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  • Property-a-holics

    Some thoughts on NMLI

    I asked the below question on the NMD guru thread but no has answered and got distracted with other issues, could I have your thoughts on the below kind people.
    a) if you are doing NMD and borrowing the 'deposit' how are they getting around the lenders, as I thought the money would have to be in an account for x no of months to show no-one leant it to you like the bridger? So if it is borrowed why does this not flag up with the lenders?
    b) If you are buying NMLI with a deposit at the net price 70k (MV 100k), can this be borrowed, would the banks mind?
    c) Assumin you buy at the net price and remortgage 6 months later to 100k, why is the policy to still value the property for a remortgage at the price you paid 6 months before ie 70k even if the property is worth 100k?
    d) If he values it at 70k when will they allow you to remortgage to the value of 100k to pull out the deposit?
    e)How can you persuade the surveyor to let you remortgage at the value?
    f) Does a Mortgage packager (not broker) help?
    Any tips on doing it ethically."
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    Fernando,
    .a Why would you want to "get around" the law when you know what you are doing is illegal?
    b. Yes, the bank would want to know the source of the deposit and may require evidence of where the funds are kept. i.e. savings account.
    c. The policy is to value the property at what the valuer thinks it is worth in the open market. This is to protect YOU as much as the lender.
    d. No.
    e. Why would you want to "persuade" him? You have paid him for his professional opinion. You can offer comparables but some valuers do not like that and it makes them suspicious. If you are confident in your property, you have little to worry about imho.
    f. No, unless of course you want to "manipulate" the whole transaction and pay for the privilege of compromising yourself.
    Tips to do it ethically:
    Get your sums and research correct from the get to. Put in 25% at the net price. Remortgage when circumstances allow.
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    Hi vanessa-ta for this.
    What I meant was:
    a) I dont believe in NMD but was curious how are the gurus are constructing these transactions if you are suppose to have a deposit in the bank: when doing nmd you borrow this, do the lenders not ask where the desposit is coming from?
    b) I meant, if you did not have the 25% could you borrow this from an investor, would the banks be ok with this?
    c) I read somewhere if you buy at the net price of 70k and try to remortgage 6 months later at the 100k value, even if the property is worth 100k, because the purchase went for 70k 6 months prior surveyors are valuing only 70k? Why is this?
    d)If the OMV is 100k but as you only paid 70k, if he values this at 70k even though MV is 100k, when you can you pull your deposit out?
    Thanks for the advce.
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    Hi Fernando
    I replied on the other thread last night just as I hit submit my battery died!
    Here we go again:-
    a) Lenders do spot checks to confirm you have the deposit, that it is yours and that it has accrued over time. A client was recently asked to produce 12 months worth of statements! The reason they spot check is so brokers and clients can't try to cover up with 'instant' deposits. If you pull out when you can't produce the goods they'll likely flag you for fraud - they're not daft!
    b) Yes they mind! They want you to have your own money invested in the deal. Buy to let is not like your own home with no money invested you may be tempted to walk away if things don't go to plan. Lenders do not wish to bear all of the risk and if you borrow the money you are 100% geared.
    c) That is not the policy at all BUT if you have not done anything to add value the lenders and valuers take the view the property is worth as much as someone is prepared to pay for it. It's perfectly possible to get a remortgage or further advance after 6 months but I always caution investors not to bank on the money. If it happens it's a bonus; if you can't afford to leave the money in don't buy in the first place!
    d) No definitive timescales other than 6 months. You can apply after 6 months and may or may not get it. If you've added value it's better, if you bought cash/bridge then refi it's better, if you wait 12 months and do a complete remortgage it's better.
    e) You can produce comparables; 3 solds in last 3 months is ideal. If you can't produce those then it'll be tough. Depends on so many factors again no definitive.
    f) Find a packager!!! No they don't make any odds; sounds like you've been speaking to someone who did deals before the credit crunch and hasn't done any since! Packaging doesn't really exist outside of sub prime these days. Lenders caught on that some packagers had valuers in their pockets so it's not likely to return for a long time yet while people are still trying to do NMD!!
    Tips on doing it ethically - save up or partner with someone who has the money. This is then easy as just both go on the mortgage, it doesn't matter who produces the deposit then as long as they're on the mortgage.
    Lisa
    PS Stop believing all that some people are obviously telling you!
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    Lisa All comments are for education and information purposes only and do not construe as advice or a financial promotion. No liability is accepted for comments made. If you wish to receive information in an advisory capacity then please contact me about becoming a client. www.keys-mortgages.com

