Buy to Let collapse - Now Chelsea Building Society

Gorgeous_George

Borrowers on 5%-ish should be held onto or sold to another bank. Those on low margin trackers need to be encouraged to move elsewhere.

I don't think lenders understand 'risk' and how to value it/arrange it in order of priority.

GG

Kenny4315

If they don't understand risk as Bankers, what have they been doing during there studies/employment.

Have they never heard of risk Vs return. Balance portfolio, etc.

Those with high interest borrowers are probably more riskier than low raters, ability to pay, in times of SH*TE if I wanted folk out it would be the risk element, keeping a guaranteed cash flow, and limit bad debts (which will be billions at the end of this fiasco).

Trollfever

Buy-to-let mortgages represent 9% of the total number of UK mortgages outstanding and 11% of the value of mortgage stock.

Council of Mortgage Lenders 26/08/08

http://www.cml.org.uk/cml/media/press/1857

The CML detailed statistics are no longer available to the public:

With effect from January 2009, the full range of data is available only to CML members and associates.

lynzpower

Any reduction of ERC is a great thing for ALL moneysavers!

Just think, if your LL ( if you are a renter) wsa able to pay off what they owe on the mortgage then the tenants position renting that house is infinately stronger. Im losing count of the amount of people coming on here saying that thier LL is trying to sell up, leading to extra costs for tenants ( more moning, more creidt checks more more more)

A good thing.

Kenny4315

As with any business it relies on a debt element, any LL who has a BTL fully paid off is in the wrong game. The whole point is to use funds to lever up wealth not to tie it all down. I think around a 30% stake is about the right level, to get the best deals, and increase your capital base. Don't forget interest is tax deductible, and thus provides a tax shield on the interest paid.

stevetodd

Kenny4315 wrote: »

As with any business it relies on a debt element, any LL who has a BTL fully paid off is in the wrong game. The whole point is to use funds to lever up wealth not to tie it all down. I think around a 30% stake is about the right level, to get the best deals, and increase your capital base. Don't forget interest is tax deductible, and thus provides a tax shield on the interest paid.

You took the words out of my mouth (or keyboard) because the interest can be offset against tax as an expense I would never pay off the mortgage (of my investment properties).

Gorgeous_George

Kenny4315 wrote: »

As with any business it relies on a debt element, any LL who has a BTL fully paid off is in the wrong game. The whole point is to use funds to lever up wealth not to tie it all down. I think around a 30% stake is about the right level, to get the best deals, and increase your capital base. Don't forget interest is tax deductible, and thus provides a tax shield on the interest paid.

Herein lies the problem.

The taxman should come up with something better. I suggest removing the requirement for the LL to pay income tax and replace it with a flat rate tax on the rent - say 10%. I'm sure the taxman could find the right level to set such that he was no worse off. LLs would save time because tax returns would be simplified and debt could be repaid without penalty.

Another point, it is better to have no BTL mortgage providing:
1. you have no other (more expensive) debts and
2. interest rates for savers are lower than the mortgage (after tax).

Sometimes we confuse the Landlord (BTL or otherwise) with property investment.

GG

Gorgeous_George

stevetodd wrote: »

You took the words out of my mouth (or keyboard) because the interest can be offset against tax as an expense I would never pay off the mortgage (of my investment properties).

You think saving 20% of the interest is better than not paying the interest?

Assuming you have the cash to clear the mortgage

Take a £100K loan at 5%.
Interest £5K
Tax saved £1K (at 20%) or £2K (at 40%)

£100K in the bank earning 5% gross
Interest earned £4K (20%) or £3K (40%)

If the interest for the savings account is less than 5% gross (as is normal), you are spending more servicing the mortgage than you are earning from the savings account


GG

Kenny4315

Better to have the cash waiting for the bottom of the market. Than paying stable debt, then having to re-finance at extra cost later.

lynzpower

Kenny4315 wrote: »

Better to have the cash waiting for the bottom of the market. Than paying stable debt, then having to re-finance at extra cost later.

only if there is mooeny left for you to buy at the bottom of the market! clearly Chelsea dont have enough to lend hence the ERC clause above.