Tag Archives: Mortgage

Northern Rock Injection

northern rock queue

The struggling bank may see as much as 10 billion pounds of cash from the government to ramp up mortgage lending. The Treasury has yet to make a final decision, which may also see the bank hiring new staff. Spokesmen for the Treasury and Northern Rock, which is due to unveil a new business plan in the next few weeks, could not immediately be reached for comment.

Northern Rock the first British casualty of the credit crunch, revealed that it had been forced to seek emergency support from the Bank of England in September 2007. The bank has been nationalized since early 2008 after attempts to find a private sector buyer fell through. Northern Rock has been shrinking its mortgage book and focusing on repaying a government loan since its nationalisation.

5 billion pounds of new equity would allow Northern Rock to write about 50 billion pounds of new lending, providing the capital is not eroded by bad debts. Could this be what the UK housing market is waiting for?
If Northern Rock offer sensible loans at resonable interest rates it could just be what the UK public needs.
happy days

Mortgage Rescue Scheme

mortgage rescue

The Government now has a £200m package of measures designed to prevent some of the most vulnerable families losing their homes due to repossession. The government scheme subject to a range of eligibility criteria is aimed at households who are eligible for homelessness assistance. In the scheme housing association will be able to buy part or all of the struggling homeowners home. The owners will then be able to stay on as a tenant at a reduced rent.

Does this sound familiar to you? I think the government has decided to offer its own Sell and Rent Back scheme to struggling homeowners. Using tax payers money of course!

To what extent will the government be able to help? well lets look at the amount involved £200m. With the 200m they reckon they will be able to help 6,000 homes avoid repossessions across England. his may seem like a large number, but compared to the ammount of yearly repossessions, this figure is but a drop in the ocean. In 2007, 27,000 homes were repossessed by their lenders as the homeoweners could not afford to pay their mortgages. This figure rose to 45,000 in 2008. This year the number of repossession will be set to rise 75,000 (CML estimate) as the recession takes its toll. 6,000 homes saved will only therefore be 8% of homeowners that will be able to benefit from the new scheme. What about all the other 92% of homeowners who face repossession?

Will this be opportunity for the investor with private sale and rent back schemes? I think so, but any investor getting involved in rental properties will have to be cash rich as most buy to let mortgages now require at least 25% deposit.

I’m so behind in blogging.. a sign of the credit crunch?

the credit crunch
the credit crunch

I’ve been really lame and haven’t blogged in ages, not blogging regularily since I got married really.
Is married life really such a drain on me?
or is it the credit crunch, has it affected me that badly?

To be honest its a combination with many things but mainly due to me being really busy with my work. Many tenants are in arrears, and the refurbishment of my house is just taking too long. The house is nearly ready now, just the kitchen and office left to do. The extension was finished some time ago, but we haven’t yet had the completion certificate from the council.
The house has been a great learning experience, I have done many light home refurbishments before, but this one was the most ambitious project I have undertaken to date. I’m lucky to have some good help and a very supportive wife.

In terms of the finance world many things have been going on that I should have blogged about and hopefully i;ll have time in the near future to ramble about them soon.
We have the nationalisation of Bradford and Bingley who own one of my favourite mortgage lenders Mortgage Express. Did they get in trouble by being too aggresive in their Buy to Let lending? too many instant remortgages?
Then we have the merger of the HBOS group with Lloyds TSB, which may spell the end of Birmingham Midshires my other favourite mortgage lender. Could they have been a little too keen to lend too?
Things are not looking good for the property investor at the moment. Property values sliding, Mortgage approvals dropping, house sales declining. Is it all going to be doom and gloom?
One things for sure, things can’t really get much worse can they??

Well hopefully the situation for the UK property market will improve in the next 6-12 months, until then hold on as its going to be a rough ride!!

Mortgage Express Instant Remortgage – The End

Whilst I was away I was informed that Mortgage Express, one of my favourite mortgage lenders had overnight pulled the plug on their instant remortgage product. Mortgage Express were the only major mortgage company to allow an investor to remortgage their property before owning it for 6 months. An instant remortgage product allows investors to remortgage a property to 85% of its surveyed market value. This is regardless of purchase price.

For example if you purchased a house for 60k and the surveyor agreed that the property is actually worth 100k the bank (mortgage express in this case) would lend you 85k as a remortgage on the day of completion. All you had to do would be to buy with 60k cash then the next day you would be given it back plus an extra 25k.

Of course not everybody has 60k in cash sat in the bank, this created a need for bridging loans companies to lend the cash to purchase the property for 1 day creating easy NMD (no money down) purchases. This market was very competitive with companies charging £500 to lend you up to 200k for one day. These bridging loans companies are not required as there is no decent provider for instant remortgages.

