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islandgirl
06-03-2007, 13:51 PM
Hello again friends! I wonder if any of you have experience of a similar situation - I would be grateful for help. We have a fully owned (ie not mortgaged) buy to let property. We wish to release equity in it to buy another property. The bank could have security on both properties. We have had a long chat to our bank but they keep insisting that they can only lend on the buy to let on a "buy to let mortgage" basis (ie the rent has to equate to 130% of the mortgage). This is not enough. Now the bank know we have enough income to pay them back and that we have a large number of assets. We can also come up with a deposit on the new property of over 20% - 25% of value. Their only answer is "the best way is to remortgage your home" - why should we? We want to remortgage our buy to let! I am certain that there are banks/lenders who are more flexible - can anyone point us in the right direction???

jeffrey
06-03-2007, 14:14 PM
Hello again friends! I wonder if any of you have experience of a similar situation - I would be grateful for help. We have a fully owned (ie not mortgaged) buy to let property. We wish to release equity in it to buy another property. The bank could have security on both properties. We have had a long chat to our bank but they keep insisting that they can only lend on the buy to let on a "buy to let mortgage" basis (ie the rent has to equate to 130% of the mortgage). This is not enough. Now the bank know we have enough income to pay them back and that we have a large number of assets. We can also come up with a deposit on the new property of over 20% - 25% of value. Their only answer is "the best way is to remortgage your home" - why should we? We want to remortgage our buy to let! I am certain that there are banks/lenders who are more flexible - can anyone point us in the right direction???

Why not just mortgage the one that you're buying?

Planner
06-03-2007, 16:16 PM
Why not invest the money in some other why rather than deptiving a 1st time buyer of yet another property?

islandgirl
06-03-2007, 18:43 PM
Jeffrey - the income generated by the new property alone would not be enough to pay for it...hence the need to mortgage something else as well. The bank know full well that we have enough income to "make up" the payments but are not willing to go down this road it seems. Maybe someone else is?
Planner - get a grip. One would ask why you are contributing to a forum called Landlordzone if you have a problem with the landlord / tenant relationship? Sorry - "contributing" was the wrong word as your effort brought nothing to the party. As it happens the new property will be a holiday let but you probably don't agree with holidays either - depriving the economy of another weeks output perhaps?

lorenzo
06-03-2007, 18:53 PM
The answer may be in the sub-prime mortgage apocalypse engulfing the US atm.

I would say lenders, not just sub-prime but prime lenders as well, would be feeling exceedingly nervous right now.

Expect a severe tightening of credit... perhaps that's what we're seeing right now?

lorenzo
06-03-2007, 19:20 PM
For anyone who wants to keep track of the spectacle:

http://ml-implode.com/

attilathelandlord
06-03-2007, 19:45 PM
Some lenders will require rent to mortgage to be less than 130%.

However, I would think very carefully about this as if the rent only just covers the mortgage then you are going to run into trouble very quickly, especially if the rates continue to rise.

Don't try to buck the market, don't forget it's not just the rent you must cover, but capital costs, service charges, insurance and the boiler always breaks down when you least need it.

The safety margin is there for a reason. If you really want to go ahead then take out a mortgage on your own home then wait for rents to rise to switch onto the BTL property, or just borrow a lot less on the BTL property which WILL be covered by rent.

islandgirl
06-03-2007, 20:05 PM
Thanks all - the whole point is that we won't under any circumstances run into trouble if rates rise - we have more than enough income from various other sources to pay back the mortgage! It is just that the bank is inflexible in its view. They cannot understand that the income for the property does not have to come solely from the letting of it! We are absolutely safe bets - unblemished credit history and lots of assets - I am sure someone will want to lend to us. Ah well, if not, I suppose we can mortgage our own home.

P.Pilcher
06-03-2007, 21:40 PM
I would try a good mortgage broker it is the sort of thing that the good ones specialise in.

