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The key consideration is the total cost of funds across the term of the project. Clients often focus only on the upfront interest rate that is quoted… and forget the importance of personal service.

Interest Rate

  • Is interest calculated daily? (or monthly?)
  • Does the same interest rate apply for the whole term of the loan?
  • Any charge in interest rate in the event of default? 
  • Are any of these changes applied only to late payment days or backdated to the beginning of the month or even from drawdown at the beginning of loan?
  • Have you been quoted ‘rates from…’ or is the rate specific to your individual circumstances?

 

Product Fees

  • What is the arrangement fee?
  • Do exit fees apply?
  • If exit fees apply are they based on the loan amount or GDV of the project?
  • If you exceed the loan term what fees are applied? How often? 
  • Is a broker or packager fee payable?
  • What insurance fees are being charged?
  • Is an Asset Manager Fee charged? 
  • What other fees are in the small print?

 

Valuation / Property

  • Do you pay the valuer direct to ensure the lender is not making a markup?
  • Is the LTV of the loan based on Open Market Value or ‘90 day’ valuation?
  • If offered a ‘Free Valuation’ are you actually paying a valuation indemnity insurance premium instead that often exceeds the cost of a valuation and you do not benefit from an independent RICS survey of the property?
  • If extensive & heavy refurbishment works are required – what view will your lender take?

 

Legals

  • If you are offered ‘free legal’ – what indemnity insurance premiums are you being asked for?
  • When you are quoted legal costs – do they include disbursements?
  • Is a separate Title Indemnity Premium Charged?
  • Does the lender accept search indemnities or do they have to wait for them to be provided?
  • How quickly can the lawyers turn the paperwork around?

 

Term

  • Are you on a low interest ‘Teaser’ rate and then that increases during the term of your loan making the interest more expensive over the term of the loan ?
  • Is a minimum interest period applicable if you pay back early?
  • Is the term less than 12 months and if you exceed your term – what fees and interest rate are applied to your account?
  • Are you free to make repayment early without penalty?
  • What default fees apply if you exceed the agreed term?
  • Are you free to make partial repayments early with interest reducing from the day of repayment?

 

Speed

  • Can your lender expect to complete in 7-10 days?
  • Does your lender have an SLA in place with valuers/lawyers?
  • What experience does your lender have in your type of project?
  • How long have they been operating?
  • Are you dealing directly with a decision maker?
  • Do your terms have to be further approved and are just indicative? Terms often change before completion 
  • Do you have a personal point of contact who can make decisions without referring to credit committees / internal structures?

 

Credit History

  • What is your lenders view on credit history?
  • Will this affect your application?

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