There are of course other companies who will do instant remortgages such as Natwest and The Bank of Ireland, but reports from other investors indicate that they are slow to offer and their rates are completely rubbish. Are there other ways to buy property NMD?

UK Lenders tighten lending

In the last 2 weeks or so ALL UK banks and lending institutions that I and my fellow investors use seem to have tightened their belts and repriced their mortgage products. Fixed rates have gone up as well as variable tracker rates. Arrangement fees are also still stupidly high.

Even though UK Interest rates have recently come down or stayed the same for the last few months. These latest lending rate hikes are definitely a result of the US credit crunch and is a result of less money being available to the banks to lend out.

tighten belt

BMS fixed rate products have gone from 3 year 5.09% rates to 2 year 5.54% rates with heafty arrangement fees of 2.5% of the loan amount (even this poor rate has today been pulled in favour of possibly an even worse product).

Mortgage Express who do instant remortgages for investors have repriced their 2 year fixed rates at 6.09% making most deals not possible for investors who need the instant remortgage product.

As it is now harder for borrowers to get decent mortgages to buy homes, this will directly reduce the ammount of sales as people cannot buy the homes they want to at todays price. The rate hikes mean that affordability will be reduced. This may in turn bring a downturn in the market. I’m a little worried are you?

Bank rate cut to 5.25%

The UK Bank of England has cut interest rates to 5.25% from 5.5% following signs that the UK economy is slowing down. The Bank needs to ensure that growth and inflation are balanced but the move today was widely anticipated by analysts after cuts in the US, where the Federal Reserve slashed its borrowing costs to 3% from 4.25%.

Even myself, I predicted that the prices would be falling. I should have put money on it, that the interest rates would fall in February. Well actually, maybe I did as the last 3-4 investment mortgages I took out were on variable rates so I should be slightly better off every month on these mortgages. A quarter point reduction in the rates would reduce the payments by about £25 on each of these mortgages.

Not all mortgage lenders will pass the interest rate cut onto their customers soon, limiting the cut’s impact on the economy. Some banks will not cut their rates until the 1st of the next month giving them over 20 days to make some more money from their customers.

Savers will be worst off from the interest rate cut. Most banks will pass the changes in interest paid on savings almost immediately. Isn’t that nice of them?

Why I like Property Investment So Much

house of money

Why do I like property investment so much? In my eyes Property Investment seems like an easy lazy mans way to make some money and provide passive income. Why do I think this?

I can only speak with my own experience and this is my experience of property investment:

In February of 2002 I bought my first house, this was against advice from my work colleagues and friends who were telling me houseprices which averaged £92,256 (Halifax data) were too expensive and will drop any time soon. Against all the advice I recieved I decided to take the plunge as I needed somewhere to live and I didn’t want to rent forever.

My first house was a 2 year old 3 bed semi-detached property on a fairly new estate. The house had been repossessed by the bank and the estate agent had it on the market for a few months with little interest. The house was on the market for £80k so I put an offer in for £78k It was a price that I could comfortably afford. To my disappointment the agents already had a higher offer and were going to proceed with that one. I was quite dissappointed and carried on my search for a house.

About 3 weeks later the same agents called me back to ask me if I was still interested in the property as their buyer had pulled out. Of course I was still interested, she then proceeeded to ask me if I would like to pay any more for the house? Well of course not! I asked her if I needed to pay any more to secure the house and she said NO. I think she was a little inexperienced as an agent, but a very nice lady. And bingo that was my first purchase.

Boom, Boom, Boom!!

I lived in that house for a couple of years, doing some small home improvements to the garden, bedrooms etc. By mid 2003 the UK had experienced a boom in house prices, the average UK house price then was £132,589 (Halifax data). The house that I bought was now worth about £110k estimated by comparing average sales of similar properties in the area. I was more than delighted with this as I could sell the house and make a cool £30k in profit. The profit was on paper but I’d never made so much money without doing too much before. I was hooked I wanted more, more, more!

I wanted to repeat this sucess and went about looking for books that could teach me, I was hungry for more information and quickly put together a small library of property investment books. Check my recommended book list. After reading these books I put together a plan to buy more houses. I bought my second and third property in 2004. In 2004 I bought four properties. In 2005, 2006 and 2007 I kept buying and buying going on and on.

