Jump to content
House Price Crash Forum

Landlords with bounce back loans denied new mortgage finance


Recommended Posts

https://www.mortgagesolutions.co.uk/news/2020/07/22/landlords-with-bounce-back-loans-denied-new-mortgage-finance/

"Banks say that if a landlord has applied for the government loan, it is evidence that their business is struggling. "

"Andrew Montlake from broker Coreco said: “Given the nature of the bounce back loan and its ready accessibility, it seems natural for many businesses and landlords to take advantage of this so they have it as a ‘just in case’ provision. It does not necessarily mean that that they are in any kind of trouble at all. You could argue that it would be remiss of them not to take up the offer."

"A spokesperson for TMW said: “We don’t decline applications just because someone took a bounce back loan. However, if someone had a loan that was still to be repaid, it would be considered as part of the holistic assessment of the mortgage application.”

 

Link to post
Share on other sites
13 minutes ago, GodlessEndeavor said:

"A spokesperson for TMW said: “We don’t decline applications just because someone took a bounce back loan. However, if someone had a loan that was still to be repaid, it would be considered as part of the holistic assessment of the mortgage application.”

 

Welcome to SVR hell

 

HAHAHAHAHAHA

Link to post
Share on other sites

HAHAHAHA....unlucky!

 

1 hour ago, GodlessEndeavor said:

“Given the nature of the bounce back loan and its ready accessibility, it seems natural for many businesses and landlords to take advantage of this so they have it as a ‘just in case’ provision. It does not necessarily mean that that they are in any kind of trouble at all. You could argue that it would be remiss of them not to take up the offer."

This says it all, pretty open admission of widespread misuse and exploitation of the system by landlords; I can't imagine why they get such bad press ?

Link to post
Share on other sites
1 hour ago, GodlessEndeavor said:

https://www.mortgagesolutions.co.uk/news/2020/07/22/landlords-with-bounce-back-loans-denied-new-mortgage-finance/

"Banks say that if a landlord has applied for the government loan, it is evidence that their business is struggling. "

"Andrew Montlake from broker Coreco said: “Given the nature of the bounce back loan and its ready accessibility, it seems natural for many businesses and landlords to take advantage of this so they have it as a ‘just in case’ provision. It does not necessarily mean that that they are in any kind of trouble at all. You could argue that it would be remiss of them not to take up the offer."

"A spokesperson for TMW said: “We don’t decline applications just because someone took a bounce back loan. However, if someone had a loan that was still to be repaid, it would be considered as part of the holistic assessment of the mortgage application.”

 

So it seems that if you took the money "just in case" then it's fine - unless you've already spent it on something else!!  If you just tucked it away somewhere then all you have to do is pay it back and you're good to go.  I would imagine that's going to be quite a bit "IF" for certain less scrupulous individuals.

Link to post
Share on other sites
39 minutes ago, stop_the_craziness said:

So it seems that if you took the money "just in case" then it's fine - unless you've already spent it on something else!!  If you just tucked it away somewhere then all you have to do is pay it back and you're good to go.  I would imagine that's going to be quite a bit "IF" for certain less scrupulous individuals.

How much is a "lightly used" supercar worth HAHAHAHAHA

Link to post
Share on other sites
2 hours ago, stop_the_craziness said:

So it seems that if you took the money "just in case" then it's fine - unless you've already spent it on something else!!  If you just tucked it away somewhere then all you have to do is pay it back and you're good to go.  I would imagine that's going to be quite a bit "IF" for certain less scrupulous individuals.

Hang on, weren't we told by someone on here they'll just use this bounce back loan as a deposit for the next addition to their portfolios? 

Genuinely surprised banks are holding out; do they suspect that someone who got a bounce back loan is more at risk of simply walking away if SHTF ?

This leaves cash buyers who take the loan out as part of their capital.  Cannot imagine this being a big % though.

Interesting times indeed.

Link to post
Share on other sites
5 hours ago, blackhole said:

Hang on, weren't we told by someone on here they'll just use this bounce back loan as a deposit for the next addition to their portfolios?

That is precisely the sort of thing banks do not want them to do.

If someone has more debt, then that has to be taken into account when deciding how good a risk they are. That is just business as usual .

On top of that, to get a bounce back loan you have to certify a negative effect from covid or lockdown. Its often not huge, but a lender will want to know what it was

Edited by gp_
Correction
Link to post
Share on other sites
13 hours ago, gp_ said:

On top of that, to get a bounce back loan you have to certify a negative effect from covid or lockdown. Its often not huge, but a lender will want to know what it was

 

Link to post
Share on other sites
30 minutes ago, Hullabaloo82 said:

Interesting to see if this applies to non landlords. I'm aware of a few people who saw it as a cheap way to do up their house and bundle it into the mortgage before repayments start. 

Unless your house is your business premises, surely drawings/salary/dividend will need tax paying on them, which makes it a fairly expensive loan?

Link to post
Share on other sites
6 minutes ago, Tulip_mania said:

Unless your house is your business premises, surely drawings/salary/dividend will need tax paying on them, which makes it a fairly expensive loan?

Like any other loan no tax due on taking or repayment. 

Link to post
Share on other sites
13 minutes ago, Tulip_mania said:

Unless your house is your business premises, surely drawings/salary/dividend will need tax paying on them, which makes it a fairly expensive loan?

It will likely lead to a tax saving, in fact.

