Remortgaging crunch looms for buy-to-let landlords

[TryingToWin]

12 hours ago, Si1 said:

There are so many unknowns here is ludicrous. The small print on your mortgage terms, on your tax returns, on your insurance documents, is not your friend. The market could go against you in several ways, in particular wrt interest rates and house values, not to mention the real losses you'll carry on your OC on your deposit. What makes you think the govt has your back on this? Have you any idea what an emergency interest rate policy is actually for?

a 10 year emergency? Im skeptical that such a thing exists. We can throw the word emergency infront of anything.
 

20 hours ago, Fromage Frais said:

OK :-) can you say if he is buying it via a limited company or as an individual? the 5.4% gross is not too bad in an area where people can pay 1800 per month on a property worth 400k.  Am i correct in assuming that this is a flat in the South east? 

Lets assume he has bought it himself in his name and its his only income.

With this being his only income soon ie 2020 he will have to treat the entirety of that income as taxable without the ability of deducting the mortgage payments or a straight line amount for wear and tear.

I have assumed

• 10% management (8-12% norm) fee as his lenders often ask for management.  = £2160
• 5% wear and tear (can no longer just do 10%) = £1080
• 1 months void per year = 1800

Sorry I havent quoted your entire post it seemed a bit much to duplicate so much data.

I didnt expect so many replies to my input so i will add some more information just to paint a clear picture.

Its a BTL company hes starting for this purchase. He is definately a 40% taxpayer,  in terms of pre-tax income  roughly 34k from work, probably the same from BTL, with 3 personally owned BTLs @ roughly 70% . These are not flats, but houses in Hayes and surrounding area.

I understand what you guys mean about the remortgage being the problem if the house goes from 400k to 350k in the 2 years that your on IO.

but 25% of the 50k he would have "lost" is only 12.5k. So in a relatively bad scenario where 400k houses drop to 350k in 2 years (12.5% falls?) . Would he make 12500 in those 2 years? Just having a rough look at the figures you provided, it would take far greater than a 12.5% price fall to force him to sell after 2 years because his Ltd company has profit from those 2 years that equates to more than 25% of the loss of equity? Just as somebody who is in equity "profit", unless he is forced to sell he will never realise the losses, just survive the dips and he receive's rent forever.

Does that make sense? What is the required percentage fall after 2 years that needs to occur to stop him being able to just reinvest the previous 2 years rental profits as more "25% deposit" to be able to avoid the SVR @ remortgage? It could be as high as 25% which makes perfect sense if you think about it from the bank + deposit requirement perspective???

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Just as a side note, not directed at anyone but as a general note:

I visit this website because I would prefer house prices to be cheaper, but more than that, I want to know what its in my best interest to do. So Im sorry if it seems like im challenging anyones ideas, but by challenging peoples ideas we can all work out what actually works for us.

[Bland Unsight]

1 hour ago, TryingToWin said:

Just as a side note, not directed at anyone but as a general note:

I visit this website because I would prefer house prices to be cheaper, but more than that, I want to know what its in my best interest to do. So Im sorry if it seems like im challenging anyones ideas, but by challenging peoples ideas we can all work out what actually works for us.

Not as a side note and directed not generally but specifically at you, TryingToWin - you're either lying by omission or just making stuff up (I still favour the latter view).

If he was adding a fourth property then he'd trip up on the portfolio lending rules in PRA SS13/16 and he wouldn't have access to the 1.79% rate you mentioned in your earlier post. Further, these ultra-low rate fixed rate deals currently in the market are not for incorporated BTL. 'Company' BTL rates from Paragon, who are hoovering up lots of this business, are more like 3.5%. Hence your earlier claim is guaranteed to be total nonsense unless your imaginary friend is applying for the new mortgage fraudulently. Anyway you choose to cut it, you're trolling.

You don't know enough to troll with any skill so give it a rest. I recommend that you quit posting as TryingToTroll, sorry, TryingToWin, read the forum more carefully for a while so that as you learn a little more you'll develop the knowledge you need to troll more competently and in about 6 months time sign up under a new name and try again.

 

[thewig]

long cut and paste posts, is this the return of vengerbot?

 

Hope so, its been long enough, I miss the old "perfumed superior" (a venger copyrighted putdown)

 

 

[Houdini]

3 hours ago, Beary McBearface said:

Not as a side note and directed not generally but specifically at you, TryingToWin - you're either lying by omission or just making stuff up (I still favour the latter view).