Today average UK house prices are at £197,039 (Halifax data for December 2007) my first house is now worth about £145k again estimated by comparing to other sales in the area. That is very healthy growth in value and I think we are safe in thinking that this growth is in line with the belief that UK house prices double every seven years. I now have over 40 proprties in my portfolio which is worth nearly £4million on paper. Business is good, except for some problem tenants, but tenant problems are just part of the job of being a landlord.

Oh BTW I’m not too worried about the property prices dipping this year as I’m in it for the long term.

Interest Rates Down to 5.5%

Thats right Interest rates down to 5.5% and I’m about a week late to report this but is it really news?

The Bank of England last week dropped their base rate to 5.5% the first drop in rates in 2 years. Economists predict that rate will reach 5% by mid next year.

Save £21, Merry Christmas!!

On a mortgage of £100k the annual interest is £5750 at the old rate. At the new rate it would be £5500. Thats a whole £250 cheaper a year, on someones monthly mortgage payments thats a whopping £21 cheaper every month. Nothing really to right home about, thats less then £1 per day cheaper.

Interesting things are happening on the new mortgage side of things though. Confidence in lower interest rates for the near future is high. Fixed rates are falling, lenders are lowering their fat arrangement fees, things in general are looking better for investors. The best rate for investors at the moment is from..

Yup you guessed it BMS. Birmingham Midshire Solutions have released a 5.09% 3 year fixed rate with only 1.5% arrangement fee. This is THE best rate to come along in months so I bet investors will be scrambling to get it. I would love to take advantage of the new rate, but i’ve got to find a house to buy first!

Best Mortgages for the BTL Investor

as a keen BTL investor I have used many different mortgage companies and here is my current list of best and worst lenders. they are rated by a mixture of speed to offer, speed to complete, rate of their products.

The Good

1. BMS – Birmingham Midshires.

speed to offer is excellent and no problems with completions either. i’ve had valuations booked the same day as my broker has instructed them. They products are amongst the best out there. the only thing that lets them down is they only offer 85% of purchase price for their instant remortgages.

2. MX – Mortgage Express.

Speed to offer is good, but they sometimes have delays, no problems with completions. Product wise they are quite competitive and used to offer a really good five year deal. They are one of the only lenders who do instant remortgaging to 85% Value of property.

3. TMW – The Mortgage works.

Speed to offer is ok, overall speed is consistent. They have good products for limited co’s but require you to use their solicitors to check everything out. no instant remortgage.

4. Bristol and West Mortgages.

Speed to offer is average, overall speed is consistent. Some of their products allow the rental to be 100% of the mortgage payments, which makes it easier for some deals to stack. no instant remortgage.

5. TMB – The Mortgage Business.

Speed to offer is slow, overall speed is consistent. They have a product that has NO rental calculation allowing you to purchase by using 15% deposit. The rates are not brilliant and you can only have one of these at any one time. Perfect if you are buying a property to sell on ASAP as their is no rental calculation which means you can buy more expensive properties.

The Bad
I only have one at the moment read: http://www.dave.so/property-investment/gmac-cannot-meet-completion-dates-rubbish/

GMAC – RFC

Speed to offer is quick. speed to completion is terrible, they have not managed to meet 1 completion date in 3 mortgages with them. The rates are average, but they offer a high LTV of 89% and also have a 100% rental calculation making this company useful for deals that are hard to stack.
even though i keep going on about them and their bad punctuality with completions i may use them again as they have a useful product.

GMAC cannot meet completion dates – Rubbish!!

this is the second mortgage that i’m trying to complete on with GMAC RFC.
they have been an absolute nightmare according to my solicitor.
both times GMAC have not been able to meet the completion date and requested more information such as asking for mining reports at the last minute when there have been no problems with subsidence. these kinds of questions should have been made way before the completion date, NOT last minute.
i have a third application going through with them and they have messed that up already. needing me to confirm if i am a first time buyer or not??

i guess i can say that they are being consistent at least. consistently appalling

benefits of using GMAC RFC

GMAC are currently one of the only BTL Lenders who will allow a 89% LTV, only requiring you to put down an 11% deposit.
the rental coverage they require is only 100% of the monthly mortgage payments which means that its easier to get deals to “stack” using this lender.

is 100% rental coverage enough?

mortgage payments £520 per month, rental income £520 per month, is this enough to cover all bases?
well no not really as buildings insurance usually amounts to £15 per month and the safety checks are about £40 annually. 100% coverage is not usually enough as you may have maintenance and void periods to consider.

what we need to remember is that the rental figure the lenders use to consider your application is the figure provided by the valuation surveyor. this figure is usually not the same as the actual figure that you are receiving. the actual rent received is usually slightly more which will help with the maintenance and void periods.