Money money money, oh where has it all gone?
And it used to be so easy!
Well there is still some around, it is just very difficult to get your hands on it and those that have got it, the lenders, are making you/us, the borrowers, jump through various hoops to even start to get at it.
So where do you start.
Well there are at least two options.
Buy to Let Mortgages
The first is the conventional buy to let mortgage route, where you will be limited to 75% of the value or purchase price, though I did see a comment yesterday that 80% LTV could re-appear by the end of June 09, and need a squeaky clean credit record without too much unsecured borrowing and 0% credit cards, these are no longer popular with the buy to let lenders
Private Finance or Lending
The second is Private Finance or Lending which is covered further down on this page.
Buy to Let Mortgages
Big problem with conventional buy to let mortgages is the rent coverage or Loan to Rent Ratio, this is the amount of rent that the property must let for, or be expected to let for by the valuer, in excess of the monthly mortgage payments.
This historically, that is 10 years ago, used to be around 125-130%, the ratio then progressively dropped to, in one case 100%, but is now back up in the 125% region.
Added to this qualification for lending is the interest rate that the calculation is based on and that is often higher than the actual interest rate you are being asked to pay.
So for conventional mortgages try my friend Geoff Laird.
But, a health warning, whilst he is both knowledgeable and tenacious, in fact a real expert, he can’t work miracles, at least not yet, though he did come close to working a miracle for one of my clients a few months ago, he arranged a deal that was quite exceptional in the teeth of the credit crunch gale!!
If you want to know more about him go to his website http://www.buytoletfundingservices.co.uk/ where there used to be a nice pic of the man himself, maybe it’s my browser that has edited it out.
Full contact details
Buy to Let Funding Services (South East)
9 Beverley Cres
Tonbridge
Kent
TN9 2RD
Tel 01732 357920
Fax 01732 357920
Mobile 07920 715178
Web site: http://www.buytoletfundingservices.co.uk/
Email: loanarranger2006@hotmail.co.uk
Geoff sends out regular newsletters and updates like the following which was sent out on the 06-05-09.
To receive these, email Geoff or, for a take on current market conditions and where we will be in a few months time, it is worth giving him a call, you will actually get to speak to a live person, at least he was a couple of days ago, that is live!.
I (Geoff) am sending you an extract of an article which illustrates the current difficulties associated with the funding of Buy to Let properties.
Research from price comparison website moneysupermarket.com shows that in just two years, the number of buy-to-let mortgages available has fallen from 4,384 to just 213 - a reduction of 95%
Furthermore, buy-to-let mortgage rates have not fallen by as much as mainstream mortgage rates following the decreases in the Bank of England base rate. Since June last year the average rate for mainstream mortgages has reduced by 2.6%, whilst buy to let rates have only fallen by 1.51%.
Banks are also demanding larger deposits from buy-to-let landlords; there are no buy-to-let mortgages left at 85% loan to value, meaning prospective landlords will need at least a 25% deposit to secure a mortgage.
Louise Cuming, head of mortgages at moneysupermarket.com, said:
"The credit crunch has killed off the majority of buy-to-let deals. Because banks view buy-to-let borrowers as riskier than normal customers, the deals that are still available require an extra large deposit.
"Even if you are lucky enough to have a sufficient deposit and have found a suitable buy to let mortgage, you must watch out for the fees levied on arranging the deal, as these can be extortionate.
"On top of all this, banks are also increasing the minimum rent they require landlords to charge. In 2007 the average requirement was for the rent to represent 112% of the mortgage payment. The average requirement now is for rent to cover 123% of the mortgage payment. However, this is against a trend of falling rents. Over the past twelve months rental property supply outstrips demand and it is a tenant’s market. The average rent now stands at £819 in comparison to £873 in April 08.”
Geoff Laird
The second route is:
Private Finance or Lending
Why you may ask should a private individual lend you their money so that you can make or at least try and make a profit.
Because they will expect you to pay an interest rate that is way above the savings rate at your local bank. Generally 1.5% per month, ouch, but if the deal stacks then go for it.
Where do you find these wonderful people?
One of the main gathering areas are Networking Meetings such as the Berkshire Property Meet run by Sylvia & Juswant Rai.
At this event you will find over 200 people, some investors, some educators & mentors, some there just for a drink and some there with Money, the real stuff, and they are looking for someone who knows what they are doing and will do all the dirty work paying them a nice return whilst they enjoy whatever turns them on and it probably is not property.
If you want to go, do book early, very early, you can book online, and don’t think that their (Sylvia & Juswant ) claims to being oversubscribed are a selling point, they are not. It’s simple, either book early or be disappointed!
At one of the meetings a guy was walking around with a T Shirt on that had printed on it “Wanted x grand” “Offered a 12% tax free return”. I think he was successful in finding the finance he needed.
I know of another well known investor/educator who needed quickly and raised, I think it was 40k, by carrying around a placard to that effect.
Anyway, need some cash, try a networking meeting and have the b**** to advertise or ask for what you want, but be clear and make sure that you have properly researched your project and that it ALL stacks up, if you don’t some other better prepared person will score over you and at the end of the day there may only be one pot available.