If he was adding a fourth property then he'd trip up on the portfolio lending rules in PRA SS13/16 and he wouldn't have access to the 1.79% rate you mentioned in your earlier post. Further, these ultra-low rate fixed rate deals currently in the market are not for incorporated BTL. 'Company' BTL rates from Paragon, who are hoovering up lots of this business, are more like 3.5%. Hence your earlier claim is guaranteed to be total nonsense unless your imaginary friend is applying for the new mortgage fraudulently. Anyway you choose to cut it, you're trolling.

You don't know enough to troll with any skill so give it a rest. I recommend that you quit posting as TryingToTroll, sorry, TryingToWin, read the forum more carefully for a while so that as you learn a little more you'll develop the knowledge you need to troll more competently and in about 6 months time sign up under a new name and try again.

 

The story is total gibberish - "but 25% of the 50k he would have "lost" is only 12.5k. " Nope - as the owner of the property he is gambling with borrowed money. If the house rises in price to £500,000 he pockets the £100,000 gain, if the house falls to £300,000 he still owes the bank £300,000 and all his money is gone. 

If as some on here suspect the prices fall to what a owner occupier can afford to borrow he may well have a £100,000 loss that he needs to pay depending on the exact terms of the loan...

 

[Byron]

Also, the probability is that as house prices fall, so will rents.

This is not an absolute, but falling house prices will remove the better off renters from the rental market as they buy their own house.

[Si1]

6 hours ago, TryingToWin said:

 

----------------------------------------

Just as a side note, not directed at anyone but as a general note:

I visit this website because I would prefer house prices to be cheaper, but more than that, I want to know what its in my best interest to do. So Im sorry if it seems like im challenging anyones ideas, but by challenging peoples ideas we can all work out what actually works for us.

You're not sorry for anything. Just grandiose. And you haven't challenged anything except your own intellectual limits.

[hi5lo5]

4 hours ago, Beary McBearface said:

Not as a side note and directed not generally but specifically at you, TryingToWin - you're either lying by omission or just making stuff up (I still favour the latter view).

If he was adding a fourth property then he'd trip up on the portfolio lending rules in PRA SS13/16 and he wouldn't have access to the 1.79% rate you mentioned in your earlier post. Further, these ultra-low rate fixed rate deals currently in the market are not for incorporated BTL. 'Company' BTL rates from Paragon, who are hoovering up lots of this business, are more like 3.5%. Hence your earlier claim is guaranteed to be total nonsense unless your imaginary friend is applying for the new mortgage fraudulently. Anyway you choose to cut it, you're trolling.

You don't know enough to troll with any skill so give it a rest. I recommend that you quit posting as TryingToTroll, sorry, TryingToWin, read the forum more carefully for a while so that as you learn a little more you'll develop the knowledge you need to troll more competently and in about 6 months time sign up under a new name and try again.

 

Typical BTLer calculation. Trying to tell the world about how wise they are by investing in property. @TryingToWin your mate paid SDLT of £22k? How long you have to hold the property to get back the investment?

[Houdini]

16 minutes ago, hi5lo5 said:

Typical BTLer calculation. Trying to tell the world about how wise they are by investing in property. @TryingToWin your mate paid SDLT of £22k? How long you have to hold the property to get back the investment?

It’s a year of rent excluding any other costs. Probably 18 months given the low monthly repayment of supposedly £450 a month.

 

personally I think we’ve found our greatest fool

[macca13]

11 hours ago, Locke said:

If housing costs rise too much, there is nothing stopping people economising on living area.

Is this your way of saying let’s all live like peasants in order to allow mass immigration and btl to continue.. 

oh that’s okay.. I will just tell my kids we to expect conditions from the early 1900’s and if they don’t like it tough.. Less people is the answer.. very simple.. 

guy on the radio today said people are poor because they are not properly educated.. ???

completly mssing the point, you need nurses and teachers and dustmen and cleaners.. you can’t just put them on the poverty line and call them stupid! The stupid person was the one who made the comment.. if I was a dustman and knew who he was I would leave his rubbish every collection day.. 

Dustmen are useful, bankers are not!

[Locke]

11 hours ago, macca13 said:

Is this your way of saying let’s all live like peasants in order to allow mass immigration and btl to continue.. 

No, I'm saying that if BTLers and "investors" think that propurdee values are gong to remain elevated because of demand, that is simply not true.

11 hours ago, macca13 said:

oh that’s okay.. I will just tell my kids we to expect conditions from the early 1900’s and if they don’t like it tough.. Less people is the answer.. very simple.. 

Yes, it sucks, and if the world were just, people would face consequences for their complicity.

11 hours ago, macca13 said:

guy on the radio today said people are poor because they are not properly educated.. ???

