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cypher007

Crazy Lending Still On

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a friend of mine told me how they have managed to now own two properties, and heres how:

they bought a flat for the crazy amount of £99k in the boom, this has a mortgage.

they cant sell the flat for £89k, so there renting it out to cover the mortgage, as they want to buy a bigger house.

they have now bought a house for £124k, on another mortgage.

so much for resposnsible lending then.

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they quite possibly will afford it and the bank should do nicely out of it too

i suspect they are screwed tho', won't default, but will never have any money and wonder why

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they quite possibly will afford it and the bank should do nicely out of it too

i suspect they are screwed tho', won't default, but will never have any money and wonder why

Is it that mad ? Odds are they're making £400-500 rent on the flat, their mortgage is probably something like £180 a month.

That probably pays the mortgage on their house, or goes towards large overpayments on the flat.

All good until rates rise.

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Is it that mad ? Odds are they're making £400-500 rent on the flat, their mortgage is probably something like £180 a month.

That probably pays the mortgage on their house, or goes towards large overpayments on the flat.

All good until rates rise.

yep, basically.

long term heavily leveraged investment based on short term rates.

Edited by Si1

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a friend of mine told me how they have managed to now own two properties, and heres how:

they bought a flat for the crazy amount of £99k in the boom, this has a mortgage.

they cant sell the flat for £89k, so there renting it out to cover the mortgage, as they want to buy a bigger house.

they have now bought a house for £124k, on another mortgage.

so much for resposnsible lending then.

Impossible to comment on the craziness of this unless we know rough salaries for friends.

They have a combined mortgage of around 210 grand and renting out a fair chunk of that. If they are earning average salaries each then it's not too bad.

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Couple of hundred K for two properties though.

Assume it's in a ropey area, but that's not going to bring anyone down even at more normal rates.

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Couple of hundred K for two properties though.

Assume it's in a ropey area, but that's not going to bring anyone down even at more normal rates.

indeed.

again, this looks like an absolutely awful investment, they are missing opportunity elsewhere big time. But I doubt they will go to the wall. Just be poor and in 20 years time look back and think how much money they put into them and how they won't hjave made any gains on the money piut down, and probably lost in real terms.

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Is it that mad ? Odds are they're making £400-500 rent on the flat, their mortgage is probably something like £180 a month.

That probably pays the mortgage on their house, or goes towards large overpayments on the flat.

All good until rates rise.

Really, I thought good rates were only available to high LTV customers (in this case they have a negative LTV), if this is true then the bubble is most definitely on again.

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Is it that mad ? Odds are they're making £400-500 rent on the flat, their mortgage is probably something like £180 a month.

That probably pays the mortgage on their house, or goes towards large overpayments on the flat.

All good until rates rise.

Odds are they aren't making £400-500 rent on the flat. You mean taking £400-500 on the flat?

A mortgage of around £180 per month sounds like IO to me.

Well, good luck to them or whatever, but really it sounds like they're sailing a bit close to the wind.

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Fast forward to 2014, BOE IR's rise to the stratospheric level of 4%.

"Two houses for sale. Great investment opportunity. Only 40K each or 70K if you take the two......." ;)

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Listen to this one - 145,000 terrace just had mortgage offered on it after surveyors report. valuation at 145k did not take into account the fact that it needed massive refurbishment and work (surveyor found roof was falling in, chimney stack was leaning, rewiring throughout, collapsed drains, etc, etc., ). 145,000 is what you pay for houses in tip-top condition in that part of the world.

Lending has become dangerous again.

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Don't know why but I've got visions of a MKIII Ford Cortina barreling down the M1 motorway at 90mph with dodgy bakes and re-mould tyres. They'll probably be ok if no surprises pop-up but it wouldn't take much for the wheels to come off (job loss, INT rate rise (inevitable) ruinous tennants etc).

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Confounded, as previously stated we cannot determine whether its crazy lending until the salaries are disclosed, however.

I don't agree with SI1's comments, complete rubbish, loads of assumptions made. Explain what opportunities they are missing out on when leveraging someone elses money (bank loan and earnings of tennants) to make money for themselves (to downpay if they are senisible the highest interest rate debt they currently hold, likely to be house). (sadly i need to assume rent paid is higher than their mortgage on the house/flat).

This is something i would certainly consider if made to move. (not just wanted to, made to). I would rent out our flat (if possible under mortgage rules etc OBVIOUSLY!) and use it as collateral to put down a deposit on a larger home. It makes sense providing the repayments for both don't exceed whatever safety level you set for home repayments. AT CURRENT RATES (who knows when these will end) for myself and OH we wouldn't have a problem owing this amount of debt. (210)

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what i mean is i dont recon theyve paid much off the first properties mortgage, so why are the banks lending them more? they said they had a lot of trouble finding a bank willing to give them a BTL mortgage.

theyve got a baby, both working, i think, and i would assume total income would be arround £35k-£40k gross. i only earn £16k gross and im in IT. this is a very low paid area, unless you work 7 days a week 70 hours plus in a factory as some of the eastern europeans do.