    Hello Lisa- great video you did with Vanessa by the way.
    Thanks for the clarfication re the above always great to hear the no BS way with you.
    Sods law with the battery!
    Re:
    a) I understand this. So how are the NMD's packagers getting around the lenders with instant deposits, as I cant imagine how they are doing this?
    c) I thought this was because the lenders wanted to you to keep the money in the deal as long as possible as if you took your money out 6 months later you were effectively buying the property NMLI?
    I find it strange that even though valuers take the view a property is worth what you paid i.e. 6 months earlier at c.70k if its is worth 100k in the first place, regardless if you done anything to it, it should be worth what similar comps are selling/sold for, 100k?
    PS- This is why I post here to get to know what the real truth is from guys like you, Vanessa, Rich, Rob, John who are all fab by the way.
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    a) I understand this. So how are the NMD's packagers getting around the lenders with instant deposits, as I cant imagine how they are doing this?
    >>> See my PS!!!
    Those that are getting away with it are simply getting away with it that’s the point. When clients get spot checked they pull the cases. Client ends up with black flag not packager – they don’t care! I’ve had packagers tell me they’ve had cases pulled; I’ve had clients tell me they’ve had cases pulled. Less and less are getting through but companies only make their money while the myth persists.

    c) I thought this was because the lenders wanted to you to keep the money in the deal as long as possible as if you took your money out 6 months later you were effectively buying the property NMLI?
    >>> Yes same thing; they don’t want a 100% geared property they want you to have some money invested in it. BUT if you can prove its worth more and demonstrate this then the lender MAY allow you to withdraw some cash. Unlikely to get everything out even on best deal.

    I find it strange that even though valuers take the view a property is worth what you paid i.e. 6 months earlier at c.70k if its is worth 100k in the first place, regardless if you done anything to it, it should be worth what similar comps are selling/sold for, 100k?
    >>> But the issue of comps is paramount; there are so few sales at present most people can’t produce actual sold comps. You’ve answered your own question! Even if you can lenders want you to have something invested in the deal. We have a steadily falling property market; that 10-25% discount might evaporate so lenders are being cautious and valuers don’t want to be sued for lenders losses.
    >>> Look at this a different way. Imagine you’re a valuer. A lender asks you to go and value a property that an investor has said they’re paying 70k for. You think it might be worth more but why are they only paying 70k for it? Now if the lender ends up repossessing that property and makes a loss because it sells for 60k at auction they’ll come after the valuer (you!) for those losses. If that was your business what would you put on the val report? Do you give a crap that the investor thinks its worth 100k, do you give a crap that next door sold for 100k? No! But you do give a crap you might get sued so you stick with 70k!
    Many valuers have lost their businesses because they can’t even get PI insurance due to this – would you take that risk as either valuer or lender?
    Lisa
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    Lisa All comments are for education and information purposes only and do not construe as advice or a financial promotion. No liability is accepted for comments made. If you wish to receive information in an advisory capacity then please contact me about becoming a client. www.keys-mortgages.com

    Again completely agree with your point about companies and Barclays Jacob but that isn’t what Fernando and others are getting at. They want to do these things with Mortgage Works and BM Solutions et al – the high street buy to let lenders that lend you 75-80% LTV BECAUSE they have little to no money to invest in property.
    As for the valuer point of view; have to disagree with you. Most bank appointed valuers these days will not see any difference in value in 6 months from what you paid for it I’m afraid. We know that shouldn’t be the case but they’re often under instruction that way. The reality of the current marketplace rightly or wrongly.
    I don’t like disagreeing with you as we’re very much on the same wavelength but many of your comments just don’t relate to the UK buy to let marketplace which is where this NMD shenanigans goes on.
    If people come to me and say how can I do no money down at 60% LTV and pay high rates for the privilege I can help them but that’s not what they want to do.
    Kind regards, Lisa
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    Lisa All comments are for education and information purposes only and do not construe as advice or a financial promotion. No liability is accepted for comments made. If you wish to receive information in an advisory capacity then please contact me about becoming a client. www.keys-mortgages.com

    Fernando,
    Square peg, round hole comes to mind.
    1. Why should the lender take all the risk and yet receive none of the upside? While you might want to get rich, why should the lender help you when there is nothing in it for them?
    2. When dealing with an illiquid asset, determining the price is not so easy. You can look at other sales or similar items and then guess. It is only a guess.
    At the Property Investor Show held at the Excel Centre I noticed that there were many vendors in the hall who sold Diet Coke. Funny enough they did not sell it for the same price. Each offered a 500 ml bottle. The high price was £1.50 and the lowest appeared to be £1.20. At a shop off site I purchased the same item for £0.99. Even when the product is very much the same the price varied by vendor.
    Arbitrage is a valid business model (making a profit from the price disparity). Finding deals and then realizing the profit requires others to participate. If the lender does not want to play ball, that is their choice.
    Nothing down can work if you use a broad definition which includes the concept of using someone other person's money. That could be a lender. More often it will mean a joint venture partner or the seller. In a JV the profit is shared as is the risk. How they are shared is to be negotiated. Lenders do not share in the profit so they have no incentive to want to take on added risk.
    John Corey
    Follow me on Twitter-> https://www.twitter.com/john_corey
    https://www.ChelseaPrivateEquity.com/blog
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    John Corey 


    I host the London Real Estate Meet on the 2nd Tuesday of every month. 11 years and running. If you have never been before, email me for the 'new visitor' link.

