As interest rates stay low or even fall, you may be tempted to look at refinancing your property portfolio. There are many reasons to look at this. You may want to raise money for an additional property investment, to consolidate various separate loans, restructure your corporate or partnership structure for tax planning reasons or simply to take advantage of the good interest rate deals out there. Whatever your reason, CWJ can assist, but first you will need to do some homework.
Getting Your House In Order
You need to consider carefully if the savings outweigh the costs of the refinance exercise. If it is a tax planning exercise, the savings may be far into the future. Costs to consider are the brokers’ and lenders’ arrangement fees, valuation fees, potentially increased life insurance and of course accountants’ and legal fees. Legal fees may involve two sets of solicitors, one for your interests and one for the lender, and in many cases you will be responsible for both.
A lender will carry out “due diligence” on your portfolio. This will involve a valuation and very thorough check on each individual property.
The valuation usually comes first, before lawyers are involved, as the lender will need to ensure the rentals are profitable and that there is sufficient equity in the portfolio to cover their security. Different lenders will have different requirements and fees, so it will be worth shopping around.
If you own your portfolio through a company, you must also establish at the outset whether the new lender will require you to give a personal guarantee for the company’s liabilities.
In addition to the legal fees for the due diligence and advice on the security documents, there will be search fees to be paid, usually in the order of £600-£900 per property together with Land Registry fees.
If it is decided there is a good deal to be had, you will save yourself a lot of time and money if you ensure that for each property you have a clear file of documents comprising:
- Tenancy or lease agreements and any supplemental documents such as rent reviews
- Rent receipts and service charge statements as applicable
- Any licences necessary such as HMO or Additional licences
- A note of any alterations carried out in the last 10 years and copies of planning and building regulations documents
- EPC, fire safety and other compliance certificates
- Insurance policy in correct names with up to date values
At CWJ giving good advice and ensuring a smooth process are important to us. We recommend that you get organised up front so that you do not incur avoidable fees on time spent unravelling untidy titles and missing documents.
CWJ can represent you the whole way through the refinance process. If there is a restructuring involved, our corporate team is there to work with your accountants and tax planners to implement any share reorganisations or partnership arrangements. We can ensure that the legal title is properly reviewed and all necessary searches are carried out. The due diligence questions raised are usually a combination of technical legal points and factual information, and by being involved, we can help minimise the risk of answers not being given with adequate care. Finally, we can ensure that you understand the risks of taking on the security required by the lender.
To get in touch with a member of our Commercial Property team, please call 01689 887826 or complete the enquiry form above.