A buy-to-let investor tempted by a ‘discounted’ Manchester new build flat is £100,000 down and was led into mortgage fraud
Richard Dyson, Financial Mail – 5 July 2009
Philip George had suffered a divorce and was unhappy. To rebuild his life he hoped to make a fortune through property.
That was 2006. Today all his money has gone, debts are mounting and bankruptcy looms.
First he lost tens of thousands of pounds in a Bulgarian property swindle. A further £7,000 disappeared in a property-related insurance scam.
Philip was greedy and naive, probably. Unlucky, certainly. But his most ruinous venture was the Manchester flat on which he is losing £1,000 a month and where his mortgage is £100,000 greater than the property’s value.
To buy this property, a two-bedroom flat in a vast, canal-side development called Spinningfields, Philip committed mortgage fraud, though he says it didn’t seem like it at the time.
- Do buy-to-let losers deserve sympathy?
The flat – built by Westbury, now part of Persimmon – was listed for sale at £356,976. But the two property companies who advised Philip to buy the place, one called JAWS Management and the other RightSource Properties, negotiated a ‘ discounted’ price of £321,200.
When he applied for the mortgage, Philip failed to disclose the discount. Instead he applied for the maximum mortgage of 90% of the higher £356,976 value.
This meant that in March 2007 the bank lent £321,200, which was 100% of the price Philip actually paid. Today the property might fetch only £200,000, say local estate agents.
