Can the bank actually do this?

deefadog

Hi all, really annoyed here, we purchased 2 overseas properties (cyprus) through a an investment company, we have paid 20% for each property with 80% to be mortgaged. The apartments are ready and handover is soon.

I have just been told that the mortgage company/Bank (Alpha bank) can only give us 60% on one of the properties! Not what we sign for, so there is a shortfall on one property which we do not have.

Are we within our right to not go ahead with the purchase on one property? As this is through no fault of our own.

Any advice much appreciated

RecoveringAlcoholic

Another Alpha thread:

https://forums.moneysavingexpert.com/discussion/2440819

phlash

Some clarifications:

Did you put all your spare cash into this? i.e. Nothing left for something like this?

Did you borrow in a foreign currency and the LTV has come down as a consequence of exchange rate movements?

deefadog

Hi, we have spare cash, but that's not for this investment, we would rather just have one property instead of two at the percentage they now said we have to have!

The Deposits were in Euros and mortgage which has not yet started in CHF (Swiss Franc)!

Actual 60% of the shortfall could be covered form currency and interest rates rising, but this was suppose to be used for emergencies on the properties, know it will be eaten away (Although lowering the mortgage payments).

If this were in the UK, this would not happen, so do they have the right and can we pull out of the purchase?

Any advice much appreciated as we are a bit distraught at the moment.

dunstonh

In the UK, lenders can withdraw the offer to lend right up to the point the money is paid. Its not that common but has happened. Mainly when there has been a significant event that causes concern. Phlash mentions potential exchange rate movements as being one reason that could apply. Another could be the likely increase in capital gains tax creating a mass disposal of assets before the change comes in reducing the value the investment properties. Exchange rate seems more likely in the short term (with CGT being more of an issue later on).

deefadog

Thanks, so do i have the right not to take the mortgage and pull out form the investment company, with my deposits returned? As these were the people that were making this an easy purchase and should have known about this?

Cheers

phlash

OK - let me get this straight....

You earn in pounds......the house will be marketed on the open market in Euros..... and you have borrowed the money in Swiss Francs?

If that is the case, you have some serious exposure to Forex. Presumably the flat is rented in Euros as well? If thats the case, and the swiss franc strengthens, then your income in both sterling and euro terms will fall relatively.

If you can't get out of this situation, with such a large asset and if you have the cash flow, it may be worth thinking about hedging against this risk using the various techniques available. If your not aware how to hedge a transaction like this, then I'd suggest your in a transaction over your head.

To find out if this is the case. Probably need details of Euro value of property, date entered into, swiss francs borrowed.

Trollfever

The Bank is incorporated and registered in the Hellenic Republic. The Bank is subject to regulation and supervision by the Bank of Greece and to Greek banking and accounting law.
Alpha Bank is active in the Greek and international banking market, with a presence in New York, London, Jersey (Channel Islands), Cyprus, Albania, Bulgaria, Romania, FYROM, Serbia, and recently in Ukraine.

Complain to the Bank of Greece.:)

Thrugelmir

deefadog wrote: »

I have just been told that the mortgage company/Bank (Alpha bank) can only give us 60% on one of the properties! Not what we sign for, so there is a shortfall on one property which we do not have.

Buying off plan is a speculative investment. The market value of the property has more than likely fallen hence the banks reduced mortgage offer.

As an investor you committed to the purchase not the bank. So the liability unfortunately is yours to meet.

Only ever gamble what you can afford to lose.

Mands

deefadog wrote: »

we purchased 2 overseas properties (cyprus)

Just curious, assuming you were planning to use one apartment what were you planning on doing with the second?

Mands

Trollfever

phlash wrote: »

OK - let me get this straight....

You earn in pounds......the house will be marketed on the open market in Euros..... and you have borrowed the money in Swiss Francs?

If that is the case, you have some serious exposure to Forex. Presumably the flat is rented in Euros as well? If thats the case, and the swiss franc strengthens, then your income in both sterling and euro terms will fall relatively.

If you can't get out of this situation, with such a large asset and if you have the cash flow, it may be worth thinking about hedging against this risk using the various techniques available. If your not aware how to hedge a transaction like this, then I'd suggest your in a transaction over your head.

To find out if this is the case. Probably need details of Euro value of property, date entered into, swiss francs borrowed.

Caution.. I lost 25k in 6 months with a professional forex broker

http://www.singingpig.co.uk/forums/thread/930620.aspx