Papitogrande

It isn't a BTL loan BL - a BTL loan is a loan that is secured on an investment property. This is a first charge residential mortgage, to call it anything else is deluded. The client MEWed £400k and then put it into another property purchase. As for thanking me for huge capital losses it is about as relevant as getting annoyed with me for the failiure to secure peace in Iraq - it ain't my job to advise on property. If you include the additional income that comes into play when the shop/flat is purchased then the total loan is 5.7x this income. This is a far greater multiple than the 3.5x maximum that is being called for by (I think) yourself and Eric, to pick two venerable examples. I am simply trying to get you to recognise that there are occasions when it is entirely justifiable and not financially irresponsible to borrow coniderably more that 3.5x So -Eric + Bloo Loo - In the scenario I have outlined, was it acceptable for the borrower to take 5.7x his income or should he have been prevented for doing so?

At the risk of repeating myself, a loan which is secured on a main residence and based on a borrowers income is usually considered to be a mortgage. He then essentially invested it in buy-to-let. I've asked a fairly direct question which I'd like to repeat. Eric - In the scenario I have outlined, was it acceptable for the borrower to take 8x his income or should he have been prevented for doing so?

I've given a real world example of why higher than 3.5x can be wholly justified. It is a mortgage, not a business loan and really it's an 8x income loan to someone who used that money to invest in another property. So many times I hear from people on this forum that we must get back to strictly enforced lending limits, based on income multiples and that more than 4 or 5 times income is financial suicide. I'd like to ask a direct question of Eric in particular and I should be most humbly grateful if his grace were to answer it; In the scenario I have outlined was it justifiable for the borrower to take on 8x his income?

A loan secured against your main residence and based on your ability to repay from your income is generally defined as a mortgage, but I guess the mind sees what it wants to. By the most generous definition this was 5.7x income - do you agree that it was a sensible loan to take on or lend? Edit : to remove unsuitable comment about Aunty's gender - which didn't even work anyway

Well for a start IFAs do hold professional qualifications which you can poo-poo all you wish but they are not as lightweight as many may have you believe. As for estate agents then I'm surprised they are on that list but if so I assume it is because they have undergone annual anti-money laundering training. It is the fact that someone has done this that will enable them to certify documents, not their age or hair colour. Maybe we should have a system where only solicitors can certify docs, that way theycould charge £20 a time and everybody is happy, particularly the solicitors.

You and I know this Carrington. I'd just like Eric to come out and say that in certain circumstances it is ok to borrow 8x income, or I suppose you could class it as 5.7x with the investment income.

(I don't do emoticons but if I did I would smile) I can tell that you really do want me to explain so I will. Whilst I am partly doing this to be a smart ****, it is also in answer to your unwavering assertions that 3.5x salary is how max loans should be calculated with NO EXCEPTIONS I will try to give as much context as necessary without this becoming a short-story, forgive me f I miss that balance. Only the names have been changed. Client: Victor Jones, a retired captain of industry type who owned a large 6 Bed pile in the south-east, worth around £800k in 2004 with no mortgage. At 67 and 65, he and his wife are in fairly good health but are mindful that quite soon they will want to downsize, just not yet. They have total pension income of £50k, no other debt or income, total liquid cash about £30k. In the local town a property comes up for sale which is an antique shop with a large flat above it - they feel the perfect place for them to move to soon, It's available for £380k. The antique business has a lease paying £11k pa with 7 years left which they are keen to extend - the flat was let out at (I think) £750pm. Before coming to me Victor had been exploring the possibility of a commercial mortgage (£100k deposit needed) We raised a £400k mortgage against his house which covered purchase, stamp + legals, plus a £5k surplus which could be paid off the mortgage straight away to allow a payment holiday if needed (unlikely but a precaution) The plan was that the flat/shop took care of itself until they wanted to move there, at which point the big house is sold, mortgage cleared and difference pocketed. The income from the new place was around £1000 higher than mortgage payments, factor in payment shock of 1% and it would be £3000 pa less. (he took a 2 yr fix) The underwriter was fully aware of the income and circumstances so this was not a liar loan, Simply an 8X income MEW for a retired pensioner to invest in property. I would be very grateful if you would indulge me in answering this question: Was this an appropriate loan to make or should Victor have been denied it?

Am I the only one here who thinks this sounds like cr@p? Almost 50% of applications come from one, I use the term loosely, profession. I'm no expert in probability but that seems like a hell of a long shot. Still it makes a nice post and gives everyone a good opportunity to vent their feelings towards EAs

Let Papo explain! Is that an instruction to me? Christ Eric I feel like like I'm at a King's court and you've just loftily waved your hand whilst deliberately not addressing a lesser mortal.