    PropertyFortress.com/Events

    Also happy to chat on the phone. Pay It Forward; my way of giving back through sharing. Click on the link: PropertyFortress.com/Ask-John to book a time. I will call you at the time you selected. Nothing to buy. Just be prepared with your questions so we can use the 20 minutes wisely.

    Two things Jacob:-
    1. Most lenders don’t even accept a Limited company for buy to let purposes those that do reduce the LTV and increase the rates generally. Also personal guarantees will be required and this can often put off the cash investor. You can as I said solve it though by simply buying jointly with the cash investor but again they both are equally liable for the mortgage.
    2. Valuers are appointed by the lender, they are not independent. This is clearly a crucial point in you’re thinking. Most people simply opt for a mortgage valuation and this is there for the banks purposes only. Yes you have to pay for it but that does not make it independent it is purely there to protect the banks security. Your Barclays lending you refer to – that’s the same!
    Finally, the deal you talk about - the IHT one - completely different scenario. I do hope they took advice because there's no way HMRC won't be accounting for that at 700k for IHT purposes!!
    KR, Lisa
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    Lisa All comments are for education and information purposes only and do not construe as advice or a financial promotion. No liability is accepted for comments made. If you wish to receive information in an advisory capacity then please contact me about becoming a client. www.keys-mortgages.com


    LisaOrme said:
    a) i>>>> . Imagine you’re a valuer. A lender asks you to go and value a property that an investor has said they’re paying 70k for. You think it might be worth more but why are they only paying 70k for it? Now if the lender ends up repossessing that property and makes a loss because it sells for 60k at auction they’ll come after the valuer (you!) for those losses. If that was your business what would you put on the val report? Do you give a crap that the investor thinks its worth 100k, do you give a crap that next door sold for 100k? No! But you do give a crap you might get sued so you stick with 70k!Many valuers have lost their businesses because they can’t even get PI insurance due to this – would you take that risk as either valuer or lender?Lisa
    Lisa
    You are obviosly the expert on this,
    Firstly hello everyone, my apologies if this is an innappropriate here or my etiquette is not correct...I am new to the forum and new to this business, I have access to some money and I am researching a buy to sell strategy, hoping to source BMV property, with small minimum or no refurb needed, and immediatly remarket. The implication of your comment is this will not work because potential buyers who require a mortgage will have an immediate problem with their lenders valuation. Am I correct in this? Is there anyone who is currently making this strategy work, or is this problem unsurmountable when anticipating selling to first time buyers requiring mortgages.
    As I am writing this i am thinking perhaps I could pay to get a valuation before I buy so get an opinion on the market value and i am guessing the valuers have a professional database they can access which will register this valuation. Say the proverbial £100,000; buy cash at £70,000 say after some costs and a few months agree a sale at £90,000. Buyers require a mortgage lenders valuer looks at it. Finds my surveyors valuation of £100,000 and my purchase for £70,000. What will happen in this scenario? any guesses or advise. Many thanks in anticipation. John
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    Thanks John but I'm no expert! Your netiquette is fine :-)
    I think you'll have less of an issue with the valuation than you will with the 6 month requirement.
    To explain how this affects you; the CML conveyancing guidelines mean that the purchasers solicitors must declare to the buyers lender if the SELLER has owned the property for 6 months or less. It's commonly referred to as the '6 month ruke' though it isn't a rule - I only wish it was!
    For buy to let buyers this means there isn't a standard buy to let lender that will allow a purchase within 6 months. One will consider the purchase but lending will be based on the SELLERS original purchase price!
    For residential buyers it's a pain in the butt because lenders are proceeding or withdrawing indiscriminately. That's why I wish it was a rule; at least we know where stand then!
    I've seen lending pulled on the day of completion, after exchange! Even where lenders have already been informed of the situation. I'm also fully aware of those which have completed ok.
    Bear in mind many are legitimate purchases by an investor say at auction, complete refurbs or renovations and open market sales via an estate agent.
    If your buyer is paying cash not an issue!
    So it is this that will more likely hinder quick resales than the valuations.
    RICS valuations are recorded, though not all, and accessible by other valuers and if you don't do anything at all to the property it may well be more of an issue but again there's no guarantees either way!
    I advise investors to bank on holding for 7 months and cost accordingly. If your buyers mortgage gets pulled offer them the opportunity to rent until they can complete. 
    Kind regards, Lisa
    https://www.keys-mortgages.com
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    Lisa All comments are for education and information purposes only and do not construe as advice or a financial promotion. No liability is accepted for comments made. If you wish to receive information in an advisory capacity then please contact me about becoming a client. www.keys-mortgages.com