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  • Debt & Negative Equity

    Is negative equity a future problem for you?



    If you have 1-2 higher leveraged properties 75-80% or even no money down special MX mortgages in your portfolios.

    Are you concerned about a correction? And also the possibility of subdued capital growth? 

    Nearing a peak property cycle (18 years) , is it a case of waiting it out? 

    Some may regard this strategy as very unusual and opposite of what should be done. Especially in light of finance relief restriction

    refinancing at 5 year fixes and removing as much equity as I can now!

    the provision of some breathing space and kicking can further down the road.

    Essentially extractIng what growth there is now as a war chest for either future acquisition or refurb. I may be playing with fire, but it’s the only way of not selling now.

    everybody circumstances will be different. I sold off the poorly performing properties and doing below with the rest.

    The transactional costs of selling up and repurchase have played a part in the strategy as seems only real option.  Better to keep going ?  Leverage to max on cheap debt whilst it’s available and lenders are competing against each other  for your remortgage.

    The cheapest personal loan is 2.8%

    and by extractIng Equity at 2.85% to build either a deposit or add to existing war chest makes sense in my mind if I’m going to expand when during or after correction/ crash is over?

    If nearing retirement age or greatly affected by section 24 then the above will clearly not be part of your plan. But if your plan is never to sell or death exit strategy, then sort of makes sense.

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    Coming soon Investorsk8.com

    Wisdom - an integration of knowledge, experience, and deep understanding that incorporates tolerance for the uncertainties of life as well as its ups and downs. 

    I can see where your coming on this issue and it is an issue for a number of investors

    I recognised in 2007 I had a problem and I solved the Problem buy saving cash for more deposits to purchase more property

    so In my own mind I have two sections of property up to 2015

    Section One is 85% lending with the Likes of ME which has a further 8 years to run

    Section Two is 75% lending with the Likes of TMW

    Both sections make me a lot of positive cash and I am using this cash for my Build To Rent

    so I have highly leveraged  low ish leveraged and no leveraged  property

    after my Build to Rent is finished I will turn to the issue of the 85% Section One to sort out

    But Its a wake up call Don't Leverage to high.

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.

    Leverage is dangerous. But fortunately if I return to work it will be manageable.

    But a distinction between growing phase and retirement phase. The advice differs depending On age?

    Also if you have 200k debt position vs 2 million debt position ?

    There still might be a run for hills phase. Especially if margins are further eroded and better options in Equity markets.

    If interest rates were at 5-6% I would not be trying this option.

    Let’s look at example

    If I have a 65k guesstimate market value

    40k Loan and 25k equity. But by intial deposit money was 12k. I refinance to get     8k out.

    So now 48k Loan and 17k equity.

    ( the lender requirements means equity will be stuck always and never accessed as 100% will never make a comeback)

    So at least 20-25% money stuck and no access till 10-15 year timeframe. ( if capital gains occur)

    by extractIng now when it’s possible and available is better than waiting.

    The reason why people are concerned with debt is they mix personal debt with business debt in their mind. If I consider me getting back some or most of my loan  ( deposits)  If im going to face a potential negative equity position at future date. Might as well get most of my money out.

    Besides the simple thing to remember is the tenant is really servicing the debt

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    Coming soon Investorsk8.com

    Wisdom - an integration of knowledge, experience, and deep understanding that incorporates tolerance for the uncertainties of life as well as its ups and downs. 


    We have a video on this topic which explains why negative equity can be a problem for landlords:

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    You may find that your mortgage lender will take account of the leverage and rental income across your portfolio when applying for a mortgage in future, also if values fall the lender may wish to review their security.

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    The reason for asking my questions above is I’m in the process of refinancing but not done deal yet. Free legal and Free vals ( surveyor spent 5 mins only round property yesterday ) - hoping no downval occurs.

    After selling property I’m left with only 3 presently.

    I know how onerous PRA is because  was refused on direct application with RBS in January ( no reason given but suspect due to me not working and mx leverage)

    you are corect and I suspect The leverage across 1-2 properties will also be a factor in future and taken into consideration trapping leveraged BTL owners due to rules. I’m hoping they take more pragmatic view.

    Hence getting money out whilst I still can.   And locking in decent 5 year fix. SVR reversion is 4.90 currently.

    I know you can’t cover all possible outcomes but I try to gain best advantage and create multiple options for future.  Smile

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    Coming soon Investorsk8.com

    Wisdom - an integration of knowledge, experience, and deep understanding that incorporates tolerance for the uncertainties of life as well as its ups and downs. 


    It will be interesting to see what the New Owner of ME will allow near the end of the term

    There must be a reason why the Mortgage book was purchased maybe they will extend the l term with a new interest rate and a fee

    after all the Landlord will have had a good track record and that makes business sense to keep them even on capital and repayment

    a good deal is when both parties win

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.


    Who knows what Rosinca ( thankfully I have only one with them). or jasper will do ? Doesn’t appear to be playing nice though. Sad

    . See this consolidate fee on redemption.

    Edit- read entire thread - misinterpretation.

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    Coming soon Investorsk8.com

    Wisdom - an integration of knowledge, experience, and deep understanding that incorporates tolerance for the uncertainties of life as well as its ups and downs. 


    I am levering mine well alone

    They are not due to be repaid for 8 years and more

    Its my intention just to horde some cash and if at that point ie end of term I will see if they offer or Remortgage with another lender

    My broker said that the lender who took over from ME did it because it wants a licence to lend im not sure if that right but I am happy just to wait and see

    how it pans out


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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.


    The original post is inaccurate, read the comments and you will see it wasn’t a consolidation fee.

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    Thankyou for that. I guess I’m tired today ( lack of sleep- insomnia) - will take a closer examination of all the thread later after siesta. Wink

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    Coming soon Investorsk8.com

    Wisdom - an integration of knowledge, experience, and deep understanding that incorporates tolerance for the uncertainties of life as well as its ups and downs.