Day one mortgages
After purchasing a property, many clients may wish to remortgage for various reasons. However, it’s important to note that some mortgage lenders require you to have owned the property for more than 6 months before considering a remortgage.
This can be frustrating for those who want to take advantage of the current market or make home improvements. Fortunately, there are lenders that offer “day one” mortgages, meaning they will consider lending from the moment you own the property.
Who would need a day one remortgage?
- Home improvements or renovations: If a homeowner wants to improve their property immediately after purchasing it, they may need a day one mortgage to finance the renovation work.
- Debt consolidation: Homeowners who have accrued debt may want to consolidate their debt by using the equity in their home, and a day one mortgage could provide the funding they need.
- Repaying someone who provided funds for the property purchase: In some cases, a homeowner may have received funds from family or friends to help purchase the property. They may wish to repay this debt immediately, which would require a day one mortgage.
- Investing in a new property: Homeowners may also use a day one mortgage to release equity in their property to buy another property, such as a second home or a rental property.
Why is there a 6 month waiting period?
The 6-month rule is a common requirement among mortgage lenders to prevent so-called “flipping,” which is when a property is bought and then quickly sold for a profit. This practice can be seen as a red flag for lenders as it may indicate that the property was overvalued or that the buyer was speculating on the property’s value rather than intending to use it as a long-term residence.
Another reason for the 6-month rule when remortgaging is usually in place because the new owner’s details may not have been registered with the Land Registry within that time frame.
This could potentially lead to complications if the property is sold or repossessed during this period.
Some lenders also believe that it may take at least 6 months for the value of the property to stabilise, allowing for a more accurate valuation and reducing the risk of lending more than the property is worth.
Sure, here are some possible reasons why someone may have bought a property outright:
Why would you need a day 1 remortgage?
Here are some reasons why someone might need a day one mortgage shortly after purchasing a property with cash:
- Inherited the property and want to access the cash value for other purposes
- Quick purchase: Bought the property outright for a cheap quick sale and now want to release the equity for other investments or purchases
- Property uninhabitable: Bought the property outright as it was uninhabitable at the time and not possible to get a mortgage, but now want to invest in renovations or improvements
- Repay someone: Need to use the funds to repay someone who helped them buy the property, such as a family member or friend who provided the cash for the purchase.
- Repay bridging loan: They used a bridging loan to purchase the property quickly and need to remortgage to pay off the loan and avoid high interest rates.
Which lenders offer day 1 mortgages?
While there are some mainstream lenders like Virgin, Natwest, and Santander that consider day one remortgages, the criteria for approval can be quite strict. There are fewer options for day one mortgages on buy-to-let properties, and most lenders who offer this type of mortgage are specialist lenders.
If you have inherited a property, you may have more options for day one mortgages as some lenders may be more willing to consider your application.
How much can you borrow on a day one mortgage? | valuation for a day 1 mortgage
The amount you can borrow on a day one mortgage will depend on various factors such as your income, expenses, credit score, and the lender’s criteria. As with any mortgage, the lender will want to ensure that you can afford the repayments.
In terms of valuation, some lenders may base the valuation on the purchase price of the property rather than the current market value at the time of application.
This means that if you have renovated the property and added value quickly, you may not be able to borrow the full amount based on the new valuation.
However, there are lenders who consider the
new valuation of the property and may be willing to lend you a higher amount based on the increased value.
What information do I need?
The documentation required for a day one remortgage may vary depending on the lender and their specific requirements. However, typically, you will need to provide the following documentation:
- Identity documents: This includes a valid passport or driver’s license to verify your identity.
- Proof of income: You will need to provide evidence of your income, such as payslips, tax returns, or bank statements, to show that you can afford the repayments.
- Bank statements: You may also be required to provide recent bank statements to demonstrate your financial stability and affordability.
- Title deeds: You will need to provide proof of ownership of the property, such as title deeds or land registry documents.
How do I get the best deal?
Here are some key points to help you get the best deal on a mortgage:
- Shop around and compare rates and fees from different lenders.
- Check your credit score: and take steps to improve it if necessary before applying for a mortgage.
- Increase your deposit – the larger your deposit, the more favourable interest rates you may be offered.
- Consider a shorter mortgage term – while the monthly payments may be higher, you could save a significant amount in interest over the life of the loan.
- Choose the right type of mortgage for your needs – consider fixed-rate, variable-rate, or adjustable-rate mortgages, depending on your financial situation and risk tolerance.
- Use a mortgage broker: Consider using a mortgage broker who can help you navigate the market and find the best deals.
- Fees and charges: Pay attention to fees and charges – make sure you understand all the fees and charges involved in a mortgage and factor them into your decision-making process.
Do I need to use a mortgage broker?
While you’re not required to use a mortgage broker to arrange your mortgage with most lenders, it’s important to keep in mind that finding the right lender for your needs can be time-consuming and challenging, especially if you’re looking for a day one mortgage.
That’s where a mortgage broker can be helpful – they have the knowledge and expertise to help you navigate the market and find lenders who may be willing to offer day one mortgages. By working with a broker, you can save time and effort and increase your chances of finding the right mortgage for your needs.
How quickly can I get a remortgage?
The timeframe for getting a day one mortgage can vary depending on several factors. While the application to offer time on a day one mortgage is usually 1-3 weeks, the legal process can take longer, typically around 5-9 weeks.
This is because the legal process involves several steps, including property valuation, conveyancing, and land registry checks, which can all take time.
In addition, delays can occur if there are issues with the property’s legal documents or if there are any outstanding debts or charges on the property.
Updating land registry documents can also cause further delays if there are any issues or discrepancies that need to be resolved.
Expedite land registry
The Land Registry office currently has major backlogs in updating title registers, which can cause significant delays when remortgaging. If you are experiencing delays due to this, there are a few steps you can take to help speed up the process:
Make sure you flag your case as urgent with the Land Registry. This can help prioritize your case and ensure it gets processed as quickly as possible.
Get a letter from your mortgage broker confirming that the delay is holding up your mortgage. This can help demonstrate the urgency of the situation and may help the Land Registry prioritise your case.
How can Strive Mortgages help?
If you’re considering getting a mortgage on a property you’ve recently purchased, we would love to help. Our team has vast experience in arranging day one mortgages and we will ensure that you have the best chance of success with your application.