Landlords enjoy windfall from global storm

SquatNow

Generali wrote: »

I tried calling Bradford and Bingley to see if their BTL mortgages contain a margin call clause, they don't. I also asked Northern Rock a few months back the same question and they also said their BTL mortgages didn't have margin calls although TBH I think the woman I spoke to their didn't have a clue what I was on about.

I've read about margin calls existing on BTL mortgages but never managed to find any reference in any bank literature to them.

I'm sure they will say that. There are plenty of other "terms" for it, I expect they have worded it in a more imaginative way.

"If the value of the asset on which the loan is secured drops the borrower may be asked to restore the LTV rate" springs to mind.

m00m00

Squatnow, you are massively devaluing any valid points you are making with your endless repeating of this margin call dogma without offering any proof it exists.

SquatNow

Well it's the same as the BTLers saying they intend to buy more properties if there is a crash, but not saying where they will get the money from.

teabelly

Mortgage express with their automatic revaluing mortgage products mentioned something similar but I think they have since dropped the requirement that in the event of falls the LL would have to pay the difference.

Theoretically all mortgage providers on all products could do this but it would be financial suicide.

I am amazed that there are some landlords that are so strapped a late rental payment would stop them paying the mortgage. If I were doing BTL then I'd want at least 6 months full mortgage payments in hand. Even then in these times that still feels slightly too little and I'd be happier with 12 months sitting in the bank plus a few thousand quid for all the random repairs that could occur.

m00m00

SquatNow wrote: »

Well it's the same as the BTLers saying they intend to buy more properties if there is a crash, but not saying where they will get the money from.

and quite rightly you do not take them seriously

so why are you expecting to be taken seriously ?

brit1234

teabelly wrote: »

Mortgage express with their automatic revaluing mortgage products mentioned something similar but I think they have since dropped the requirement that in the event of falls the LL would have to pay the difference.

Is that the same Mortgage Express that has stopped doing re-mortgages on New builds?:rotfl:

Any way the truth is that the majority of repossessions at auctions are former buy to lets and the volumes are growing. Buy to let lenders are also feeling the pinch due to the growing loses.





Autioneers report rise in buy-to-let repossessions

Allsop, the UK’s largest property auctioneer, has reported a rise in repossessed properties in its February sales, a significant number of which have come from buy-to-let investors. It is widely recognised that the most vulnerable buy-to-let investors are those who own new-build properties in city centres.:j

Only last month, Neil Woodford, a well respected fund manager at Invesco Perpetual, warned that such properties now “almost unsellable”.

Cities such as Leeds, Newcastle and Liverpool have an oversupply of new-build flats, most of which have been bought by buy-to-let investors. Many of these landlords are now struggling to find tenants.

In addition, Mortgages Plc, West Bromwich Building Society and Preferred Mortgages will no longer lend above 75% of the property value on this type of development.

According to David Whittaker of Mortgages for Business, the specialist buy-to-let lender: “There are one or two city centres where people were led by the nose into rent-guaranteed deals, and once the guarantees ran out they found themselves without tenants and in trouble.”

However, for investors who have not overstretched themselves or bought the wrong kind of property, the outlook remains positive.

Paragon Mortgages recorded a 19% rise in rents in 2007 and the average yield is now 6.2%, up from 6% in February 2007.
http://www.homemove.co.uk/news/14-02-2008/autioneers-report-rise-in-buy-to-let-repossessions.html

IveSeenTheLight

GavLaw wrote: »

It depends on location though, in general aberdeen and edinburgh are obviously doing very well

I fully agree, and have on many occasions highlighted that locations (General e.g. Aberdeen, Edinburgh, Manchested, London etc and more locally i.e. town districts e.g. Town centres, subarbs, near universities etc) are affected differently from each other.
It is also affected by the type of property i.e. 1, 2, 3, 4 bed flat / terrace semi-detached etc
It's important to do your market research for the area you are interested in.

For one of my properties I secured a long term rent at 22% higher than recommended by the EA I used.
It's important not to just blindly trust people who should have more market knowledge than you (EA's)

SquatNow

m00m00 wrote: »

and quite rightly you do not take them seriously

so why are you expecting to be taken seriously ?

Because everything I say is available in the public domain, as is backed by economists, where-as everything they say is backed by estate agents...?

brit1234 wrote: »

According to David Whittaker of Mortgages for Business, the specialist buy-to-let lender: “There are one or two city centres where people were led by the nose into rent-guaranteed deals, and once the guarantees ran out they found themselves without tenants and in trouble.”

However, for investors who have not overstretched themselves or bought the wrong kind of property, the outlook remains positive.

Paragon Mortgages recorded a 19% rise in rents in 2007 and the average yield is now 6.2%, up from 6% in February 2007.

So none of the people being quoted would have any vested interest in talking up the market???

IveSeenTheLight

!!!!!!? wrote: »

If the rent isn't covering the mortgage outgoings then there's little sense in BTL - relying on capital appreciation in the property isn't a viable long term BTL strategy.

I expect that rental yields should improve but that won't be a lot of use for idiots who bought into BTL in the last few years without doing their sums first. They have huge mortgages to pay off and rent isn't likely to increase by anything like enough to help them meet their payments. Unless they anticipate being able to subsidise their tenants over the coming years they can either sell up now or wait until they get repossessed.

The two paragraphs above kind of contradict each other.

The first details that to be a viable long term BTL strategy the rent must cover the mortgage payment and recent BTL mortgages were using a 125% ratio.

The second is saying that the rent does not cover the mortgage payment and that they need to subsidise the tenants. If this is the case then there really has been a problem with the mortgage companies approving the release.

I think that too many people have been associating the cost of buying a BTL now and comparing against the rent now. I wonder how many mortgages released in the last year or two are not receiving the rental income to cover the mortgage payments. Other than periods of no tenancy, it should be a pre-requisite that the rent covers the mortgage payments.

IveSeenTheLight

mystic_trev wrote: »

The question has been asked before Squat. So long as a mortgage holder (residential or BTL) is making their repayments, the only time they will have to make a 'margin call' is if they change their Lenders i.e. take out a new mortgage. So this dosen't apply if they're renewing a fixed rate deal, or whatever!

A Mortgage Lendor asking a Lendee who has always serviced the monthly mortgage to reduce the outstanding balance in order to maintain the LTV ratio will only result in the Lendee owing less money and therefore the mortgage company earning less from the interest accrued.

This is why they will only carry out a margin call if there is a default in the payments, in order to reduce the risk

The purpose of a margin call will be to reduce the risk to the lenders invested money. If the monthly payments are always made then this would be adjusted for in the risk analysis.

I presume the banks would prefer people to make the monthly payments without overpaying the outstanding balance, otherwise there would not be any restrictions on making overpayments to outstanding mortgage amounts