Mortgage Fraud and Buy to Let

I’m sad to say that at some recent events I have been to, quite a few punters came to me with pretty strong evidence that some property investment “advisors” are still encouraging people to carry out mortgage frauds as a way of buying property with little or no money down (NMD) and / or as part of a “buying below market value” or BMV strategy in buy to let investment.

The advisors often claim that they have uncovered a new clever way around the rules. I’m not so sure.

Let’s be clear here: If you do not declare the actual net property purchase price to the lender, you have carried out a mortgage fraud. There are no ifs and buts about this.

And no matter what a “friendly” solicitor says, if you know the price you sign to say you are paying on the mortgage application form is not the same net price that you have paid (taking account of all side agreements and options etc), then you have committed mortgage fraud. It’s that simple.

Lenders are now very sharp at detecting fraud as we can see from the many solicitors and brokers who have been struck off in recent months. And yet there are many more bent mortgage brokers and solicitors still at large who are still operating the dodgy deals and will do all they can to ensure the trail does not end with them.

They will ensure that it is the hapless investor, not them and not the property advisor who is exposed to the force of the law when the brown stuff hits the proverbial spinning thing on the ceiling.

A Plea for Common Sense

At a recent event two people came up to me to lament that they had paid thousands of pounds to property sourcing and property finding companies that had later gone bankrupt, taking all their money with them.

I really despair at this and have to ask when will people ever learn? I see some firms are now asking sums in the range from ten to sixty thousand pounds to either teach people all there is to know about property or to find them a few properties.

“Great” I say, “And what happens should that firm go bankrupt?”

Sadly, it seems that often people are too blinded by the concept of fast riches and “financial freedom” to worry over much about such an event occurring.

For me parting with that kind of cash would be too much of a risk. But then again, I know that 85 to 90% of all that someone needs to know about residential property investment in letting property is in my book:

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Other good sources are Property Investor News and sites like LandlordZone and our low cost seminars:

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Recent Mortgage Moves – The Latest and Best Buy to Let Mortgages

In next weeks’ blog we will publish a beginner and intermediate guide to buy to let mortgages. But this week I will have a quick look at what rates are available.

Most lenders prefer landlords with experience, though as noted in a previous blog, Lloyds Banking Group (BM Solutions and Cheltenham & Gloucester brands) have rather bizarrely recently decided that they will no longer lend to landlords who have more than 3 mortgages with them across the group.

This odd move has been countered recently by lender Paragon which has recently re-entered the market. For landlords with a number of properties, that’s good news because Paragon has always majored on portfolio landlords (though their rates have not always been the best.)

And two new buy-to-let lenders Aldermore and Precise Mortgages have also helped fill up the space vacated by the Black Horse. The Mortgage Works (part of Nationwide) are still offering buy to let mortgages at 80% loan to value but credit score is very important to them – so make sure both your Experian and Equifax credit reports are accurate.

Bank of China is offering good rates on Buy to Let up to 75% with fixed fees. Northern Rock offering buy to lets up to 70% loan to value with no income verification and refinances within 6 months.  HMO lending up to 75% and loans for portfolios are available with a variety of lenders but will always cost more and you must be an experienced landlord.

There are currently 292 buy to let products available on the market, compared to the 266 products that were available in July 2010. The average variable rate has been reduced from 4.84% to 4.76% and the average fixed rate on the market is now about 5.55%, so whilst the margins over base rate are still very high on an historical basis, maybe these are small signs that things are finally looking rosier in the world of buy to let finance.

MORE ABOUT LETTINGFOCUS AND WHAT WE DO is the home of Private Rented Sector and Landlord Information.

I’m David Lawrenson, a landlord and property investor myself for over 25 years and author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years. 25,000 copies sold.

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Primarily I am a consultant to a range of organisations including banks, building societies, local authorities, social housing providers, institutional investors in build to let and insurers – helping them with their landlord facing or buy to let product strategies, marketing and services.

For example, I help banks improve their buy to let mortgage lending practices and I help housing associations / local authorities find private landlords (private rented access schemes, local letting agency models etc.)

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We also find a limited amount of time to help landlords and property investors by coaching them in how to make money in the private rented sector using ways that work, which are ethical, fair to tenants and which involve minimal risk to the investor. We pride ourselves on giving independent unbiased Buy to Let Advice on a one-to-one mentoring / coaching basis or through our (very occasional) group seminars.



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