1. Take out loan

DR Cash

CR Non current liabilities 

2. Buy things

DR Inventory

DR Cost of Sales

DR Vat

CR Cash

(Then charge inventory to cost of sales as you go along)

3. Assuming you can get the mortgage in a personal capacity, introduce it into the business as capital;

DR Cash

CR Shareholders equity

4. Pay off loan (if done within a year, interest free)

DR Loans repayable

CR Cash 

How's about that? Where does anything hit income there? Interest free loan and a nice vat and income/corporation tax saving to offset the interest you'll pay on the higher mortgage. Tidy tax saving to be honest as you're effectively doing a big job with no revenue to offset it so aa long as you charge it all to consumables/expenses and don't capitalise anything i wouldn't be surprised it if wipes out a lot of some traders already artificially deflated profits or at least puts them below the income tax threshold. Unless HMRC develops some wuite sophisticated analytics it won't be immediately obvious either (especially not in a "massive apocalyptic recession" where we expect people's profits to collapse) To be fair, if it works out some money goes into the economy and we/HMG don't lose out on the cash at least. Keeps a few more in a job for a few months at least. 

If the market crashes though or banks start refusing to lend I suspect you will see a lot trying to go bankrupt or winding up to avoid repaying the loan. That's where this will get interesting as HMRC might then take a look into how loans were spent. Taking out a business loan to spend on a personal property and then winding up the business to avoid repaying is arguably misfeasance (unless any insolvency practitioners reading can tell me otherwise?) and will lead to personal liability for the debt. 

Of course, what will actually happen is the government won't want to be seen as the baddie so there won't be any scrutiny, it'll just be a case of "hard luck, mate, business didn't work out, never mind" and people will walk off free with a £50k extension which the taxpayer will be paying for for years to come, which is what is frustrating about this whole thing. 

Link to post
Share on other sites
1 hour ago, captainb said:

Like any other loan no tax due on taking or repayment. 

No tax to the business, however personal tax on money out of the business should be due? I think what @Hullabaloo82 suggests involves  the business paying for the extension, then the owner taking out a personal mortgage and inserting that into the business as Capital to pay off the BBL.

Link to post
Share on other sites
37 minutes ago, Tulip_mania said:

No tax to the business, however personal tax on money out of the business should be due? I think what @Hullabaloo82 suggests involves  the business paying for the extension, then the owner taking out a personal mortgage and inserting that into the business as Capital to pay off the BBL.

Makes no difference; depending on the structure, you don't pay tax on drawings (it's a balance sheet movement, you pay tax on the overall net profit which will likely reduce as described above). Ltd companies, your salary is your salary regardless. Unless you suddenly give yourself a massive pay rise out if the loan your personal liability won't increase and the business's will go down as the credit side of the entry is on the balance sheet, not to revenue. Draw the cash down as if the business is doing a job and no requirement to pay dividend tax. 

Link to post
Share on other sites
17 hours ago, Hullabaloo82 said:

It will likely lead to a tax saving, in fact.

1. Take out loan

DR Cash

CR Non current liabilities 

2. Buy things

DR Inventory

DR Cost of Sales

DR Vat

CR Cash

(Then charge inventory to cost of sales as you go along)

3. Assuming you can get the mortgage in a personal capacity, introduce it into the business as capital;

DR Cash

CR Shareholders equity

4. Pay off loan (if done within a year, interest free)

DR Loans repayable

CR Cash 

How's about that? Where does anything hit income there?

It's a benefit in kind.

Link to post
Share on other sites
1 hour ago, Will! said:

It's a benefit in kind.

You're assuming that there's any kind of oversight over where this money is going; there isn't. As far as HMRC is concerned it's just paying bills and "investing" in the business.

Link to post
Share on other sites
2 hours ago, Hullabaloo82 said:

You're assuming that there's any kind of oversight over where this money is going; there isn't. As far as HMRC is concerned it's just paying bills and "investing" in the business.

Anyone doing what you describe would have to declare it on their tax return.

Link to post
Share on other sites
3 hours ago, Hullabaloo82 said:

You're assuming that there's any kind of oversight over where this money is going; there isn't. As far as HMRC is concerned it's just paying bills and "investing" in the business.


If its a Ltd company HMRC look at director loans and there are tax rules about them : https://www.gov.uk/directors-loans/you-owe-your-company-money

23 hours ago, Hullabaloo82 said:

Interesting to see if this applies to non landlords. I'm aware of a few people who saw it as a cheap way to do up their house and bundle it into the mortgage before repayments start. 

If you are a sole trader or in a partnership you can have some flexibility because of the blurry lines between personal and business finances, but blatantly spending the loan on home improvements is probably a breach of the (very unclear) rules.

If your business is a Ltd company, its more restricted. You can only only pay dividends out of (retained) profits. You may have profits that have been tied up in the business because you did not have the cash to pay them out (if you bought assets, kept some for working capital, etc.) so you might free some of it for dividends. You can continue paying yourself a salary, but not give yourself a big increase or bonus. If you give  yourself a loan then you have the problem with tax above.

Link to post
Share on other sites

Genuinely surprised by the level of naivety on display here. What director loans? Who's going to declare a BIK? Business takes a loan to keep it afloat, director/owner remortgages or sells a property to repay it at a later date in exchange for more equity. Who is going to make the connection? HMRC does not have these kind of resources. 

If people can't get their loans though or can't sell at the right price, that is when we are going to see somebody having to take a closer look and it will be really interesting to see how it pans out. 

The government will almost certainly write off the debt but then what is left of their fiscally responsible credentials? Going to require some monumental spin, that will. How will it play with PAYE voters who end up footing the bill either through austerity pay restraint or higher income taxes? By right, it should be open revolt but doubtlessly the bovine hordes will get distracted by something else and keep obediently voting blue, as ever. 

Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
  • Recently Browsing   0 members

    No registered users viewing this page.

  • 415 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.