it has been settled.
With all this information, along with details of your commitments and your income, a mortgage adviser would be able to work out whether you fit the criteria for a High Street lender or a more specialist lender to accommodate your situation.
Your mortgage broker would need a copy of your credit file to review your credit score and work out affordability. If you would like to find out more about your credit history you can go to Check My File and sign up for a free trial.
Do specialist lenders lend on commercial properties?
When it comes to commercial lending, mortgages can be considered by both High Street lenders and specialist lenders.
As with a residential mortgage or buy to let mortgage, it may be in certain circumstances that the application is outside criteria for a High Street lender and it requires a specialist lender to lend on a commercial transaction.
Perhaps this is due to the accounts of the business, the property, the background of the directors, or something else.
When you are considering a commercial mortgage, you should find a commercial property adviser that can look into your options.
When they understand your full situation and the details of the property, they will be able to work out whether you would need a High Street lender or a specialist lender for your commercial transaction.
Your commercial property adviser will likely be a member of the National Association of Commercial Finance Brokers (NACFB).
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Do specialist lenders lend more than High Street lenders?
There are some situations where a specialist lender may be able to lend more than a High Street lender, but this would not always be the case.
An example of when this may be so is when they are looking for income for shareholders of a business.
Some specialist lenders can consider the applicant’s share of the operating profit before Corporation Tax.
Most banks and building societies that can offer mortgages on a profit basis of a limited company, rather than using salary and dividends, will lend based on the share of the net profit after Corporation Tax.
This may mean that in this example there may be a specialist lender that can offer a higher loan by using a more generous calculation.
Another example could be a person with credit commitments on their credit file, such as loans, car leases and credit cards.
There may be a specialist lender with a more flexible rule around these debts, for example, ignoring some that are to be repaid within the next six months.
If this were to happen, it may be that a specialist lender can offer a higher loan amount than that of the High Street lender.
Generally, specialist mortgage lenders do not offer more than the High Street.
Speak with your mortgage adviser who will be able to look at your full situation to work out whether you would be able to borrow more with a specialist mortgage lender, or with a High Street lender.
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Are rates higher with specialist lenders?
Although lenders’ products are constantly changing, the rates will likely be higher with specialist lenders.
The reason is that they are usually smaller, so they cannot handle levels of business as high as what the High Street lender can.
In addition to this, they can also look at situations that a High Street lender may not be flexible with.
As a result, as payment for taking higher risk than what perhaps a High Street lender would, they may charge a premium on the rates for doing so.
The difference will vary from lender to lender and your mortgage adviser would be able to confirm this.
It may also be a case of that fees are higher, for example, valuation fees, lender arrangement fees and possibly even legal fees.
Again, this will vary and fees and products change regularly so make sure that you get your mortgage adviser to look into this for you.
Do I need a specialist mortgage broker to work with specialist mortgage lenders?
It may not be the case that you need a certain type of mortgage broker to work with specialist mortgage lenders. However, if your situation is specialist or complex, it is advisable to find a mortgage adviser that has the right background to assist you in your situation.
You should explain to your mortgage adviser everything about your scenario and ask whether they have had experience in placing similar cases in the past.
Some mortgage advisors stick to certain types of mortgage applications.
As a mortgage adviser, it is impossible to know everything, so this is why it is important to ask about their experience.
Specialist mortgage advisers are usually smaller than other banks and building societies and, as a result, cannot handle the same type of volume that perhaps the larger lenders could.
To keep the volume under control, specialist mortgage lenders often charge higher rates than that of the High Street, but they also can be willing to look at situations that the larger lenders are perhaps not comfortable lending on.
You should look for a mortgage adviser that can inform you whether you need a specialist mortgage lender or a High Street lender to accommodate your scenario.
If you would like I NEED ADVICE to find you an experienced mortgage broker that can give you your options with no obligation to proceed, please complete the contact form.