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  • Debt & Negative Equity

    Buy to Let Interest Only - we were mis-sold



    I currently have 42 properties. I have been a landlord for 15 years. Some of these properties are on interest only mortgages, Now because of negative equity and constantly forced government reforms from licesing to compliance, benefit changes, lack of local council investment making some of these areas more deprived. The  rise in the claim culture, drugs and antisocial behaviour, make these investments un-desrable.

     If I knew then that this would be a lifetime job, filled with misery and stress and of which I would have no control, with these type of mortgages we would be stuck with them as things would change and trap us, I wouldn't have taken them on.

    Is there a movement on this anywhere? You know this doesn't just apply to landlords all interest only mortgages are the same, my sister has been paying her interest only mortgage for 25 years and now it's time to pay it off, they can't and with negative equity etc they will have to try and get a council flat and go bankrupt. Lots of people are in similar situations.

    To top it all now with the new tax implications and the introduction of universal credit, tenants getting poorer either by losing their underpaid jobs or experiencing a squeeze on their benefits. It certainly has its challenges.

    We are simply in a trap that we can't get out of. With negative equity and government changes that make it so damn difficult to now operate as a landlord successfully. We need a little help from somewhere,

    I wish I knew then that these mortgages would trap me. I would be forced to become a social worker, a family advisor, a mentor, a rubbish collector, a volunteer to help clean the local neighbour hoods, an accountant,  a ruthless admin assistant, a finance manager, an innovator. And for what?  To be a landlord, who is now seen as the enemy, with 20% of tenants either trying to sue you for harassment because they have had a letter for their arrears,  or wreck our  properties, don't or can't pay rent,, use them as factories to grow drugs, the list is endless.

    Could we get some compensation for them selling us something, that is really entrapment. Once they have you in, because of the lack of control we have on our own destiny, in this ever changing pool of ....... there is no way out.

    Sorry, feel a little better after that.

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    Hi Denise,

    Sorry to hear of your plight.

    I am afraid that you could not claim you were mis-sold as all interest only mortgages come with caveats and warnings about having a repayment vehicle in place for the end of the term.  If you did not have one, and were simply banking on property prices rising, then that is down to you.

    Furthermore, when you borrow  money, you are taking the risk and you should have understood those risks.  Lenders cannot be held responsible for things that change in the market place 10 years down the line.

    Neither can lenders be blamed for the type of properties you chose to buy, or the type of tenants you put into those properties.

    Your best option is to seek professional debt advice and see if you can wind down your portfolio or re-structure it.  Our debt partner, Landlord Debt Advisory, is the only FCA regulated company for this activity in the UK.  They offer a caring and professional service and have helped many landlords in your position.  You can call them on 0161 222 4311.

    I would recommend that you do this as a matter of urgency.  The longer this problem goes on, the harder it will be to solve, and the less options you will have.

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    Yes I quite agree. We seem to be moving to a society where people are looking for others to blame rather than themselves.

    Running a business is taking a risk.

    You take decisions and act on them based on your assumptions of the future. Some people will get it right, sometimes but luck more than judgement, while others will get it wrong, also sometimes not helped by a dose of bad luck. But such is life.

    As Vanessa says, the whole assumption behind interest only is that house prices will at worst stay static, although the base case is that they will rise, inflating away the debt. In the meantime, you have a much reduced monthly payment compared to those that are paying off the capital as well.

    Some of that free capital could be put to work in building a buffer fund in the eventuality that prices fall. But not everyone does this because they assume prices will rise unabated forever.

    Assumption is the mother of all f**kups. In business it's best to assume the worst, provision for it, but act on you base case scenario. That way even if your aim is off, you are still alive to fight another day.

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    Hi Clarasa,

    Thanks Vanessa.

    I'm the guy in the video Vanessa has kindly shared. I sense the sheer frustration in your post.

    As Vanessa says, there will be options for you.

    Your post reminds me of a case we completed earlier this year for a couple with a similarly sized portfolio where, through no fault of their own, it became virtually impossible to profitably manage. Our advice led to a recommendation to sell the majority of the properties and a manageable settlement was achieved for the negative equity realised.

    I'm happy to discuss this with you, initially without any cost. Feel free to call me today on 0161 222 4311.

    Regards,

    Tom

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    @clarasa

    The last two YouTube videos I did about 5 weeks ago targeted at new BTL investors, highlighted some of the issues you have had, in particular interest only mortgages. One of them - increase in interest rate has already occurred.

    Geoff (NOT a professional video maker ha! ha!)

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    Full time Landlord in WestYorkshire, mentor and property education to new and inexperienced PRS investors. 25+ years of working knowledge. Accredited NLA member http://www.landlordgeoff.co.uk [color=#800080]


    A Major Solicitors Practice who specialises in No Win No Fee is looking at the BTL sector for miss selling of Mortgages

    They are looking at Mortgages that have been sold since the introduction of S24

    I was asked to there office to have a chat about the PRS

    The Tack they are going down is who gave the advice about Mortgages when they were sold to a Landlord  and was S24 ever mentioned

    Most of us here fully understand S24 and the impact

    But a great number of Landlords have purchased BTL since Osborne announced S24

    I know a lot here would say quite rightly its up to the Landlord who is borrowing to check out the Tax Situation before preceding

    There tack as far as I could make out was this Did The Mortgage advisor mention S24 and did he advise you to take advice ????

    Property sourcing companies are also being looked at ???? who were arranging BTL investments for there customers

    The ambulance chasing may soon start

    If I was involved in sourcing or arranging a Mortgage I would  make sure you signpost your client to get Taxation Advice  and get there signature to say they understand the implications of S24

    I fully understand some would say its not my job GUV  but solicitors look for blame and they will come looking for advisors of Mortgages and property sourcing individuals

    even the GURU industry could be in line for a shock when they are asked fid you mention S24.

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    Learn Change and Adapt ?????


    From what you said, it Sounds like they have no idea. Buy-to-let is a business transaction, consumer protection laws hardly apply. Your expected to take own Tax advice before launching or growing  a business.

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    _________________________________________________________________________


    The above post is not financial advice, its often me rambling - passing time on a coffee break.
    If you are looking for the Best BTL Mortgage? Call the Specialist Team at Bespoke Finance.


    _________________________________________________________________________


    If it was Business we would pay NI on profits

    If It was a Business we would not have S24

    Every year when I have done my Tax Return I have completed Land and Property on the Return

    BTL is not a Business and you as a professional should know That Adam

    The pressure will build on Blame as Tax Bills rise and The investors who used Mortgages will look to blame someone if they were sold

    a mortgage after the S24 announcement

    You and I know a great number of folk don't understand S24

     am fairly switched on being an ex IFA and it took me a while to fully understand the beast

    The Red Herring is the Govt have said if your a 20% tax payer S24 doesn't effect you

    This is totally untrue and misleading IMO

    If I was still in the industry I would have had a declaration from the client advising that they should seek independent Tax Advice and I was not authorised to give Tax advice

    Time will tell on this one





     

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    Learn Change and Adapt ?????


    "Buy to let is not a business" ??  That's quite a bold statement. It's a legal requirement for me to submit full statutory accounts and we don't have S24 ??

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    If you are using a Company it is a business

    If you are an individual its Not and never has been

    Most Landlords are not in Business so its not a bold statement I am  stating a fact

    Its because of this rule George Osborne got away with S24 because its not self employment



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    Learn Change and Adapt ?????

    Agreed, the government don't want individuals owning buy to let, they will surely be taxed out of "business", or will they ?? wait for the budget.

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