Mortgage Rinse and repeat tactics

1j1o1n1o1

Hi All,

I have finally got into property this year and being 24 it wasn't easy. My goal is to have a sizable portfolio by the time i am 30 ish

Now the first house i brought was in February 2014 i brought this using a residential mortgage for £55,000. 6 months later i refinanced this house for £95,000 on a 75% LTV as a buy to let this produced around £18,500. I am currently awaiting an offer on my second house, which i will be buying using a residential mortgage ( 90% LTV ) I planned on doing the same thing ... Live there for 6 months and move it to BTL take the money out and buy again, expanding my portfolio every 6 months by converting my resi to a BTL to release funds. But i have been told today that although what i am doing isn't illegal it will be highly frowned upon by any future lenders and doing it for a third time could seriously effect the way lenders see me.

so i suppose my question is does any one have any previous experience of this ? and will it effect me if i carry on doing it ?

Thanks for your time reading, i appreciate any input

J

Thrugelmir

1j1o1n1o1 wrote: »

I am currently awaiting an offer on my second house, which i will be buying using a residential mortgage ( 90% LTV ) I planned on doing the same thing ... Live there for 6 months and move it to BTL take the money out and buy again,

Release what equity? There's insufficient to fund another purchase. If prices fall you'll be in negative equity.

so i suppose my question is does any one have any previous experience of this ?

Leveraging with debt, yes. Though not with property. When the wind blows hard you'll understand the meaning of the term house of cards. Fortunately for me it wasn't my personal money. Though taught me a salutory lesson some decades ago.

1j1o1n1o1

unsure of the negative equity part there:

first house paid

55,000 pp
revalued at 95,000 changed to 75% LTV and released £18,500 leaving 23,750 in the house

Second purchase
70,000 pp
estimated revalue at 100,000 change to 75% LTV leave 25k in take 75,000 out pay mortgage of 63,000 leaving me with 12,000

this is where i am asking if i should buy again using a resi ....

Thrugelmir

1j1o1n1o1 wrote: »

Second purchase
70,000 pp
estimated revalue at 100,000 change to 75% LTV leave 25k in take 75,000 out pay mortgage of 63,000 leaving me with 12,000

In six months starting from a 90% LTV? :eek:

Markets do fall as well as rise you know.

ACG

You wont get away with doing that more than a couple of times.

Best to do it the right way otherwise you could find lenders get nervous about lending to you (read up on national hunter, you are committing mortgage fraud).

samba

What you're doing isn't illegal, but I can't see it being good for your soul.

dimbo61

" first house paid 55,000 pp "
You managed to refinance it only 6 months later onto BTL
What about the FEES ?
revalued at £95,000 after 6 months !!!
what did you do rebuild it?
Now the BTL surveyor might just have looked at recent SOLD prices in the area and BINGO come up with the most recent sale

1j1o1n1o1

Dimbo61. I replaced a awful lot in my first house, windows, heating system etc... The truth is it was just a fantastic deal. And frankly comparable actual sold figures where often in access of 100,000.

Acg thanks for the reply, can you expand on how I am committing mortgage fraud ? I buy a house live there for 6 months whilst renovating the house then move on by changing the mortgage to a BTL and re investing the gained equity.

It would seem that people are focusing on the figures inside of this question. Although I appreciate all of your input, i need help on the implications this could cause if I carry on doing it... Not the figures side I do ok on that front

Thanks again

Southend1

If you carry on doing it you will end up very poor indeed. Such a highly leveraged business model, which relies on constantly rising prices is only going to end up one way. And it won't be pretty.

ACG

1j1o1n1o1 wrote: »

Acg thanks for the reply, can you expand on how I am committing mortgage fraud ? I buy a house live there for 6 months whilst renovating the house then move on by changing the mortgage to a BTL and re investing the gained equity.

Mortgage fraud is a crime in which the intent is to materially misrepresent or omit information on a mortgage application to obtain a loan

I imagine you have not told the lender you intend to do the property up and then convert to a BTL within 6-12 months. If you had, you would not get a mortgage.

People do not class it as fraud as they have every intention of paying it back, but it is.

As I said, you may get away with it a few times but eventually they are going to cotton on what you are doing.

SG27

People are focusing on the figures because the figures don't make sense. Sounds like you have been extremely lucky with your first house purchase but it's very unlikely that you will be able to increase the value of future houses by enough to enable you to release equity on a BTL. Even if you can make it work it's a high risk strategy!