Equity release - bank not playing ball

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

    Equity release - bank not playing ball

    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???
    Unshackled by the chains of idle vanity, A modest manatee, that's me

    #2
    Originally posted by islandgirl View Post
    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?
    JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
    1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
    2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
    3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
    4. *- Contact info: click on my name (blue-highlight link).

    Comment


      #3
      Why not invest the money in some other why rather than deptiving a 1st time buyer of yet another property?

      Comment


        #4
        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?
        Unshackled by the chains of idle vanity, A modest manatee, that's me

        Comment


          #5
          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?
          Now signature free.

          Comment


            #6
            For anyone who wants to keep track of the spectacle:

            http://ml-implode.com/
            Now signature free.

            Comment


              #7
              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.

              Comment


                #8
                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.
                Unshackled by the chains of idle vanity, A modest manatee, that's me

                Comment


                  #9
                  I would try a good mortgage broker it is the sort of thing that the good ones specialise in.

                  P.P.
                  Any information given in this post is based on my personal experience as a landlord, what I have learned from this and other boards and elsewhere. It is not to be relied on. Definitive advice is only available from a Solicitor or other appropriately qualified person.

                  Comment


                    #10
                    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.

                    Comment


                      #11
                      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
                      Last edited by Joannepowell; 07-03-2007, 08:32 AM. Reason: typo

                      Comment


                        #12
                        Originally posted by attilathelandlord View Post
                        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.

                        Comment


                          #13
                          Originally posted by Ericthelobster View Post
                          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 !)

                          Comment


                            #14
                            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

                            Comment


                              #15
                              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.
                              Unshackled by the chains of idle vanity, A modest manatee, that's me

                              Comment

                              Latest Activity

                              Collapse

                              • Reply to SDLT relief for multiple dwellings
                                by BIGGYBIBIG
                                I don`t make the rules my friend,,, i could easily have bought a block of flats the other day,,, tenanted by most of them for over 5 years 10 years 12 years etc,,, all long term but the state of the place i would not let my dog live like that,,, if it were all about money that would have been a great...
                                10-08-2022, 19:44 PM
                              • SDLT relief for multiple dwellings
                                by BIGGYBIBIG
                                Hello everyone,
                                I have had an offer accepted on a property purchase, subject to a surveyors report of £395,000 in England.


                                I am currently looking at surveyors but i just wanted to know where i stand in terms of stamp duty, costs etc.

                                I have phoned 5 different solicitors
                                ...
                                10-08-2022, 19:20 PM
                              • Reply to SDLT relief for multiple dwellings
                                by AndrewDod
                                I don't know the answer, but if true this would be an absolute outrage.

                                Some little kid buying their own home where granny left them a quarter of a house that is rented out pays 3% additional tax

                                Someone who buys 8 properties pays 1%

                                Pity us all
                                10-08-2022, 19:32 PM
                              • Reply to Winter of Unpaid Bills
                                by SouthernDave
                                Good point...
                                10-08-2022, 19:09 PM
                              • Winter of Unpaid Bills
                                by jpucng62
                                Does anyone think their tenants are ready for the huge rises in energy bills this winter? Given that unit prices are expected to more than double from where we are now (and that is a big rise already) does anyone think tenants really have a grasp on this?

                                With mortgage rates going up fast...
                                10-08-2022, 10:50 AM
                              • Reply to Winter of Unpaid Bills
                                by DPT57
                                I'm more concerned at the possibility of a winter of unheated rental properties and then the tenants expecting me to deal with the resultant mold.
                                10-08-2022, 19:04 PM
                              • Reply to Dps deposit
                                by Codger
                                I think the deposit of five weeks rent is more trouble than its worth. Not taking deposits means being a bit more selective in choosing tenants.
                                Considering the value of the asset the tenants are trusted with the deposit rules are crazy. But thats only one of the red tape obstacles to being a...
                                10-08-2022, 18:22 PM
                              • Dps deposit
                                by Jm1972
                                Hi All,

                                i would be grateful if I could get some help please.

                                I got an estate agents to find me a tenant and do all the paperwork and get proof of service for everything, tenant moved in and paid deposit just over a week ago.

                                The estate agents took the deposit from...
                                08-08-2022, 22:40 PM
                              • Reply to Winter of Unpaid Bills
                                by jpkeates
                                The daft thing is that because people will owe them the money, it won't even affect the energy company profits.
                                10-08-2022, 16:52 PM
                              • Reply to Dps deposit
                                by jpkeates
                                Looking after a significant amount of someone else's money is not a trivial undertaking.

                                I spent most of my career designing and building business solutions to replace manual processes.
                                So I have a reasonable idea of what's possible.

                                There's nothing in it but downside...
                                10-08-2022, 16:50 PM
                              Working...
                              X