Hi,

i have been thinking of capital raising off some buy to let properties and then buy a residential property to live in .I could then remortgage my home with a flexi residential mortgage and use the money for auctions.I was thinking of doing the same for my brother and then our finances would be very well set up for auctions without having to bother with bridging.This has to be the cheapest way to raise finance and have it at your finger tips at lightning speed.

Which lender would do this on a interest only basis, with a LTV of 75%, for a self employed landlord who's main source of income is from renting property?

Thanks for your help.

(26-09-2012 08:20 PM)Bill_Morgan Wrote:  Hi,

i have been thinking of capital raising off some buy to let properties and then buy a residential property to live in .I could then remortgage my home with a flexi residential mortgage and use the money for auctions.I was thinking of doing the same for my brother and then our finances would be very well set up for auctions without having to bother with bridging.This has to be the cheapest way to raise finance and have it at your finger tips at lightning speed.

Which lender would do this on a interest only basis, with a LTV of 75%, for a self employed landlord who's main source of income is from renting property?

Thanks for your help.

You would not be allowed to raise finance to purchase BTL property if you have a residential flexible offset resi mortgage.
You can raise the money to buy a car, go on holiday.
You are not allowed to use resi mortgaqge finance for business purposes.
So I will leave it to your imagination as to what you put down for the reason you wish to use any offset facility!!!!
Being self-employed, no matter how successful, you will struggle to source a resi offset mortgage or even BTL mortgages.
Most lenders will not take into account rental incoime for affordability.
Lisa Orme is a mortgage broker who posts informnative posts and she could be an appropriate channel to make some provisional enquiries with.
However you must not mention that you might wish to use some resi-offset mortgage finance for business use.
That £50000 Beemer would look good on your drive wouldn't it?

Thank you Paul.

As this is residential I can't give you any personal advice here Bill but please do drop me a line.

However is there a lender that will lend to a 'unnamed' FT property investor, IO, 75% on an offset mortgage - not a hope in hell!

There are actually only a couple of offsets available anyway, 75% IO is nigh on impossible unless you have proof of repayment vehicle (property is ok if current equity can pay off the but mortgage min 150k equity in any single property not aggregated).

Lisa
http://www.keys-mortgages.com

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Just to add Paul is right that most if not all lenders will refuse borrowing for business purposes however most are ok with purchase of investment property.

Lisa

(27-09-2012 10:17 PM)Lisa Orme Wrote:  Thank you Paul.

As this is residential I can't give you any personal advice here Bill but please do drop me a line.

However is there a lender that will lend to a 'unnamed' FT property investor, IO, 75% on an offset mortgage - not a hope in hell!

There are actually only a couple of offsets available anyway, 75% IO is nigh on impossible unless you have proof of repayment vehicle (property is ok if current equity can pay off the but mortgage min 150k equity in any single property not aggregated).

Lisa
http://www.keys-mortgages.com

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Just to add Paul is right that most if not all lenders will refuse borrowing for business purposes however most are ok with purchase of investment property.

Lisa

Your last point was interesting Lisa; I believed that lenders would look upon BTL property as a business and would therefore not allow finance raised via a resi mortgage to be invested in BTL property.
I have never seen the logic of such on the basis that any drawdown on a resi offset mortgage for investment purposes gives a lender 2 chances to recover the total loan as they could have a 2nd charge applied on the investment property in the event of payment default.
But as you say bit academic as obtaining an IO offset resi mortgage for this guy's purposes is effectively impossible unless you defined repayment vehicles and a 'normal' income of a required amount.
It does seem bizarre that entrepreneurs; like small LL are consindered less than a bakable prospect but that if you are a wage slave then you are seen as better risk!

Not all lenders are ok with it but most are, however as most won't lend on resi to f/t investors its a moot point!

I could go on all day about the amateur landlord vs professional landlord vs employee debate!

Lisa

In principle Bill you have a great strategy. Unfortunately it falls down in the practicalities of getting a main res mortgage in today market.

Which lender would do this on a interest only basis, with a LTV of 75% ....none, forget about offset versions, virutally no lender will now go above 50% ltv for a main res mortgage for interest only with no repayment vehicle i.e. ISA or whatever.

As I have explained previously on different threads, there are tens of thousands of people currently sitting on main res interest only mortgages with no hope of being able to repay them. They will be forced to sell the property, usually at the point where they are in retirement. Lenders are bracing themselves for the negative publicity that will follow.

Sensibly they have this year chosen to stem this flow by refusing to grant new high ltv interest only main res mortgages

a self employed landlord who's main source of income is from renting property . for most main res lenders that is not an acceptable source of income, so therefore it counts as no income...no income equals no mortgage.