The reasons behind poverty are complicated and education is only one factor. Not everyone benefits from being educated. Certainly, the government-enforced financialisation of the economy and mass importation of low skilled workers have destroyed a lot of opportunities for poor people.

11 hours ago, macca13 said:

Dustmen are useful, bankers are not!

Bankers perform a useful function in society. Today, the government has made them far more "valuable" than they would be in a natural economy.

[TryingToWin]

 

15 hours ago, Si1 said:

You're not sorry for anything. Just grandiose. And you haven't challenged anything except your own intellectual limits.

I admit I have no idea whats going on in my previous posts, If I did I would have bet the farm in 2007. One person I work with is telling me one thing, a website I have browsed silently for years is saying something else. Im trying to work out whats going on, im trying to work out who is correct and what is happening.

But im not joining any religion. I just want the objective truth. I posted that im sorry in advance because I know to some of you this has gone past "belief" and become a religion and I dont want to challenge your sincerely held beliefs for any malicious reasons, only to benefit my own personal situation.

The fact there are people here for 10 years who still swear that buying in 2007 would be a bad move is a testament to how ideology is poisoning reasonable discourse.

 

All im saying is if your house falls in value by 50K over 2 years, is it correct that if you have made 12500 in profit during that time you have enough money to avoid the SVR because 25% of 50k is 12500 so you have enough to make up the shortfall and remortgage?

 

I'm assuming we are all adults. You can either attack me or educate me. I dont know how the former benefits you.

If im wrong please correct me. Its actually in my interest for you to correct me. Maybe even yours too.

Thanks/Sorry

[thewig]

only one person can buy the very top of the greatest bubble in history

 

what are the odds it won't be an actual person, instead it'll be a dumb as rocks DEBTjunkie

[Si1]

3 hours ago, TryingToWin said:

 

I admit I have no idea whats going on in my previous posts, If I did I would have bet the farm in 2007. One person I work with is telling me one thing, a website I have browsed silently for years is saying something else. Im trying to work out whats going on, im trying to work out who is correct and what is happening.

But im not joining any religion. I just want the objective truth. I posted that im sorry in advance because I know to some of you this has gone past "belief" and become a religion and I dont want to challenge your sincerely held beliefs for any malicious reasons, only to benefit my own personal situation.

The fact there are people here for 10 years who still swear that buying in 2007 would be a bad move is a testament to how ideology is poisoning reasonable discourse.

 

All im saying is if your house falls in value by 50K over 2 years, is it correct that if you have made 12500 in profit during that time you have enough money to avoid the SVR because 25% of 50k is 12500 so you have enough to make up the shortfall and remortgage?

 

I'm assuming we are all adults. You can either attack me or educate me. I dont know how the former benefits you.

If im wrong please correct me. Its actually in my interest for you to correct me. Maybe even yours too.

Thanks/Sorry

All other things being equal, yes. But all other things aren't necessarily equal. Such as your lenders position when your security falls significantly. Or regarding accidental breaches of BTL mortgage regulations.yadda Yadda.

Edited January 24, 2018 by Si1

[TryingToWin]

20 hours ago, Beary McBearface said:

Not as a side note and directed not generally but specifically at you, TryingToWin - you're either lying by omission or just making stuff up (I still favour the latter view).

If he was adding a fourth property then he'd trip up on the portfolio lending rules in PRA SS13/16 and he wouldn't have access to the 1.79% rate you mentioned in your earlier post. Further, these ultra-low rate fixed rate deals currently in the market are not for incorporated BTL. 'Company' BTL rates from Paragon, who are hoovering up lots of this business, are more like 3.5%. Hence your earlier claim is guaranteed to be total nonsense unless your imaginary friend is applying for the new mortgage fraudulently. Anyway you choose to cut it, you're trolling.

You don't know enough to troll with any skill so give it a rest. I recommend that you quit posting as TryingToTroll, sorry, TryingToWin, read the forum more carefully for a while so that as you learn a little more you'll develop the knowledge you need to troll more competently and in about 6 months time sign up under a new name and try again.

 

he is adding a fourth property via Ltd Company , he is in the process of forming the Ltd company. perhaps the 1.79 rate i referenced is in relation to his personally owned BTL and I got it wrong which would drastically change the figures, in which case im sorry.

What i do know is that this situation (buying BTL through Ltd companies with 25% deposit) is something that I am assuming is economically viable because it IS happening. I will clarify the rate the next time I speak to the guy but he hasnt even completed the company formation yet.

Its weird that you can look at the things ive posted, look at what you have just directed at me and claim I am the malicious 'troll' in this exchange. Maybe im a Russian Bot trying to influence the election or a Nazi sympathiser. Lets just call anyone who doesnt agree with us the bots/trolls/"bad people", right?

