Jump to content
House Price Crash Forum
Sign in to follow this  
OnlyMe

Buy-to-let Lenders Scrap Rent-to-interest Cover

Recommended Posts

http://www.businessmoneynews.co.uk/ext/bm/....jsp?story=1637

Buy-to-let lenders scrap rent-to-interest cover

14 Aug 2007

Buy-to-let mortgage lenders are beginning to make significant changes to their lending criteria by scrapping the rent-to-interest cover calculation when the investor is prepared to put down a larger deposit according to Mortgages for Business, the specialist UK buy to let mortgage broker.

A number of buy-to-let lenders have amended their lending criteria so if an investor is prepared to put down a large deposit there is no need for potential rental income or the investor’s earnings to be taken into consideration. Normally buy-to-let mortgages are granted because the rental income is a percentage higher than the monthly interest only mortgage payment.

Share this post


Link to post
Share on other sites
http://www.businessmoneynews.co.uk/ext/bm/....jsp?story=1637

Buy-to-let lenders scrap rent-to-interest cover

14 Aug 2007

Buy-to-let mortgage lenders are beginning to make significant changes to their lending criteria by scrapping the rent-to-interest cover calculation when the investor is prepared to put down a larger deposit according to Mortgages for Business, the specialist UK buy to let mortgage broker.

A number of buy-to-let lenders have amended their lending criteria so if an investor is prepared to put down a large deposit there is no need for potential rental income or the investor’s earnings to be taken into consideration. Normally buy-to-let mortgages are granted because the rental income is a percentage higher than the monthly interest only mortgage payment.

Sounds like a pretty good deal for the mortgage lenders!

Edited by Ash4781

Share this post


Link to post
Share on other sites

More from the article:

For example, for mortgages where the investor has put down at least a 30% deposit, GMAC will not take rent-to-interest in consideration. The Mortgage Works criteria means that for mortgages where the borrower has put down a 25% deposit, again rent to interest cover is not taken into consideration. According to recent Council of Mortgage Lenders statistics, the average buy-to-let investor borrows at 85% loan to value, therefore putting down a 15% deposit.

In other words, these lenders have factored in a fall in property values. The 30% deposit required by GMAC is extemely reminiscent of the Miles' Report in December last year that estimated that the value of UK property was about 30% speculation.

If Miles is right, then these lenders should still get their money back from the sale of the repossessed property.

Smart move, ar5es covered. Unless.....really nasty crash.

Edited by redwing

Share this post


Link to post
Share on other sites
More from the article:

In other words, these lenders have factored in a fall in property values. The 30% deposit required by GMAC is extemely reminiscent of the Miles' Report in December last year that estimated that the value of UK property was about 30% speculation.

If Miles is right, then these lenders should still get their money back from the sale of the repossessed property.

Smart move, ar5es covered. Unless.....really nasty crash.

Exactly, take the interest payments, then if things are looking bad repossess and sell for the original mortgage price - no lose for the lenders.

Share this post


Link to post
Share on other sites
Exactly, take the interest payments, then if things are looking bad repossess and sell for the original mortgage price - no lose for the lenders.

Yes, a fairly cynical bit of lending. But at least in a couple of years time we'll be able to laugh at the suckers who've lost their 30% equity.

There are a couple of questions though:

1. Where on earth are investors going to find a 30% deposit? They're going to find it harder to MEW as prices flatten, lenders are going to be a bit tighter at lending MEW, and yields are so low that a lot of BTLers won't be generating that kind of profit to fund this.

2. Are people really that stupid?

ps I know the answer to number 2.

Share this post


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...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 349 The Prime Minister stated that there were three Brexit options available to the UK:

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal



×
×
  • 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.