P.P.

attilathelandlord
07-03-2007, 07:14 AM
High street banks are no good for BTL lender, go to a specialist lender. Some may take your other assets into account, but it is you who don't understand, your bank wants the BTL property to be self supporting and you won't change their minds.

The banks want something they can put a charge over, and they can't put a charge over income, but they can over assets.

Anyway, if the rent won't even cover the mortgage, why, may i ask are you considering going ahead with it? Unless it is for capital reasons of course.

Joannepowell
07-03-2007, 08:32 AM
Islandgirl - I am currently in the position of raising a mortgage on a property where the rent ultimately would not be at the 130% mark. To get around that I am just using a larger deposit to bring the mortgage cost down (hence the rent required drops).

If you have sufficient cash to draw on could you not do the same? The past I have gone so far as to get a loan to pay the deposit. In fact, one property was bought with two loans with total monthly payments of £888 over 5 yrs. No chance of ever getting a rent to cover the total loans but ultimatley the property would be owned outright in 5yrs! I say 'would' because I have now actually mortgaged that property to buy another one!

All good fun! ;)

Wishing you good luck with your venture.

Regards

J

Ericthelobster
07-03-2007, 08:41 AM
Anyway, if the rent won't even cover the mortgage, why, may i ask are you considering going ahead with it? Unless it is for capital reasons of course.Is there any area/property type (except for HMOs, I expect) where rents do exceed the mortgage on a current purchase, in the absence of a hefty deposit? And if the LL does put down a large cash sum, the same argument applies, as that sum could be earning the equivalent of rent (ie, bank interest etc) if it weren't tied up in the property.

Miffy
07-03-2007, 08:51 AM
Is there any area/property type (except for HMOs, I expect) where rents do exceed the mortgage on a current purchase, in the absence of a hefty deposit? And if the LL does put down a large cash sum, the same argument applies, as that sum could be earning the equivalent of rent (ie, bank interest etc) if it weren't tied up in the property.

Certainly you are right in my area (Chester). That's why I don't intend to buy any more (that and reading everyone's horror stories, of course:D !)

Joannepowell
07-03-2007, 09:06 AM
Eric - rents can still exceed the mortgage on a current purchase in Oldham (just about). I've managed to release £76k from a property with £450pcm rent. You can just about buy another property with that amount!

The only reason I tend to put large deposits down is if the property requires a lot of work and I intend releasing additional funds (including the deposit) once the work complete. This has worked quite well for me on a couple of projects but only because the properties in question consist of more than one self-contained unit.

I am about to chance my arm on converting a four-bed house into two self-contained units (if I can get planning permission). I've paid £90k for the property and obviously could not achieve the 130% rule if I was to let it as one unit. I have therefore put £25k deposit down to ensure getting a mortgage for the difference. The 130% will be easily achieveable on a £65k mortgage. My plan (if all goes well) is to create two units (of high standard) and then re-mortgage to 85% of new property value which will actually give me my deposit and renovation costs back (and possibly a bit more) and 130% rule will be achieved because there will be 2 rents!

Doing the above might not be earning me interest on my deposit money but the project will be a lot of fun and will hopefully pay off more handsomely in the middle to long term. ;)

Kind Regards

islandgirl
07-03-2007, 09:48 AM
Thanks all for your advice - much appreciated - will try a specialist broker. Good luck with your project Joanne. Atilla - there would be a VERY large deposit and the bank would of course have a charge over the new property (not the income). If we defaulted, they would get a property worth say £250,000 with a mortgage of say £190,000. They could also put a charge over the current (fully owned) buy to let worth over £200,000 -how can they lose? I am astute enough not to borrow if I can't pay it back! As you say though the bank will probably not change its mind though we are waiting for the business section to come up with a proposition - time to look elsewhere I think. I just resent having to re-mortgage my own home! Thanks again everyone.

justaboutsane
07-03-2007, 09:58 AM
It may be time for a change of banks! My boss did this about 4 years ago when LloydsTSB, his bank for over 40 years. just could not provide the level of support he needed in Property terms. He headed to HSBC who apart from an iffy Manager in the middle of three have been very good at helping the business to grow!

