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200,000 buy-to-let investors lose up to 90% of their cash
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Wi wuz kepin it sympl initBobProperty wrote: »I don't know if it works like that in non-recourse state cases. The principle is that if you borrow x but on sale of the house it only sells for y where x > y, then when the lender writes off the x-y amount, they have to balance that with a 1099 form which is copied to the IRS which says the borrower has effectively "made" x-y. The borrower therefore owes tax on the amount.
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BobProperty wrote: »I don't know if it works like that in non-recourse state cases. The principle is that if you borrow x but on sale of the house it only sells for y where x > y, then when the lender writes off the x-y amount, they have to balance that with a 1099 form which is copied to the IRS which says the borrower has effectively "made" x-y. The borrower therefore owes tax on the amount.
Sounds right - though they're being pretty generous to the borrower in this case which is pretty unusual for tax authorities
Although given the sort of drops in selling prices that foreclosed properties are experiencing I'd say that the borrower could well end up being liable for tax on the majority of the loan anyway. :rotfl:
You would have thought that the non-recourse laws and danger of ending up losing on the house would have imposed a bit of discipline on mortgage lenders. Evidently the magic of securitization removed that last little barrier of common sense holding back their greed.--
Every pound less borrowed (to buy a house) is more than two pounds less to repay and more than three pounds less to earn, over the course of a typical mortgage.0 -
Quite likely that's why they weren't bothered. Who cares if it's recourse or non-recourse if you've made you fees up front and sold the problem to someone else?You would have thought that the non-recourse laws and danger of ending up losing on the house would have imposed a bit of discipline on mortgage lenders. Evidently the magic of securitization removed that last little barrier of common sense holding back their greed.A house isn't a home without a cat.
Those are my principles. If you don't like them, I have others.
I have writer's block - I can't begin to tell you about it.
You told me again you preferred handsome men but for me you would make an exception.
It's a recession when your neighbour loses his job; it's a depression when you lose yours.0 -
Thanks OP - great article. I look forward to hearing the shrieks of denial from the resident BTL landlords on here. Yes, I've Seen The Light - we all know you were sensible and will be fine.... :rolleyes:
I found the comments at the bottom of the article most entertaining. It appears I'm not alone in my lack of sympathy for the BTL brigade:
"These buy-to-let owners only have themselves to blame for pushing up the unrealistic high house prices.
Good,the best news I have heard for weeks.Perhaps all the people who thought they could make a quick pile of money at someone else's expense will get their due...
no sympathy from me i must say these leeches were not complaining when house prices were going thru the roof robbing so many ordinary people from buying a house to LIVE in......Deep losses mean deep joy to many!!
I'm crying into my cornflakes!!! These people tried to get rich of the backs of those who couldn't afford to get on the property ladder as they happily pushed up the house prices with their greed. Shame on you and shame on the people who lent you the money! Still bragging about your portfolio?
Burn, baby, burn! No sympathy for these vultures and their schemes."
etc etc
Imagine what reaction any poster on here would get if they expressed thoughts like that! Just shows how moderate us 'bears' are on here, really..... :A0 -
The thing is people here will hand back the keys (jinglekeys in america) as the house becomes a noose round your neck i have been there and in the end all logic goes out of the window and you just accept that there is going to be a shortfall (mine was 50k) and try and rebuild your life as best as you can without credit.they caught up with me many years later after i had married with a new family luckily i had told my wife about this debt..i came to a agreement with the bank to repay them as my life and income had changed beyond belief...It is nice to see the value of your house going up'' Why ?
Unless you are planning to sell up and not live anywhere, I can;t see the advantage.
If you are planning to upsize the new house will cost more.
If you are planning to downsize your new house will cost more than it should
If you are trying to buy your first house its almost impossible.0 -
It's "Jingle Mail" and goes back to the Savings and Loans troubles of the late 80s and early 90s.The thing is people here will hand back the keys (jinglekeys in america) ...A house isn't a home without a cat.
Those are my principles. If you don't like them, I have others.
I have writer's block - I can't begin to tell you about it.
You told me again you preferred handsome men but for me you would make an exception.
It's a recession when your neighbour loses his job; it's a depression when you lose yours.0 -
as far as i understand negative equity is only an issue when a person for what ever reason has to sell in a crash or down ward market,otherwise it has no effect on the person who owns the property,as values can vary widely,this happened to my sister in the 90s crash,she just rode it out until markets picked up again.
It does have an effect - you can't remortgage on to a lower rate than your lender's SVR, and you can't go to another bank if their rate is lower....much enquiry having been made concerning a gentleman, who had quitted a company where Johnson was, and no information being obtained; at last Johnson observed, that 'he did not care to speak ill of any man behind his back, but he believed the gentleman was an attorney'.0 -
So all that blather about 90% losses is just that a 9% house price fall is 90% of a 10% deposit.Happy chappy0
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tomstickland wrote: »So all that blather about 90% losses is just that a 9% house price fall is 90% of a 10% deposit.
Yep - although accurate it's somewhat misleading as it's worded to give the impression that the property value had fallen 90%.
Also, this means that leverage has not actually kicked in yet to multiply their losses - once they've burned through their deposit they are facing >100% losses (potentially up to a limit of 1000% of their investment assuming a 10% deposit) if they are forced to sell at a loss.--
Every pound less borrowed (to buy a house) is more than two pounds less to repay and more than three pounds less to earn, over the course of a typical mortgage.0
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