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Buy-to-let, can lender demand repayment?
HeatSink
Posts: 3 Newbie
Hi,
I am starting to look into the possibility of investing in a buy-to-let property. I've still got a lot to research, but I can't find the answer to one nagging question I have.
I am sure that a couple of years ago, I read an article somewhere saying that some lenders were demanding immediate repayment of mortgages on properties that were heavily in negative equity (and then repossessing if the money wasn't repaid), even though there was no default on payments, to limit their potential loss if there ever was a default.
Does that actually happen, or did I just imagine reading the article (or just misunderstood it)?
Does a mortgage lender have the power to just ask for their money back, if there has not been a payment default and no other term of the mortgage has been breached?
Would appreciate any advice you can provide.
I am starting to look into the possibility of investing in a buy-to-let property. I've still got a lot to research, but I can't find the answer to one nagging question I have.
I am sure that a couple of years ago, I read an article somewhere saying that some lenders were demanding immediate repayment of mortgages on properties that were heavily in negative equity (and then repossessing if the money wasn't repaid), even though there was no default on payments, to limit their potential loss if there ever was a default.
Does that actually happen, or did I just imagine reading the article (or just misunderstood it)?
Does a mortgage lender have the power to just ask for their money back, if there has not been a payment default and no other term of the mortgage has been breached?
Would appreciate any advice you can provide.
0
Comments
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Legally they could. Although I've never come across it.
They'd need to take you to court and convince a District Judge to give them power of sale. That would be unlikely to be granted unless you had seriously breached your mortgage conditions.
I don't remember these cases you talk about and I think you may have got hold of the wrong end of the stick somewhere.
I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.0 -
Its called a margin call and the banks are allowed to do it. However with so many properties on their books in negative equity and their own balance sheets weak I doubt they could afford to do it with all the properties.
Why are you considering buy to let if you are in financial trouble. Wouldn't it be better to wait a few years for prices to bottom out after all rents are to start falling this December with the HB cuts and other economic probs.:exclamatiScams - Shared Equity, Shared Ownership, Newbuy, Firstbuy and Help to Buy.
Save our Savers
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rents are to start falling this December with the HB cuts and other economic probs.
Can you expand a little more on this point? I heard about this measure from the coalition Govt., but will this not have a bearing on LL's who have housing benefit tenants and not private paying tenants.0 -
Its called a margin call and the banks are allowed to do it. However with so many properties on their books in negative equity and their own balance sheets weak I doubt they could afford to do it with all the properties.
Are there any constraints on when they can do it? Do you know of any cases where it has happened?Why are you considering buy to let if you are in financial trouble.
I'm not at all in financial trouble. I just want to know what can happen in theory.
Investing in the stock market, on leverage, attracts me, but the danger of a margin call concerns me. I trade now, using a bit of margin, but nothing excessive.
Investing in the property market, using leverage, would be far more appealing if I knew that I wasn't at risk of a margin call.
I'd keep enough cash to make sure that I had plenty of cover for mortgage payments, but I can hardly guarantee that market values won't dip substantially in the short term.0 -
Providing that you weren't in breach of contractual terms, and that repayments were being regularly made. Hard to see why a lender would repossess the property. At great expense and a loss to themselves. Negative equity is not an issue for a lender. As they are making a return on the money lent i.e. interest. Over the much longer term inflation will ensure that property prices will rise. So this provides some guarantee over the capital lent.
I would suggest that there were other factors involved in what you are referring to.0 -
I would really just ignore brit. He is a troll, and regularly gets pulled to pieces on the Debate House prices board, which is why he posts on here0
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nollag2006 wrote: »I would really just ignore brit. He is a troll, and regularly gets pulled to pieces on the Debate House prices board, which is why he posts on here
Ouch .... !
What is a troll ? :rotfl:
Holly0 -
holly_hobby wrote: »Ouch .... !
What is a troll ? :rotfl:
Holly
In Internet slang, a troll is someone who posts inflammatory, extraneous, or off-topic messages in an online community, such as an online discussion forum.
So obviously else doesn't know either judging by the post they made.0
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