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Buy-to-let mortgages


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Hi folks.

I just found this on the moneyadvice.org.uk website and it raises a fair point with regard to interest only mortgages.

''Don’t fall into the trap of assuming you’ll be able to sell the property to repay the mortgage. If house prices fall, you might not be able to sell for as much as you had hoped. If this happens, you’ll be left to make up the difference on the mortgage''.   ~ moneyadvice.org.uk 

Link: https://www.moneyadviceservice.org.uk/en/articles/buy-to-let-mortgages#how-do-buy-to-let-mortgages-work

It was an exit strategy of mine to sell a BTL property to re-pay an interest only mortgage.

I thought most people did it that way too? 

Are moneyadvice.org.uk simply being overly cautious in their advice perhaps?

Many thanks. 

 

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Yeah that's what most people do, so dont overly worry.

You're able to opt for a repayment mortgage or make separate provisions through saving if you want to pay it off, but it is common to sell it to repay the debt. There's lots of podcasts on it by Rob and Rob about options regarding buy to let's as well as inflation and deflation and how it works with property.

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41 minutes ago, julia urquhart said:

If your property isn't worth your mortgage after 25 years something pretty bad has happened! 

I would imagine so...It just strikes me as odd that they would try to put people off from the idea.

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I think the advice is important, and worth thinking about. In the great recession in 2009, people couldn't sell their buy to let properties as they were in negative equity. The property value was less than their mortgage. 

Hopefully, you will be careful with the property you buy, and it will appreciate in value a lot. But you do need to buy well 

To sell a property for a good price, you need to have a selling strategy.

- Is your property in good condition?

- does it meet the needs of the local market?

- Who is marketing your property? An agent? An auction house?

- try to avoid selling your property in a recession

Don't just assume you can sell your property at any time for a good price

_______________________________________________________________________________________________________________________________
Vin Gupta
Property Investor and Developer
UK Property Blog: https://evolutionblogger.com/article/uk-property-articles
Travel Blog: https://soulfultravelguy.com/

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1 hour ago, nicholas_b said:

There's lots of podcasts on it by Rob and Rob about options regarding buy to let's as well as inflation and deflation and how it works with property.

I know that's why i posted about it...I've heard some of the podcasts but will of course listen to more of them as my learning is very fresh. 

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5 minutes ago, EvolutionBlogger said:

I think the advice is important, and worth thinking about. In the great recession in 2009, people couldn't sell their buy to let properties as they were in negative equity. The property value was less than their mortgage.

I'm assuming those that were at the end of their BTL mortgage term simply re-mortgaged to extend the term and hold on to their properties? 

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9 minutes ago, frank7 said:

I'm assuming those that were at the end of their BTL mortgage term simply re-mortgaged to extend the term and hold on to their properties? 

If the value of the property is lower than your outstanding mortgage, then nobody will give you a mortgage. At this point, you only have two options:

  • Stay with your existing mortgage provider, on an expensive Standard Variable Rate
  • Default on your mortgage repayments, and then the bank will repossess your property

If you are careful with the properties you buy, then you should avoid this situation. However, if you buy enough properties, you'll end up with a dud at one point. 

I did write an article on what to do if your buy to let is losing money. It's always good to know the risks you might face

_______________________________________________________________________________________________________________________________
Vin Gupta
Property Investor and Developer
UK Property Blog: https://evolutionblogger.com/article/uk-property-articles
Travel Blog: https://soulfultravelguy.com/

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47 minutes ago, EvolutionBlogger said:

if you buy enough properties, you'll end up with a dud at one point. 

That seems counter intuitive.

I would have thought it less likely the more experience an investor has? 

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42 minutes ago, frank7 said:

That seems counter intuitive.

I would have thought it less likely the more experience an investor has? 

Sometimes things happen out of your control.

- Bad tenant

- burglaries

- Property damage

If you buy 100 properties, at least a couple will work out badly

 

 

 

_______________________________________________________________________________________________________________________________
Vin Gupta
Property Investor and Developer
UK Property Blog: https://evolutionblogger.com/article/uk-property-articles
Travel Blog: https://soulfultravelguy.com/

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2 hours ago, frank7 said:

I know that's why i posted about it...I've heard some of the podcasts but will of course listen to more of them as my learning is very fresh. 

The recent one on inflation / deflation and the one about property making you rich in the long term will be the most applicable, and there's one specific to the scenario you're describing that was last year too, just can't remember the exact title.

Briefly summarised there is always a risk that you can go in negative equity or struggle with remortgaging but ultimately if you buy smart, then you will always be ok when remortgaging or selling... because assets go up in the long term. The old saying is "you make your money when you buy" is so true. In the crash people get carried away, over leverage and when prices dip they're snookered. Dont forget you could get 125 mortgages and remortgage the same day!!! Things were stupid. The restrictions in place now prevent you from being as stupid even if you want to. There should always be equity in to sell or remortgage because it's in the interest of all parties, and the regulation stipulate there needs to be equity. Even if you buy at the wrong time, over 20 years it is almost certain to go up in price and value. 

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