Some banks have different rules and diffeent levels of risk!

I know of a very good Mortgage broker if you require info! Just PM me and I will reply!

islandgirl
07-03-2007, 10:10 AM
Hi Justaboutsane - will PM you - thanks! Agree about the change of banks but ironically we are currently business banking with the HSBC - obviously it varies considerably from branch to branch. Thanks again.

justaboutsane
07-03-2007, 10:49 AM
PM receieved and replied! .. Most be a regional thing! As I said one manager was not very helpful but the first one and the current one have been great! Only one thing about HSBC... you cant pay in at Post Office which is a pain for some tenants who cant get to a branch! Never mind!

attilathelandlord
07-03-2007, 14:41 PM
Yes it is possible to make a living with rents exceeding mortgages, but yes you do have to put down at least 15%. But it's the interest rate that's the killer, not the few extra thousand quid you have to find.

High street banks are not generally competetive in the BTL market.

Planner
07-03-2007, 16:04 PM
Jeffrey - the income generated by the new property alone would not be enough to pay for it...hence the need to mortgage something else as well. The bank know full well that we have enough income to "make up" the payments but are not willing to go down this road it seems. Maybe someone else is?
Planner - get a grip. One would ask why you are contributing to a forum called Landlordzone if you have a problem with the landlord / tenant relationship? Sorry - "contributing" was the wrong word as your effort brought nothing to the party. As it happens the new property will be a holiday let but you probably don't agree with holidays either - depriving the economy of another weeks output perhaps?


I think the key word here would be FORUM, if you can find time away from your property empire, and your not on holiday, Google it. Think I had a valid point, if the bank are causing you difficulties, sell it and diversify your investment portfolio accordingly into something none property related. A further house on the property market for a FTB will benifit the economy far more than another weeks holiday.

Joannepowell
07-03-2007, 16:30 PM
Planner - you obviously do not appreciate that there are many tenants out there who could actually afford to buy a home but chose not to! Some people actually prefer not to be tied down to a mortgage because they want to have mobility (particularly for employment purposes). Therefore, many landlords are providing an invaluable service by providing quality homes to rent - especially as many councils do not have the housing stock to provide everyone with a home!!!

I fail to see what your problem is! Unless of course you are wanting to buy your first home but can't afford to.... :confused:

Regards

J

islandgirl
07-03-2007, 17:38 PM
Planner - "property is theft" huh? Thought that idea came crashing down with the Berlin wall...
I echo Joanne's excellent post.
Clearly you are bitter about something - don't wallow in it it's not good for you. Perhaps you need a holiday?

Miffy
07-03-2007, 18:00 PM
Planner - "property is theft" huh? Thought that idea came crashing down with the Berlin wall...
I echo Joanne's excellent post.
Clearly you are bitter about something - don't wallow in it it's not good for you. Perhaps you need a holiday?

Don't encourage him/her. Its a free country, and planner can post here if s/he desires but you don't have to reply to pointless and trollish posts if you don't want. Of course, if debating with trolls is your thing then don't let me stop you ;). YMMV etc.

islandgirl
07-03-2007, 18:35 PM
Well said Miffy. Far too busy running my "property empire" (as the troll put it)to debate with the likes of him/her! Still think a holiday would do them good though...

Ruth Less
08-03-2007, 01:52 AM
Don't know if you've sorted this yet, but if not Singing Pig are pretty good for being a bit creative for finding the financing.

http://www.singingpig.co.uk/forums/

But I suspect most peeps here know that forum already...

islandgirl
08-03-2007, 09:13 AM
Thanks RuthLess - another one for the list much appreciated.

Planner
08-03-2007, 10:54 AM
How very dare you.