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A possible way forward
socrates
Posts: 2,889 Forumite
I am of the belief that - there is not a lack of money, but a lack of deposits when it comes to mortgages.
I also know there are a number of BTL Investors who have mortgage free properties. However they lack deposits in order to purchase under the new more stringent rules for lending in order to BTL. That is that they cannot use their properties as collateral.
Ordinarily these investors would approach the lender and use the properties as collateral to raise money and subsequently purchase more property.
My plan is to borrow on the same basis that they lend i.e on a mortgage free BTL property they lend only 25-30%. In turn the investor uses that to purchase more property. The only difference is that they have to use the same lender to purchase as they did to release the money. Rather than drawing down the money and going elsewhere.
I feel the rates should be realistic i.e 2-2.5% above base but capped to a maximum of say 6% when interest rates eventually rise. Arrangement fees should also be realistic.
The whole point of this is that anyone who has mortgage free properties must have done somethig right and be a safe bet.
They will have loads of equity anyway as they will have first possibly only charge on the original property and at the other end they are already lending at 25-30% deposit anyway - so no change in criteria there.
Ultimately these cherry picked clients would use their formula to continue their BTL/investment business and when prices eventually rise their investment would become even stronger and make the lenders position more solid than it already is.
Perhaps other criteria could be thrown in - like it has to be part repayment say 10-15% and the rest interest.
Or it must be an offset mortgage in order to incentivise keeping as much money as possible in that particular lenders account. Perhpas even moving all of their rental income there to reduce monthly payments and exposure.
Just floating an idea I thought made sense.
I also know there are a number of BTL Investors who have mortgage free properties. However they lack deposits in order to purchase under the new more stringent rules for lending in order to BTL. That is that they cannot use their properties as collateral.
Ordinarily these investors would approach the lender and use the properties as collateral to raise money and subsequently purchase more property.
My plan is to borrow on the same basis that they lend i.e on a mortgage free BTL property they lend only 25-30%. In turn the investor uses that to purchase more property. The only difference is that they have to use the same lender to purchase as they did to release the money. Rather than drawing down the money and going elsewhere.
I feel the rates should be realistic i.e 2-2.5% above base but capped to a maximum of say 6% when interest rates eventually rise. Arrangement fees should also be realistic.
The whole point of this is that anyone who has mortgage free properties must have done somethig right and be a safe bet.
They will have loads of equity anyway as they will have first possibly only charge on the original property and at the other end they are already lending at 25-30% deposit anyway - so no change in criteria there.
Ultimately these cherry picked clients would use their formula to continue their BTL/investment business and when prices eventually rise their investment would become even stronger and make the lenders position more solid than it already is.
Perhaps other criteria could be thrown in - like it has to be part repayment say 10-15% and the rest interest.
Or it must be an offset mortgage in order to incentivise keeping as much money as possible in that particular lenders account. Perhpas even moving all of their rental income there to reduce monthly payments and exposure.
Just floating an idea I thought made sense.
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Comments
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buy to let should just made as expensive as possible. homes are for living in not for greedy developers0
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Lol - I knew the BTL haters would love this one!0
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At the moment they get 0%
I was just doing my once monthly glance at SP forums and this tallied with your idea.property finance
I have just been informed by my broker that as i own in excess of 9 properties I am considered a bad risk to lenders.
i have never defaulted have excellent cashflow and know what I am doing.
Can anyone make any suggestions
?
http://www.singingpig.co.uk/forums/thread/709043.aspx0 -
I was just doing my once monthly glance at SP forums and this tallied with your idea.
http://www.singingpig.co.uk/forums/thread/709043.aspx
Interesting post - they are out there - I know three of my close friends in similar positions.
Like I said my plan is only for mortgage free properties. I cannot see how that would be deemed a bad risk.0 -
Interesting post - they are out there - I know three of my close friends in similar positions.
Like I said my plan is only for mortgage free properties. I cannot see how that would be deemed a bad risk.
There are some areas in this country I wouldn't even want a certain types of mortgage-free houses or flats (even for free - given to me), especially locations which are reliant on a few big employers who are under pressure, and there are few other opportunities for employment.
And like that £9,000 Middlesbrough house... where some dreamers are drooling at the thought of buying places like that... putting a little more cash in to make it decent, then get it rented out to some DSS tenant at £300-ish a month, and have it paid off within 3 years and producing pure profits from there on in.
Dreaming. For me it looks more of a liability and a lot of trouble even if it were free.0 -
But in the right area - with sensible lending criteria to established professional BTL LL's with A1 credit rating and mortgage free properties - a totally different proposition.
Just lend on this type of mortgage to the cream.0 -
Like I said my plan is only for mortgage free properties. I cannot see how that would be deemed a bad risk.But in the right area - with sensible lending criteria to established professional BTL LL's with A1 credit rating and mortgage free properties - a totally different proposition.
Just lend on this type of mortgage to the cream.
Maybe the BTL landlords who are mortgage free, like being mortgage free? Even those with very low-leverage prefer it that way?
Maybe they don't want to buy further properties at current levels?
I'm just thinking demand amongst the BTLers who are better credit risk might not be as high as you might believe - but I could be wrong. The press often says it is a credit-crunch but ignores the fact £trillion+ of wealth has just been wiped out on the UK stockmarket and in property values since August 2007, leading to business having to adapt to non-boom conditions, job losses as well... which all dampens demand.0 -
Maybe the BTL landlords who are mortgage free, like being mortgage free? Even those with very low-leverage prefer it that way?
Maybe they don't want to buy further properties at current levels?
I'm just thinking demand amongst the BTLers who are better credit risk might not be as high as you might believe - but I could be wrong. The press often says it is a credit-crunch but ignores the fact £trillion+ of wealth has just been wiped out on the UK stockmarket and in property values since August 2007, leading to business having to adapt to non-boom conditions, job losses as well... which all dampens demand.
I personally know of three BTL LL who are mortgage free and would love to buy (at the right time) however they do not have the desired deposits and this plan would assist them.
They would only buy at 10% yields - so they too are cherry picking
Not to mention the knock on effects.
I am not debating the rights and wrongs of buying - I am debating the tools used to do so.
Financial prudence is the order of the day - which part of my plan does not show financial prudence from either the buyer or the lender?0
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