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Buy-to-let: Warning For 'accidental' Landlords


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I recently offered HSBC £300 in settlement of an old debt. They replied that it had to be at least £1100 and then threatened court action for the whole £1300 plus £250 costs. I wrote back and told them that they had missed the boat as far as the £300 went. The offer was now £250. Guess what? They accepted £250.

Oh, I like that, well done. Touch of the Corleones about it!

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A landlord on the edge, unable to sell or switch to BTL will not be wasting money with a permanent postal redirection from there own property, they'll just have an agreement with the tenant to periodcally send it on, as my former landlord did

Mortgage companies will be VERY interested in this climate. They will demand the LTV is brought into line for a BTL product, and will be very interested in that "slightly" increased rate.

They will also be very interested in switching to BTL for the ease of reposession and protection of all parties afforded by being on the right product.

This is all quite naive of you, but perhaps indicative of the casual approach everyone took during the boom.

So is mortgage fraud :o

People need to wise up quick as to how ruthless the banks are going to be. They DO NOT WANT all these mortgages on their books and will look for all sorts of clauses to get LTVs back in line, encourage the borrowers move to another bank etc. There is hard evidence of this happening RIGHT NOW

Well, all I can say is I did it for five years back in the nineties. I lived in a one bed flat, kid came along by accident, had to move. I could have rung my mortgage company and asked them to increase the rate or I could just rent it out. I chose to rent it out without advising them and I'm glad I did. It had no repercussions whatsoever. Granted under some possibly, but unlikely circumstances, it could have.

I think most of you think it is a far bigger deal than it actually is.

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Letting out your falling asset, in other words, ain't the panacea increasing numbers of desperate ALs think it is.

Agreed.

I was ok because my rental income was always at least £200 more than my costs and my mortgage was small despite being originally 95% LTV.

These ALs will be ok if they find tenants and if interest rates stay low. Voids will be a big problem and if they are unable to play a very long game, capital losses will kill off any possible profit. I would have lost over £5k if I had sold my flat in 1993. In 2005 I made £20k after selling expenses.

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Isn't holding onto a depreciating asset rather like holding onto a toxic loan? ;)

Not if the tenants are paying off the mortgage it isn't. :lol:

Even if the property falls in value to virtually nothing, if the eventual value is still more than the amount the buyer put in when buying the property, he has made a profit! ;)

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We are living in uncharted times.

We have had a generation of people that have been priced out of the market for over five years, so many have conceded to rent.

Couple this with the Banks cutting back on lending on property, and this will inflame the rental market further.

Granted you will see a few Landlords sell up, but the ones I meet are very very happy with their properties.

They have all taken advantage of the cheap loans available today for people with a bit of financial clout behind them.

Many have fixed on rates like 4%!!!! Now if you bought five years ago, and you now pay 4%, you are quids in.

I honestly think as time goes by, and we move into a full socialist state, renting will become the only option.

I dont really see any Government opening up house ownership again to the masses, as that has been a wholesale disaster.

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Very true, Sour Mash - good point. I'm going to be moving in the next few months back from HK to Edinburgh, it will mean ending my tenancy in Oxford and starting a new one, my current landlord I know for a fact has an OO mortgage and looking at the deluge of Edinburgh rentals - there are good odds my new one will too - that will be my first line of 'leverage' if they dick me around....

It won't make any difference! When I was in the RAF and was suddenly posted to Germany, I contacted my bank (Think it was the Halifax) and they just gave me permission to rent the house out for two years! They stipulated that it had to be properly insured for tenants to live there and they were happy. In fact, they even extended it an extra year when my tour was extended!

What are the banks going to do if they are not as good as my bank was, repossess? They can't, the courts wouldn't back them up. All they can do is try to force the owner onto one of their BTL mortgages, but if the owner won't sign, they can't take more money each month by direct debit.

Actually, if a home owner stops paying the mortgage completely, then it takes about 6-months to repossess, but if the homeowner is paying some of his mortgage each month (And this could be as little as £50 a month) it can take years to repossess the property.

Forced landlords often don't have contracts with their tenants and are not paying the deposit into the DPS, so the tenants are not protected. Other stuff like boiler servicing, electrical checks etc. are probably not done either, so the tenant is probably better off out of there anyway!

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Then again, if the property burned down, I bet the insurance company would have ZERO sympathy and make ZERO payout.

It is possible to hold a normal mortgage on a property and obtain BTL buildings insurance. There is no cross referencing going on between lender and insurer.

The government are also aware that a huge (More than 50%) of people renting out property including those with lodgers are not declaring this income to the tax man.

When Gordon was asked about this last year, he said that there was little tax to chase because most of this income was off-set by the interest payments on the property, so while they are keeping an eye on it, there are bigger tax dodging fish to chase in the UK and they have no plans to do anything about this at the moment.

I personally think that if I was a landlord and my tenant started spouting off about tax, mortgages and attempting to blackmail me, he/ she would be on the street quicker than it takes to write Assured Shorthold Tenancy Agreement!!

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Is it not reasonable to assume that covering payments on a 60% LTV should be easily coverable by the rental income?

