A possible way forward

Austin_Allegro

socrates wrote: »

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?

The trouble with your plan is it seems to make the assumption that the banks are just withholding money out of spite (which seems to be the populist bull view). Isn't it more that the banks don't actually have any money to lend out and are using all they can from bailouts just to stay afloat, so are not prepared to take on even the supposed moderate risk of these BTLers? Just because they are mortgage free doesn't guarantee they will be again.

socrates

Austin_Allegro wrote: »

The trouble with your plan is it seems to make the assumption that the banks are just withholding money out of spite (which seems to be the populist bull view). Isn't it more that the banks don't actually have any money to lend out and are using all they can from bailouts just to stay afloat, so are not prepared to take on even the supposed moderate risk of these BTLers? Just because they are mortgage free doesn't guarantee they will be again.

I have not come across anyone with proper deposit (LTV) who has been refused a mortgage - the banks have money they are just not moving it around.

Like I said there is a lack of deposits not a lack of mortgages.

But I am glad the debate is about the formula not the dislike for BTL LL's

silvercar

How about this idea. I realise it requires equity in existing properties, but anyone who hasn't got a realistic amount of equity in their properties shouldn't be risking what little they have investing in more property.

Take offset mortgage on residential home; sensible if you may want to utilise savings at short notice.

Increase mortgage on BTL declaring the purpose to be to reduce mortgage on residential home, so just a movement of money rather than increase borrowing. Provided LTV on BTL remains acceptable this shouldn't be an issue. You could even say that the accountant suggested it was tax efficient.

Then you put the money raised on the BTL in the offset. You have to do this because that was the purpose you increased the BTL borrowing.

Then you buy your new BTL with the deposit coming from the money in your offset savings pot. Fully allowed as you don't need to give a reason for taking money out of your offset savings pot (or I would be on the phone everytime I went to Starbucks/ Tesco).

socrates

How do you increase the mortgage on your BTL?

carolt

Yes, what this country needs is more BTL landlords.

Can never have enough.

In an ideal world, everyone in the country would be a BTL landlord, owning multiple properties and enjoying enormous wealth.

Or....is there something wrong with this theory?

Now, whatever could it be?

Thank goodness it's harder for those like the OP and his cronies to access cash.

Long may it continue!!!!!!

socrates

carolt - many thanks for your informative post - it really added some flavour to the whole debate. A nicely balanced argument you put forward, you looked at both sides and came up with a workable solution.

silvercar

socrates wrote: »

But I am glad the debate is about the formula not the dislike for BTL LL's

You typed too soon.

silvercar

socrates wrote: »

How do you increase the mortgage on your BTL?

I was working from your starting point that lenders won't allow you to increase BTL mortgages in order to fund further property purchases.

I was thinking that the lender would be more agreeable if you told them that the reason was not further property investment but "just" to move money around between your BTL and residential property.

socrates

silvercar wrote: »

I was working from your starting point that lenders won't allow you to increase BTL mortgages in order to fund further property purchases.

I was thinking that the lender would be more agreeable if you told them that the reason was not further property investment but "just" to move money around between your BTL and residential property.

I do not think they would go for that.

What people like Carolt forget is that. If there is property movement/purchases by investors - there is a whole knock on effect.

They are not new BTL pretenders they are experienced LL's with a proven formula - thus the reason why they are mortgage free in the first place.

My idea is already in practise in a way - its along the lines of bridge financing but their rates are ridiculous. The model obviously works it just a case of packaging it.

silvercar

socrates wrote: »

I do not think they would go for that.

I don't see why not, but then I haven't seen that there is an issue with taking a mortgage on a currently unmortgaged BTL. Coventry BS for example has their criteria listed here:

http://www.coventrybuildingsociety.co.uk/mortgages/buytoletinfo.aspx

This suggests that provided you have less than 10 properties and have owned the one in question for more than 6 months, you could take a mortgage out upto 65% LTV, provided the rental income was sufficient.