Monday, April 28, 2014

Nasty new lending rules!

First-time buyers face rent trap under new mortgage rules

Measures to prevent a fresh housing boom could push up rental costs and shut young families out of the housing market for years.....

Posted by tom101 @ 02:05 PM (4904 views)
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14 thoughts on “Nasty new lending rules!

  • mark wadsworth says:

    Heads they win, tails you lose.

    I don’t understand the concept of being “shut out from the housing market” though, young families are very much in the housing market, only right at the bottom and paying for the whole pyramid above them. They are the customers, not the suppliers.

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  • More talk about an end to Interest only Mortgages but not in respect of BTL which reinforces a major point in the article “Current rent levels give landlords a substantial premium over the cost of their mortgage”.

    So we have a mortgage arrangement which on a traditional residential purchase is effectively ‘outlawed’ – no wonder people are attempting to “game” the system

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  • Banks to be stress tested for 35% drop in house prices and 5% base rates

    Breaking news sky

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  • mark wadsworth says:

    Re what Jack C says, it used to be that owner-occupiers got a lower interest rate and BTL paid a higher rate because they counted as “a business”. So a lot of people lied, said the home was being bought to move in themselves, and then sneakily rented it out.

    That’s all flipped over, because strictly speaking, a BTL is a better bet as he can turf out tenants if they lose their jobs or retire etc, saving the banks the hassle of worrying about actual repayments of principal (the banks prefer IO mortgages with the occasional MEW, that way they can keep collecting interest/rent for ever from the same home). So no doubt, people will now being taking out BTL mortgages and then sneakily moving in themselves.

    What goes around comes around, I suppose.

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  • [email protected] – why not take out a BTL IO mortgage and then rent it out to yourself?

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  • I wonder whether you could get away with this. If you paid yourself rent and then paid the tax due, claiming the relief, I daresay that would be considered fraudulent, and anyway would no doubt would work out more expensive unless BTL rates become much lower than for owner occupants.

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  • MW (Monday, April 28, 2014 03:27PM) excellent summary of what now appears to be taking place.

    I know one BTL’r who is a joiner by trade and he earns a living exclusively by billing himself for the maintenance on his BTL portfolio. He regards roughly £1m worth of borrowing as the Banks problem not his !

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  • @jack – After all landlords work for the bankseters.

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  • mark wadsworth says:

    TT, well, assuming you are happy to be in breach of contract with the bank and are prepared to pay a smidge in income tax on net profits (as LTF suggests), then that is what you could do.

    Jack, that’s even more bizarre, why would anybody shuffle profits taxable at 20% (if at all) into self-employment income taxable at 29%?

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  • Why would you be in breach of contract? Your company would buy the property with an IO BTL mortgage and rent it out, then you as an individual would rent it. Why is that any different to freelancers who have their own companies and pay dividends to the shareholder which just so happens to be them? Does a BTL mortgage stipulate that the BTL’er and the tenant can’t be the same person?

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  • TT/MW, How about Peter takes a BTL mortgage out on House A and Paul takes the same out on House B, Peter then rents Pauls house and Paul rents Peters house.

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  • I know of two families that now have BTL mortgages, taken out in their 50’s, and then rented it out to their kids (in their 30’s) as a way of providing a decent house for the grandchildren, while housing benefit pays for the mortgage.

    This is just more rentier enslavement but hey – if it keeps the banks in business & house prices going up – what do the government care….

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  • mark wadsworth says:

    Enui, you think you are joking, but back in the day (when I worked in Germany 1990s), the tax breaks and interest subsidies for landlords were so incredibly favourable, compared to those for owner-occupation (which were favourable enough), that it actually made sense for A to buy the new home which B wanted and rent it to B, and B bought the house which A wanted etc.

    We actually advised people to do this, clearly, it only really works with close family where people trust each other.

    (All the subsidies just went into higher land prices of course).

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  • mark wadsworth (Monday, April 28, 2014 04:41PM) bizarre indeed or maybe he just pays himself cash in hand (lol)

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