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Stuart Phillips

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Everything posted by Stuart Phillips

  1. Firstly, i think its your solicitors job to be explaining this to you, in the context of the wider contract. Its impossible for a snippet of a contract to be enough to judge. There will be other parts in the contract that stipulate your protections, warranties, and obligations and they will conflict with this clause. Whilst the freeholder has the right to build something within the planning rules and modify the building it seems, they surely will not have the right to affect your leasehold in the way you fear and wont be able to simply demolish the building. You need to check though because if the solicitor cannot see any protection from that then its not a contract you will want to sign. You need to have a conversation with the lawyer about what your risks are. I presume you are paying them several thousand pounds for this very service?!?
  2. Yeah, my first reaction would be one of surprise if the deal goes through and they see that money again. It should have been handled by the lawyer and its unlikely a home made contract will hold up in any legal proceedings. The buyers will also have to disclose this to their lender, who will usually deduct any cash incentives from the purchase price, which leaves the gift quite redundant in a lot of cases.
  3. They can only say no. Shy bairns get nowt as they say. A few of my clients have successfully knocked £10k off. Vendors know one in the hand is worth two in the bush these days, they are motivated to get a deal done asap. It's a very difficult question to answer, between investment and residential security. I'd be wanting a good 30 minute chat with someone to understand it in detail to be comfortable giving advice. I'd recommend you make use of a broker and give a few a call. Find one who's been through the last credit crunch, they will at least know how everything is connected and what the worst case scenarios look like.
  4. Its a fundamental part of the product im afraid. You get that 5 years at 2.14%, they also want that 5 years worth of interest from you. So the ERC can be seen as their guarantee on that. The only time lenders might do this is if you are taking a new deal with them or porting/miss-selling as Aston says. Otherwise you have to see it as a cost of doing business, and factor it into your calculations im afraid.
  5. I have to say your fear of a Labour government, in the face of what we have witnessed from this government over the recent months, is rather amusing! The general BTL market is practically dead right now. Because interest rates shot up so quickly, Stress tests on rental had to also. Now you need between £850 - £1000 rent to justify a £100k mortgage! If you have a sub 4% mortgage deal and have secured a mortgage offer then go for it, why waste that opportunity? You have 5 years to worry about what labour will do to you. 🤣
  6. Agree with Dino, keep the low rate for now, but overpay whatever you can afford when this comes to renew, because the mortgage interest rate you will pay on the otherside will be much greater than what any savings rates will pay. What you should look at though is an Offset account. That is a mortgage where theres a savings account next to it. Any balance in the savings is mortgage you are not paying interest on. If your mortgage is 6%, then thats equivelent to a 6% savings account (better actually as you dont pay tax). Whilst the money sits there doing nothing you effectively have a £30k mortgage, but should you need it, its yours to spend (with a corresponding increase in interest of course) anytime you want.
  7. Yes, you absolutely can. The company doesn't matter as long as it meets the basic requirements (SIC code, number of directors etc) but you be credit checked and the affordability will be confirmed the same as a personal BTL mortgages.
  8. The two factors that matter most here is the exit, and the timescale involved. Bridging loans are expensive, but are month by month, so if the work can be done quickly, that might still end up cheaper than fixing for 2 or even 5 years on your residential. Bridging rates havent jumped in the same way because they are short term loans and therefore they dont need to consider your long term ability to support the loan, nor do they need to secure those funds from the 'market' long term. They only care about the value will add and the chance it will sell or refinance in time to repay them. If you know the extent of the work (Light refurb - non stuctural - 0.75%, heavy refurb - structural alterations or redevelopment - 1.00%, changing use, resi to HMO for example - 1.5%), the time you think it might take and then look at the total cost of a bridge. Compare that to the total cost of a 2 year residential mortgage at 6.49% and you will have our answer, something your broker should have already spelled out to be honest. The above rates are just estimates, fee's vary wildly and can be a huge expense, maybe £4-6k ontop for lawyers, valuations, admin fee's etc.
  9. Its tough for all of the BTL mortgage industry at present. The main factor, asie from prohibitive costs, is the ICR stress testing they do on the rent. This used to be considered at about 5.5% now we are looking at anything from 7% up to over 8% in some cases. A a result anything that fit before application, now probably wont. Im also finding that lenders have raised affordability thresholds, tightened criteria and probably also tuned their credit algorythm too on the basis that if they are accepting less business, they want that to be the most prime business possible. Looking at rates today for Portfolio 75% purchases (£200k value) the best deals are as follows: 2 year Tracker - Vernon - 3.64% + £1300 2 year fix - Barclays - 5.1% + £2,800 2 year fix - Skipton - 5.89% + £999 5 year fixed - NatWest - 5.54% + £1025 5 year fixed - TMW - 5.39% + £4890 As you can see lenders are increasing fee's, not just rates, and we are also seeing less cashback, free lawyers and valuations etc. Being below an EPC E will make it almost impossible to mortgage at the moment, even if it is technically feasable i'd expect it to be really tricky. I'd steer well clear. That said, you could purchase with a bridge, or a hybrid refurbishment loan and take advantage of some of the green options from lenders.
