“Paperwork wouldn’t be so bad if it weren’t for all the paper. And the work.” ― Darynda Jones
One of the keys to closing a property development deal is financing. And one of the keys to securing financing is paperwork.
Now the bad news is that the word ‘paperwork’ has negative connotations that immediately put people off and hinder them from exploring opportunities because of any paperwork that might be involved.
This is a shame, since paperwork is really the ticket that lets you board the plane of an opportunity. Because once you present the paperwork to a lender – and they’re able to verify all the information you’ve presented to them – then they have the freedom to loan you the money that will make your deal a reality.
However, the great news is that if you can love and master the area of paperwork, you will have a competitive advantage over the masses of people who don’t. Also, remember that you’re not in this process by yourself.Your property development finance brokers will be able to advise you as to all the information you’ll need, and they’ll guide you through this process.
The most important thing your lender wants to know
When you first sit down with a broker or lender, you’ll have a friendly conversation in which the broker will ask questions to understand your objectives and requirements for any commercial mortgage product.
After doing a search for a suitable solution, the broker will then send you your first piece of ‘paperwork’ that will outline the details of the product to see if it is appropriate.
If it is then you have to submit your first piece of paperwork that contains the most important thing your lender wants to know: proof of income.
This proof can come in several forms depending on your individual situation. Here are the categories:
• Employees – 3 months’ payslips and/or a P60
• Self-employed – SA302
• Director of limited company – 2 years’ audited accounts
As you can see, this paperwork isn’t complicated to obtain and present. However it is vital because without evidence of your income, you won’t be able to obtain a loan.
But once you’ve passed this first hurdle, the real paperwork challenge begins. Don’t worry though, because it all falls into five categories:
1. Standard documents (everyone needs to have these)
2. Employee documents
3. Self-employed documents
4. Limited Company documents
5. Unusual documents
As long as you’ve got the standard documents, you just need to look at the sections underneath that relate to you.
• Identification e.g. passport or driving licence
• Proof of address e.g. utility bills, bank statements…must be from last 3 months
• Proof of deposit e.g. original bank statements and any paperwork proving the source of the income for your deposit (inheritance letter from solicitor, sale memorandum from estate agent etc)
• Bank statements – original bank statements for the last 3 months
Employee documents (if you are employed)
• Payslips – last 3 months of payslips
• P60 – this confirms your final tax code and earnings for the year as well as tax deductions and National Insurance contributions
Self-employed documents (if you have your own business)
• SA302 – an extremely important document from HMRC that outlines your income and tax deductions. Visit the HMRC website for details on how to get this • Accounts – 1 to 3 years of accounts for your business • Assets and liabilities statement – download this from the lender’s website and answer the questions
Limited Company documents
• Accounts – these include a balance sheet (which must include the printed name and signature of one of the company directors), a profit and loss account, notes about the accounts and both a director’s and auditor’s report.
• Assets and liabilities statement – download this from the lender’s website and answer the questions
These include things such as the: buy-to-let schedule, residential mortgage statement, buy-to-let mortgage statements, credit/loan statements, mortgage declaration, direct debit mandate, existing AST, signed application form and fees to the lender.
However, few lenders require any/all of these documents.
And there you have it: a non-exhaustive list of the different types of paperwork you’ll be required to provide in order to secure financing for your deal. Now whilst it’s not a single sheet of paper, neither is it a million sheets of paper.
So hopefully this list will excite you about the powerful opportunities that will be opened to you…simply because you’ve got all the required paperwork.
If you’re currently going through this process yourself, we’re here to help. Give us a call and we can be your invaluable resource to help you each step of the way.