[Bland Unsight]

4 hours ago, TryingToWin said:

Lets just call anyone who doesnt agree with us the bots/trolls/"bad people", right?

The problem is not that there is something in your post which could be disagreed with. You are clumsily attempting to dress yourself in a distinctly rumpled and ill-fitting cloak of reasonableness. We are not learning anything from you and if you are learning anything from us you are merely using the acquired knowledge to back-fill your ignorance about the key matter at hand - buy-to-let remortgaging - so you can repair the glaring inconsistencies in your nonsense story.

I suppose it is just about plausible that some total moron tips up on this thread (having bizarrely misunderstood the thread title) and starts claiming that their mate has a mortgage rate of 1.79% when in fact they have no idea what the mortgage rate is. A moron like that might leave out that they were speculating about the mortgage rate and might even get a bit chippy when someone called them out. A moron like that might even move on to some daft as a brush tangential nonsense about Russian bots and influencing elections. That kind of conduct would make the moron in question a troll, but the heart of the trolling would not be any putative attempt to influence - it would be the moronic posts.

Somebody could attempt to influence without being a troll and someone could be a troll without attempting to influence. However, a moron, as imagined above, will be a troll regardless of their intentions and will always fail to influence. 

 

[Fromage Frais]

4 hours ago, TryingToWin said:

he is adding a fourth property via Ltd Company , he is in the process of forming the Ltd company. perhaps the 1.79 rate i referenced is in relation to his personally owned BTL and I got it wrong which would drastically change the figures, in which case im sorry.

What i do know is that this situation (buying BTL through Ltd companies with 25% deposit) is something that I am assuming is economically viable because it IS happening. I will clarify the rate the next time I speak to the guy but he hasnt even completed the company formation yet.

Its weird that you can look at the things ive posted, look at what you have just directed at me and claim I am the malicious 'troll' in this exchange. Maybe im a Russian Bot trying to influence the election or a Nazi sympathiser. Lets just call anyone who doesnt agree with us the bots/trolls/"bad people", right?

From what i can see the rates would be over 2.6% with nasty fees of 1-2% = £450 > £650

Your in a limited company so he would have to pay tax on the profits before he could take them out.

he would either be making a directors loan or share investment in the company and since this company would be for property investment he would be liable for inheritance tax on the shares should he die.

Limited companies would require accounts etc these can be cheapo online services using xero etc but its another bill on top of his tax return after.

The absolute killer is the removal of indexation

http://www.telegraph.co.uk/money/consumer-affairs/budget-2017-buy-to-let-investors-face-higher-taxes-capital-gains/

So at the end of the day taking 300k debt for a sub 5% return with the issues of inheritance tax, capital gains tax and then tax to take it out.....is just not worth it.

Its out of date but I still live by the mantra < 5% safe investment 6-10% risky investment 10%+ very risky or an actual business you are working in day to day (most businesses fail).

Better to just buy some shares and some ISAs (20k a year allowance) for a few years to speculate.  You can loose you money but with BTL you can go negative....the best rates for LTD co mortgages want personal guarantees. 

With shares you can change your mind and be agile....no chance with the BTL limited company.

Edited January 24, 2018 by Fromage Frais

[Bland Unsight]

5 hours ago, TryingToWin said:

What i do know is that this situation (buying BTL through Ltd companies with 25% deposit) is something that I am assuming is economically viable because it IS happening. I will clarify the rate the next time I speak to the guy but he hasnt even completed the company formation yet.

Two things on that.

Firstly the the factual observation you are supposedly 'making' regarding the lending actually happening is in the blooming FT article linked to in the OP and used as the thread title FFS and obviously nobody is contesting that.

Quote

Rental investors are increasingly buying new properties via a company structure rather than as an individual buyer, in order to benefit from corporate tax rate on rental profits of 18 per cent.

(Quote limited to a single sentence due to FT's understandable policing of fair use quotation)

Secondly, the inference you tack onto the observation is idiocy (if the lending is happening then it is economically viable).

You're arguing that because something is happening then it follows that it is economically viable. By that logic no business start-up would ever fail. It's a particularly stupid claim to make today about buy-to-let:

Quote

Landlord tax relief changes are set to heavily dent profits, with around six out of 10 buy-to-let purchase mortgages taken since 2014 to potentially become loss-making, according to analysis by ratings agency Standard and Poor's Global.

Source: Buy-to-let tax changes to tip 60% of recent landlord mortgages into loss – Standard and Poor’s, Mortgage Solutions, 24 January 2018

There was gold in them thar hills too, but that didn't mean that every prospector heading out West to make their fortune was pursuing an "economically viable" plan.