The reason is they view it as unstable. A rental void can mean the income disappears at short notice. You may argue that it is no less stable than other forms of self employment....it doesn't matter...its their ball so its their rules



On the different issue of what you can and cant do with an offset mortgage....using an example to illustrate it

* you have a £300,000 property with £100,000 mortgage on it
* you have sufficient provable income to be granted a £200,000 mortgage
* your truthful reason for the additional £100,000 is it is to be used to purchase additional investment properties
* you opt for an offset mortgage
* you pay off your old £100,000 mortgage
* you put the additional £100,000 into the savings account linked to your mortgage
* you earn no interest on your £100,000 savings but equally the interest on your mortgage is nullified on a £ for £ basis by each pound sitting in your savings account.... thus you pay no interest, only capital monthly payments
* your £100,000 savings can be drawn out at any time, in part of in whole, without giving any reason for the nature of its use...think of any savings account you currently own, do you have to account for what your intended expenditure is when you make a withdrawal?
* you can replenish you savings account, by any amount at any time, when your capital becomes available again

(27-09-2012 11:34 PM)Lisa Orme Wrote:  Not all lenders are ok with it but most are, however as most won't lend on resi to f/t investors its a moot point!

I could go on all day about the amateur landlord vs professional landlord vs employee debate!

Lisa

I'd like to know at what point as far as lenders are concerned does an amateur LL become a professional one!!!
I've been doing this for 6 years now, but still consider myself an amateur!!.
What sort of provenance do lenders need to consider one a professional!!!?
Seems so subjective!?
As far as defined repayment vehicle for an IO resi mortgage, I have even heard they won't accept a share ISA!!?
Do you have a prescriptive list of acceptable defined repayment vehicles as far as lenders are concerned or do they each have their own foibles as to what they will consider.
Perhaps FTB wishing to try for a IO resi mortgage should know a few years before attempting an application to get themselves set up with a relevant RV.
In addition to a massive deposit that would be the only way I can see of anyone getting a IO resi mortgage!!

Re professional vs amateur; each lender differs and some want one not the other. TMW want you to have been a landlord for at least 6 months but Paragon want 3 years to do HMOs. BM only want the amateur landlord with a job, many of the high street lenders doing buy to let feel similar such as Abbey, Accord and building societies.

I'm doing a resi mortgage now with share ISAs as a repayment vehicle, most will accept as long as the current value equals the mortgage.

Again each lender is different but typically the fooling are acceptable:-

Savings
ISAs
Pension
Endowment

The current values need to equal the mortgage.

Sale of property (resi or investment) can be used by some if the loan to value is low enough and there's typically a requirement for at least 150k equity or the equivalent of the mortgage.

You won't even get a look in on IO these days above 50% LTV for many lenders and a few will consider up to 75%, one at 80%.

But it's no bad thing; my purely personal view is following the next boom the next bust will be accelerated by the huge numbers of IO mortgages coming to fruition.

Lisa
http://www.keys-mortgages.com

a simplistic definition of a professional landlord Paul is someone who's sole source of income is derived from renting property

(29-09-2012 07:59 PM)Lisa Orme Wrote:  Re professional vs amateur; each lender differs and some want one not the other. TMW want you to have been a landlord for at least 6 months but Paragon want 3 years to do HMOs. BM only want the amateur landlord with a job, many of the high street lenders doing buy to let feel similar such as Abbey, Accord and building societies.

I'm doing a resi mortgage now with share ISAs as a repayment vehicle, most will accept as long as the current value equals the mortgage.

Again each lender is different but typically the fooling are acceptable:-

Savings
ISAs
Pension
Endowment

The current values need to equal the mortgage.

Sale of property (resi or investment) can be used by some if the loan to value is low enough and there's typically a requirement for at least 150k equity or the equivalent of the mortgage.

You won't even get a look in on IO these days above 50% LTV for many lenders and a few will consider up to 75%, one at 80%.

But it's no bad thing; my purely personal view is following the next boom the next bust will be accelerated by the huge numbers of IO mortgages coming to fruition.

Lisa
http://www.keys-mortgages.com

Yes I agree with your contention re the next bust on IO resi mortgages.
15 years ago I was thinking this when all the endowment problems arose.
I think think a similar bust will also occur to LL with IO only mortgages over the next 10 years or so who will be in such a position that they will not have any positive equity and will be bankrupted.
I don't expect property valies to recover til 2008 values for about another 20 years.
There will be some nervous LL over the coming years who bought at the top of the market.
I am one of them!!
I reckon LL will lose most of their capital they invested to prevent being bankrupted.
I think it hindsight most of these LL will have been better off leaving the money in a high interest savings account and receiving about half of the return they have made on property..
Yes less return but you still would have your capital in liquid cash; hindsight is a wonderful thing isn't it!!??