Edited by cypher007

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Is it that mad ? Odds are they're making £400-500 rent on the flat, their mortgage is probably something like £180 a month.

That probably pays the mortgage on their house, or goes towards large overpayments on the flat.

All good until rates rise.

£180 a month :blink: . ive just used a mortgage calculator based on £90k, and i think thats being generous as most young people round here probably buy at 99% mortgage levels and higher, and i get a figure of £475 pm based on a 4% interest rate.

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a friend of mine told me how they have managed to now own two properties, and heres how:

they bought a flat for the crazy amount of £99k in the boom, this has a mortgage.

they cant sell the flat for £89k, so there renting it out to cover the mortgage, as they want to buy a bigger house.

they have now bought a house for £124k, on another mortgage.

so much for resposnsible lending then.

It's a very clever idea.... I am surprised others have not thought of it before

I think it should be called Buy to Let ...I am now going to register the idea and try and get copyright on it.

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It's a very clever idea.... I am surprised others have not thought of it before

I think it should be called Buy to Let ...I am now going to register the idea and try and get copyright on it.

...actually , it's called 'Let to Buy' ....and was the forerunner to BTL in the early 90's ....the Banks used it to help customers who were moving due to a job shift ....and this was the solution ....by 95/96 the fully fledged new product BTL were being flogged ....the aftermath of LTB..... :rolleyes:

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Explain what opportunities they are missing out on

err - how about the rest of the economy

to make money for themselves

does not equal:

(to downpay if they are senisible the highest interest rate debt they currently hold, likely to be house). (sadly i need to assume rent paid is higher than their mortgage on the house/flat).

modern bulls are just so weird (not a patch on some of the bulls of the past) - it's like taking all possible logic, chopping it up and rearranging the letters and spelling 'I'm a properdie miwwionaire!' before putting your head down the toilet and flushing it.

All I can say is the world is your oyster, go for it, etc. but do remember to remove the bleach block first...

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£180 a month :blink: . ive just used a mortgage calculator based on £90k, and i think thats being generous as most young people round here probably buy at 99% mortgage levels and higher, and i get a figure of £475 pm based on a 4% interest rate.

Sounds about right! They are not "making" money on that flat! They just a bit reluctant to sell! :huh:

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...actually , it's called 'Let to Buy' ....and was the forerunner to BTL in the early 90's ....the Banks used it to help customers who were moving due to a job shift ....and this was the solution ....by 95/96 the fully fledged new product BTL were being flogged ....the aftermath of LTB..... :rolleyes:

Nope.....

It's LIE TO BUY......

i.e. LIAR LOAN..........

:rolleyes:

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err - how about the rest of the economy

What? Explain the alternative options "in the rest of the economy to secure a return on 21k.

does not equal:

modern bulls are just so weird (not a patch on some of the bulls of the past) - it's like taking all possible logic, chopping it up and rearranging the letters and spelling 'I'm a properdie miwwionaire!' before putting your head down the toilet and flushing it.

All I can say is the world is your oyster, go for it, etc. but do remember to remove the bleach block first...

I dont understand that.

210k total debt @ 5.5% rate = 1200 apx repayment mortgage.

combined earnings 40k 5*joint income, high!

Compare the current rent in the area, stated by OP as £450 p/m?

So 1200 - 450 = 750.?

£750 p/m for living when you bring in appx 2,300 after tax (40k gross, not high threshold tax payers) hardly seems cripling. in 30 years they have 2 properties. It's a risk but not as high as you're stating Si.

50% of take home with no tennant.

35% with tennant.

Their intention was to sell it at some point when they could and not take a hit. This could be tomorrow or it could be in 10years time. In the mean time they could afford it.

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I dont understand that.

210k total debt @ 5.5% rate = 1200 apx repayment mortgage.

combined earnings 40k 5*joint income, high!

Compare the current rent in the area, stated by OP as £450 p/m?

So 1200 - 450 = 750.?

£750 p/m for living when you bring in appx 2,300 after tax (40k gross, not high threshold tax payers) hardly seems cripling. in 30 years they have 2 properties. It's a risk but not as high as you're stating Si.

50% of take home with no tennant.

35% with tennant.

Their intention was to sell it at some point when they could and not take a hit. This could be tomorrow or it could be in 10years time. In the mean time they could afford it.

i think £400pm is the absolute limit, its only a one bed appartment, i think.

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i think £400pm is the absolute limit, its only a one bed appartment, i think.

Cypher, fair enough it is all completely rough but i just wanted to know from Si1 what alternatives there are with 21k that would GUARENTEE you a return in excess of what the rent achieves.

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  • 140 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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