1 in 8 mortgages now BTL

Thrugelmir

Graham_Devon wrote: »

This isn't really about buying and paying off a loan. It's about making an investment work.

Precisely.

Make a trading profit.
Generate an after tax cash return.
Use the cash to repay the loan.
Less interest to pay.
Higher trading profit.
and so on.

The fundamental assumptions that (a) property will rise eternally year in year out (b) interest rates will remain low indefinately are flawed.

A BTL is not an investment it's a business. With all the risks that go with running a business. Something which gets glossed over time after time.

dryhat

I'll say it once more and for the last time ...

The reason BTL mortgages are on the increase has nothing to do with rental sector trends or perceived value in rental property as an investment/business.
The rise is because people are using them to buy their own home, thereby circumventing many of the restrictions associated with a residential mortgage.

It is basically "self-cert" but with rental income taking the place of earnings.

ILW

BTL is a business, pity it is based on buying a scarce limited resource though and produces few of the benefits (such as employment) than investing in more conventional businesses.

Graham_Devon

Thrugelmir wrote: »

Precisely.

Make a trading profit.
Generate an after tax cash return.
Use the cash to repay the loan.
Less interest to pay.
Higher trading profit.
and so on.

The fundamental assumptions that (a) property will rise eternally year in year out (b) interest rates will remain low indefinately are flawed.

A BTL is not an investment it's a business. With all the risks that go with running a business. Something which gets glossed over time after time.

But most BTL investors on here don't want to pay down their mortgages? I know it's a business and understand what you are saying, but most class themselves as investors...just look at those on this very forum, not once do you hear the word "business". It's all about their investments.

They'd rather buy another property with further loans. It seems your process stops at "generate an after tax cash return" and move swiftly onto "hope for capital appreciation".

I've not seen anyone trying to pay down their BTL mortgages, bar those who have bought a BTL mainly as investments for their children. Indeed, the buying and selling forum often has advice on how to maximise the return on your debt when getting into BTL. Many have large cash reserves which are not used to pay down the BTL mortgage, but to use as a deposit on the next in the portfolio.

One of the main pieces of advice for "accidental landlords", i.e the increasing number who are lucky enough not to have to sell their home to buy another, is to switch to an IO mortgage to maximise the return. There is little regard to paying the mortgage down in most, if not all BTL threads I see.

I don't want to get long term property investors, often buying up buildings and converting them to flats / homes etc mixed up with BTL here, as your explanation IMHO would mainly apply to them.

Thrugelmir

dryhat wrote: »

The rise is because people are using them to buy their own home, thereby circumventing many of the restrictions associated with a residential mortgage.

It is basically "self-cert" but with rental income taking the place of earnings.

Given the deposit, earning and rental requirements to obtain a BTL mortgage. Also not least the fact that people already have to own a residential property. I suspect your summisation to be wide of the mark for the majority of the BTL lending market.

dryhat

Thrugelmir wrote: »

I suspect your summisation to be wide of the mark for the majority of the BTL lending market.

You suspect whatever you want mate.

I'm just stating facts.

Thrugelmir

dryhat wrote: »

I'm just stating facts.

I would suggest opinion rather than fact. :beer:

Graham_Devon

Thrugelmir wrote: »

I would suggest opinion rather than fact. :beer:

Didn't conrad hint at it recently....so it seems it could be goong on? What I am sure of, is it would in no way account for the majority of BTL mortgages!

Thrugelmir

Graham_Devon wrote: »

Didn't conrad hint at it recently....so it seems it could be goong on?

I'm sure that fraud is committed every day by someone. There's still corrupt mortgage brokers, solicitors and surveyors in practice. However taking the macro view the rules have changed immeasurably this year alone. So the volume is small out of total lending.

Its total lending that will drive the market. I'm not anti BTL. Just strikes me that too many people who don't have the ability to run any sort of business. See BTL as a road to a pot of gold. History suggests that when this is the case. The amateurs are the ones that get their fingers burnt. As a commercial transaction there'll be no FOS to complain to if it does all go wrong.

dryhat

Graham_Devon wrote: »

Didn't conrad hint at it recently....so it seems it could be goong on? What I am sure of, is it would in no way account for the majority of BTL mortgages!

You're right Graham - they don't account for the majority of BTL mortgages.

And I haven't said otherwise.

What I have said (and this is 100% fact) is that the RISE in the number of BTL mortgages is due to people using BTL as front in order to obtain an IO mortgage for their own residence.