I really do not understand what the LTV rate has to do with covering repayments!!!

The choice of property, it's original purchase price, location and condition dictate the amount of rent that can be charged and the risk it may face of lengthy void periods!

One of my BTL properties was bought in September 2007 with a 85% LTV. Because it was a bargain when I bought it, i still have around 10% of equity in it, but even if I go into negative equity later this year, it matters not.

I have a tenant that is happy, she is a single mum on housing benefits, the rent is and always has, covererd the mortgage payments and even if, one day it doesn't, so what. My other BTL's (Some purchased way back in 1992) give me a huge profit margin each month, I can cover the repayments, repairs etc. without issue. There is no way I would sell any property for less than I paid for it, so the LTV plays no part in whether a BTL property has to be sold.

My thinking is that I am buying these properties with the help and support of the tenants, even if I have to rent each property out at 50% below current rental prices just to keep them filled. Which ever way you look at it, the tenants are subsidising my purchase and effectively providing me with a discounted pension. Who really cares what the value of the property is and how this compares to the amount of mortgage loan remaining. Also on a repayment mortgage, the size of the original loan is also reducing month on month, thus in a static market, the LTV is actually falling towards 0%.

The size of the original loan is a factor if and when a fixed rate mortgage expires, especially if the varable rate is higher than the fixed rate. Not really a problem these days with varable rates tending to be at their lowest level ever.

This site seems to bring out complete novices with people spouting out figures that they know nothing about and have no idea, because they have never owned a BTL property or have had no dealings with it.

Edited by Steamerpoint
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Well, all I can say is I did it for five years back in the nineties. I lived in a one bed flat, kid came along by accident, had to move. I could have rung my mortgage company and asked them to increase the rate or I could just rent it out. I chose to rent it out without advising them and I'm glad I did. It had no repercussions whatsoever. Granted under some possibly, but unlikely circumstances, it could have.

I think most of you think it is a far bigger deal than it actually is.

Similar sort of situation for me 1992 onwards. Couldn't sell and rented at my loss for 10 years, just about covered the mortgage so maintenance plus insurance was always a loss. Never put the rent up as it was not a profit-making venture, much better a happy tenant and no voids. Kept it as residential mortgage but did do the tax returns with rental income to avoid hassle. Still, gave a few couples a low rental place for a few years. My last tenant (from 1999) bought the place from me in 2005, gave him a 10K discount from the then-current valuation. Not all accidental landlords are bastards or a disaster for the rental market.

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My thinking is that I am buying these properties with the help and support of the tenants

You think your BTL is doing your tenants a favour?

even if I have to rent each property out at 50% below current rental prices just to keep them filled

Hang on -- maybe you are doing them a favour :lol:

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You think your BTL is doing your tenants a favour?

Hang on -- maybe you are doing them a favour :lol:

I think it should be viewed that we are doing each other a favour. I get my house bought at a discounted price with help from the tenants, and they get somewhere to live, maintenance free and without risk of losing money when the housing market crashes. Win, Win! :lol:

When I hear about BTL investors trying to cover ALL of the mortgage, ALL of the time and pull the plug the first chance they get when they find they have to chuck in a £100 a month to maintain their investment, I have no sympathy. Greed, that's what it is.

I guess that we are lucky though. We have no mortgage on our own home, so if the day comes where we have to spend £700 or £800 a month to support our investments, so what. We are still only spending what most people spend a month on their own property, yet I will be supporting five properties.

Actually, we have around £40k in the bank at the moment earning very little interest. It had crossed my mind to pay off another 10% on each of our 4 BTL's and reduce the monthly repayments. This will make more sense as a few of the mortgages are fixed at 6.14%, yet our savings are only 5% gross and about 3% net! The risk is that it is better to have some funds available should something go wrong. Bank loans are hard to come by these days. :(

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One of my BTL properties was bought in September 2007 with a 85% LTV. Because it was a bargain when I bought it, i still have around 10% of equity in it, but even if I go into negative equity later this year, it matters not.

You bought at peak ......you're BTL is already in negative equity......you just havn't realised or accepted it yet ....but at least you've convinced yourself you got a bargain ..... :rolleyes:

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How the duck would the tenant know what type of mortgage you've got? I rented out a flat for five years to 3 seperate couples, I highly doubt that it even remotely occurred to any of them what type of mortgage I had.

They would know when documents from the bank/BS drop through the letterbox. Not too hard to deduce what they are about. As for having them redirected that isn't 100% reliable.

As for fraud, get real man. Some things are serious and some are not. If my mortgage company had of found out they would probably just have upped the rate slightly. They're not interested in taking people to court, they're there to make money.

Yes - fraud because you are obtaining a pecuniary advantage by deception. You'll note that BTL mortgages typically impose more stringent terms than OO ones. If you choose not to inform the lender of your change in status and gain financial advantage because of it, you are opening up a legal can of worms if you are caught.

Why didn't you bother to tell your lender that you were now renting your property out then?

I fail to see how whether or not you are paying tax on the rent is related to your mortgage type.

I said chances are that you're not also declaring to the taxman. And this is indeed true of most amateur BTL chancers I have come across.

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