  10. The important thing to note on a poting application is the only thing you port is the rate. Everything else is a brand new assesment. Income, interest only, credit, docs, valuation all just like a new application which can be declined. If its declined you dont lose the mortgage you already have, you just dont get to apply its, no doubt, very attractive interest rate to your new home and would have to rethink your plans.
  11. Any other time and i would say just walk away and try a new lender, but i suspect you might have secured a rate that you couldnt get again today, so for that reason its worth the appeal. I wouldnt expect a positive result though. Many lenders will decline ex-local flats if private ownership is under 50% at the best of times, but as prices are likely to fall they will be all the more cautious. You would need to get the estate agent to find 3 properties that have sold in the past 3-6 months that support your valuation, and even if they can supply those, i wouldnt expect the valuer to change their decision, its really not in their interests to admit they got it wrong... From there lenders will have a form the broker needs to submit to raise an appeal. If that doesent work then you simply need to try a new lender and the broker needs to find someone who is more open to ex-local properties.
  12. Im not so sure thats a concern @tuk . New property, yes, but generally anytime you want to borrow less than you've been approved for thats simple admin request and doeent need underwriter approval. Even if you wanted more money its unlikely you would lose the rate, however you might find that lenders have not only increased rates but tightened criteria (Just had a decline from BM for the same customer and property type/value i had approved last week...) and so dont assume you will still qualify if you have to go back through underwriting.
  13. There are a few options to utilise that equity: Bridging finance where you use the equity in the existing properties as collateral. You'll pay higher rates, but essentially leave the existing mortgages as they are if the lender will allow a second charge. Further advance with the current lender. This is a top up on a seperate product, probably at prevailing rates, but theres few fees to pay and the process should be fairly quick. Second charge. These are likely much higher rates and fee's and probably the least viable option This is all dependant on the LTV of the properties though. Do you know what they are worth, what they rent for and what the outstanding is and i can comment on which of the above might be feasable?
  14. I think it depends on the LTV on your residential. If you've leveraged the family home over 60% then you might want to speculate what monthly payments might look like if you have to pay 6% on it for a while. How does that compare to the yeilds on the new rental and the size of the equity over a similiar period? Can you foresee a situation where you might need to sell the new rental to make finances work and if so, what would the result be if prices dropped 5% or 10%? I think long term property is always going to be a sound investment, but in the short term, can you weather a storm?
  15. You can always renegotiate, theres two sides to it though and the other side mght not agree. If you had agreed a deal and then the other party came back and said "Things look rubbish, so im going to leverage that and reduce my asking price". What would your reaction be? Is it still a buyers market in the area youve offered in? Were there other offers aswell as yours? If the vendor says no will you still buy? If you have to buy another house you are not going to get a mortgage deal like the one you have and many lenders expect a new application for a new property. You might want to check their terms on that before you give an ultimatum because unless you are prepeared to follow through and walk away theres every chance they call your bluff.
  16. Looking at the rates of interest im quoting today, i cant imagine we are not going to see a change in house prices as we adjust to this chaos. I dont think we will have a good measure of the situation until November 23rd though, although i think they will be forced to announce something sooner. Estimates i read suggest between a 5% and 20% contraction over the next few years. Ive no idea what thats based on or an understanding of the economics behind them though, thats just what im reading in industry press from senior staff at lenders, large brokers and other financial commentators. Dont forget though that lenders have been pricing in a 7% interest rate for a very long time now, over 5 years, for affordability purposes and there is a still a significant lack of stock in the housing market so where something gives in one part, it favours those in another. We might see more BTL being sold and FTB'ers taking them up as the rental ICR calculations change and reduce max loans for a given rent, for instance. The whole system is so complex that even government economists evidently dont know what the result of their changes will be, so what hope do us mere mortals have?
  17. A lender completions team taking just a few days to assess documents? Sounds great to me. Some of my limited company lenders are taking weeks to look at anything we send in! Sounds to me they are just overcommited and well behind like most lenders. I'd have just sent them a company bank statement showing the funds credited, the terms of the loan shouldnt matter so much as they will likely condition that you cant withdraw the loan until they have been repaid anyway, and you will of course have to demonstrae any money laundering requirements showing that you acquited the funds correctly and giving them an audit train for their records.