I've looked up the word obfuscation, and I fail to see how it applies to this situation. I wasn't getting around the rules as I have pointed out twice, and your semi-coherent ramblings about everyone else and pretending it's ok are entirely irrelevant and stem purely from your own prejudice - not from anything I have said or inferred. I am baiting you and to this I confess, but it is because you are promoting some idea that a fixed rule of 3.5x salary is an appropriate way to calculate how much someone should be ALLOWED to borrow. Would you like me to explain the context in which 8x salary for a 67 yr old retiree was an appropriate loan? Then perhaps you could tell me that I am wrong. EDIT: To tidy up the grammar because oh my god I could not bear to be picked up on that. I bet I've still made some sort of mistake, I just know it.

disbarred? Isn't that for lawyers? Leaving aside the fact that you ignored that this wasn't a liar loan - the lender knew that it amounted to 8x income, and BTW it was Abbey, not some fly-by-night subprime. My point is, I maintain that income multiples are not always suitable. You need to understand the context and affordability. 8x income in this case was no problem.

You want it on the front page? OK To Eric and all your pebbles - I respect your point about easy credit driving up prices, and in all honesty, I didn't really realise it until you made the point in your own lovable way. However, you are wrong if you think that 3.5x salary, strictly enforced is the way to go. It is about affordability and Carrington arranging 4.2x Joint did not hurt anyone I am sure. About 4 years ago I got someone a mortgage of around 8 times his earned* income and I think he was about 67. The loan made total sense and he was very pleased - still is as of a year ago when I last spoke to him. It also required no lying to anyone, just a long chat with an underwriter so he could understand the circumstances. It all depends on the context of what a client is trying to achieve and what his circumstances are. If you had your wish of a strict 3.5x as LAW, this guy wouldn't have got his loan and I suspect his life would be worse for it. EDIT: to point out that *earned in this case refers to pension income

If you will permit I would also like to add my definition Luxury executive apartment - Tomorrow's ghetto Deceptively spacious - predictably tiny Viewing essential - to be honest we know it looks shit so we need to be there and desperately try and draw your attention to the better parts.

Bank of Ireland, which includes Bristol and West are announcing tomorrow that they now have a ceiling of 75%LTV on all buy to lets. It seems pretty obvious that the few lenders who still do 85% will lower it to avoid being swamped with applications.

That's the whole idea. However, IMHO, someone who buys a derelict house at auction then spends £30k on turning into a very nice home and sells it on, is not a vulture. They are replenishing the housing stock. I know there are all sorts of issues about doing a botched job and overcharging and I'm not trying to defend everyone who has done this, but proper property developers are very useful to the housing stock - now they will be no more.

In an attempt to fox the purchase of below value property or distressed sales, the majority of lenders have introduced a new rule. My guess is they all will very soon. From a typical lender : Bristol & West will no longer accept cases where the owner/vendor is not the registered proprietor, and has not been so for a minimum period of 12 months. All fine and dandy I guess as it stops back to back transactions and sub-sales. However if no one can get a mortgage on a place unless the vendor has owned it for six months, then 'do it up and sell it' is finished. Edit: typo

Teaching - for people who can't hack the real world?

Eric I need to go out at 4 - would you mind conceding your error so I can try to get on with my life.

Let me try a simple definition and see if we can all agree: LIAR LOAN! - This is a loan provided to someone who has inflated their income, knowing it would not be checked, in order to obtain a larger mortgage than the bank would otherwise agree. They may or may not have impaired credit (In fact they are much less likely to have had credit problems) Sub-prime mortgage - This is a loan provided to someone who has, within the last 6 years, experienced problems in repaying a mortgage or other loan. They may have CCJs or defaults.

Sub-Prime does not equal a liar loan Eric, they are two seperate things. By spinning this story in this way you are losing credibility on the single issue you like to promote.

FFS just say how much you earn - you know you want to

This lad seems to have taken a kicking but I for one will defend him. It is very small-minded to take the kind of pleasure that you seem to in trying to get someone else into the sh1t. Where would you stop? Call the council because that single mum is overloading her bin with nappies? How about that pensioner down the pub selling duty-free baccy? Whether or not the LL is scum or in the wrong is hardly the point. You have the moral authority to report a crime if it offends your sense of right and wrong but I doubt that's the case - you're just being vindictive/vengeful.

Just sounds like theft to me, you're suggesting going into an agreement you have no intention of honoring, just so you can deceive people for financial gain. To address the OP's original query, the solicitor is under an obligation to disclose the incentive, but this in itself does not prevent the mechanism being used. Quite a few lenders still accept it as a deposit - Abbey, BOS and C&G are three. Whether they will continue to do so as it inevitably becomes more common is another matter

Yes I am a broker and if you have any questions I'd be happy to give you my opinion. What specifically were you interested in?

I'm going to this Dai - I'll let you know what it's like if you're interested.