OK, TryingToWin, I'm starting to warm to you. I've got an inkling that there's a part of your thinking which runs like this, "Surely the mortgage banks wouldn't lend recklessly to their customers?" If my supposition about your thinking is correct then I really think you should sit down before we continue this discussion any further.

Edited January 24, 2018 by Beary McBearface

[spacedin]

On 20/01/2018 at 2:04 PM, thewig said:

you realise going from 2%-8% is a fourfold increase

so I hope you can sleep at night wishing for rents to go up fourfold

once again, its the poor tenants who will bear the brunt of this.

 

If coca colas costs suddenly increase fourfold, who do you think picks up the difference? that's right, the customer

 

I'm providing a service here not a charity etc.

 

 

 

 

 

Landlords do not control rents. The market is supposed to do that. Yes government intervention has distorted house prices and rents but ultimately the landlords do not control rental values. 

How this basic fact is lost on so many landlords is perhaps indicative of why they should not make investments in this market. 

Edited January 24, 2018 by spacedin

[thewig]

We’ll see about that pal I control rents just fine thanks it’s a simple equation as I tell my lot “pay the rent or find a tent”

 

[Byron]

8 minutes ago, thewig said:

We’ll see about that pal I control rents just fine thanks it’s a simple equation as I tell my lot “pay the rent or find a tent”

 

Of course in Bristol and other cities they find a campervan.

[BorrowToLeech]

1 hour ago, spacedin said:

Landlords do not control rents. The market is supposed to do that. Yes government intervention has distorted house prices and rents but ultimately the landlords do not control rental values. 

How this basic fact is lost on so many landlords is perhaps indicative of why they should not make investments in this market. 

Actually, that’s not quite right.

Landlords do control rents, because they don’t suffer from competition (not in the simple way widget makers do anyway). That means they will set the rent as high as they can get at any time. 

However the outcome of this is that they can’t change rents in response to their own changing costs.

For example, rents don’t fall in response to falls in interest rates unlike other markets (petrol prices do fall somewhat when oil prices fall, PC prices do fall when component prices fall, and so on).  

Edit: Of course thewig, like all landlords, is different mate, innit.    Understands the landlording game, got a portfolio.

 

Edited January 24, 2018 by BuyToLeech

[TryingToWin]

15 hours ago, Beary McBearface said:

OK, TryingToWin, I'm starting to warm to you. I've got an inkling that there's a part of your thinking which runs like this, "Surely the mortgage banks wouldn't lend recklessly to their customers?" If my supposition about your thinking is correct then I really think you should sit down before we continue this discussion any further.

My line of thinking is:

The 10 year insistence that prices are going to crash below 2008 any day now is the true trolling.

I have 3 questions.

Was buying in 2008 a good idea?

When exactly is this refinancing problem going to occur. What exact date will be the date after which I shall be wholeheartedly apologising to you for myself being wrong?

Is it possible the general ideology of this site could be wrong? Is it possible you are wrong?

[Locke]

15 hours ago, BuyToLeech said:

Landlords do control rents, because they don’t suffer from competition (not in the simple way widget makers do anyway). That means they will set the rent as high as they can get at any time.

Do you think that everyone is not always trying to get the highest price when they sell any good or service and the lowest when they buy?

There is always competition, for everything. Landlords are competing against "not moving", sharing a house with mates, other landlords in the same area, landlords in further away areas + commuting, the potential renter taking a job elsewhere due to rent differences etc etc etc etc

 

Landlords have an influence on rent price, but neither they nor tenants fully control it.

[thewig]

Landlords

 

Scumbag DEBTjunkies 

[Ah-so]

6 hours ago, TryingToWin said:

My line of thinking is:

The 10 year insistence that prices are going to crash below 2008 any day now is the true trolling.

I have 3 questions.

Was buying in 2008 a good idea?

When exactly is this refinancing problem going to occur. What exact date will be the date after which I shall be wholeheartedly apologising to you for myself being wrong?

Is it possible the general ideology of this site could be wrong? Is it possible you are wrong?

Whether buying or not in 2008 was a good idea will be down to your local area.  But your question is clearly rhetorical. Where I live it would certainly have been a good idea, because prices are in an even more dangerous bubble now, propped up by low interest rates and Bank of England's FLS/TFS.  House prices have been maintained through unprecedented government monetar intervention of which house prices were unintended and fortunate benficiaries. 

The refinancing issue has started - landlords, especially leveraged portfolio ones are running into difficulties. A lot are selling, as the FT reported today.

The general ideology of this site is clearly correct. 

Is it possible that you are  troll?