  18. It is ridiculous, but i think they are simply scared of someone creating a precedenet by arguing they didnt understand the guarantee and lenders across the country losing their security. I recommend https://www.ila-connect.co.uk/. I dont get a kickback or anything, just found them to be the cheapest at £150 plus VAT
  19. Which is best is a question only your accountant could answer, as it depends on other income you recieve, the rent and interest on the portfolio, and a slew of other factors you probably dont want to share online. Should you look to move a BTL property owned personally into a company that is considered a transaction, and so CGT and SDLT would be payable, ontop of the admin fees from brokers, lawers and accountants, and the fees from SPV lenders to refinance. Its usually prohibitively expensive and out of hundreds of clients, very few have found it to be viable. There are some rare exceptions where you might be able to get a CGT exemption if you can demonstrate that its your primary business, usually by the amount of hours a week you spend managing the properties (typically 20 hrs a week consistently and you have to be able to prove that). I recommend speaking with an accountant and perhaps forecasting roughly what you think your portfolio will be worth in the future and ask them to model the costs via both personal and SPV ownership, then speak to lawyers, brokers etc to get the costs and decide if the tipping point (SPV will always be more expensive in the short term) is soon enough to be worth it?
  20. Not really. If you are a higher rate tax payer then you dont get the full benefit of this and havent since George Osborne introduced this new rule in 2007, over 5 years ago! See here: https://www.which.co.uk/money/tax/income-tax/tax-on-property-and-rental-income/buy-to-let-mortgage-tax-relief-changes-explained-atnsv0j6j782 The article just leads to a £400 "fact find" service that any other tax advisor would provide for free. Its widely known that the HMRC will only allow these incorporation rules to apply to a BTL investment if it can be demonstrated that its their sole activity. If you have a full time job that's going to be near impossible. Speak to your accountant about this. There are a few lenders who offer further advances at SVR, however they also allow you to switch an SVR rate to a fixed rate immediately. Its just the way their system works, you advance the funds and then put them on a prevailing rate once agreed. It may be they just didnt highlight that as an option because they are not able to give advice. Who's the lender? Personally i would have thought that theres enough equity in the BTL's to keep the LTV low and still release enough to fund a new property. If you can do it with just one mortgage that would keep costs down, although doing two at the same time is usually just as simple, and if the valuations and legals are free makes little difference in cost. It all depends on the point above and what rate you could get the advance at, as well as how comfortable you are securing extra funds against where you live versus an investment property that would be far easier to sell should you need to. Establish the actual numbers and it'll be easier to compare the risks.
  21. I think a contingency of 3 months rent is wise, but i suspect in the present market you wont face gaps that large. Lenders for example assume 1 month in 12 you will have a void period. Have you factored in accountancy fee's? If you are doing this in a company then thats likely about £1000 a year, regardless of the number of properties. If personal then perhaps half that.
  22. Theres a new hybrid refurb mortgage available that looks pretty interesting. I need to really look at the rates and weight that up against the alternatives, but instead of the bridge > remortgage approach they use a retention instead. IE they give you a standard mortgage, value both now and once improvd, but hold back the difference between 75% of todays value and 75% of the improved value. You get that money once you demonstrate you've done the work. The major positive in these hybrid refurbishment products is that you can release equity from improvements made WITHIN 6 months.
  23. Back in George Osbournes day, yeah, lots looked at this as an option. It was supported quite heavily by a few lenders too. Ultimately though, anyone who was young enough to care, or had the disposable income to fund a property portfolio almost certainly wouldnt have fit the definition of their portfolio being a business. The reality is it simply isnt for the vast majority, its an investment, a more hands on one, but still not the same as running a trading business.
  24. It's the difference between knowledge and experience...
  25. No, you cant realistically. You are refering to Ramsey vs HMRC, but ignore one very important factor: The tribunal ruled that: Ive spoken to scores of clients who have attempted this and numerous accountants who all agree. You would need to demonstrate that you spend over 20 hours a week managing your properties to deem it "a business". If you cant, then the assumption is is a passive investment and not eligible for Section 162 relief. How many investors are going to be able to log activity consistently that equals 20 hours a week? If you have a full time job, maage another business or simply use a managing agent its going to be near impossible to demonstrate such involvement. This was an interesting and promissing topic many years ago, but today its widely understood this isnt a viable option for the vast majority of investors.
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