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LettingFocus

Unbiased buy to let, property investment and letting coaching, mentoring, advice and seminars for landlords from top selling property author and media commentator.

Bank of China, Mortgages, Defaulting Landlords by Lawrenson of LettingFocus

As you may know from a previous blog post on Monday 6th July, I have recently railed against the fact that in Buy to Let Land the borrower is being carved up by a complete lack of competition among lenders.

BANK ROBBERS
The Lloyds Group (via its C&G and BM Solutions/ Birmingham Midshires brands) and The Nationwide (owners of The Mortgage Works) now now have no competition post credit crunch. (The crunch meant the likes of Paragon and others got starved of funds and Bradford & Bingley and Northern Rock bit the dust for new money.)
Lloyds and Nationwide are charging a minimum of base rate plus 4.2% for buy to let with fees of at least 2.5%.
Outrageous!
So, I’m delighted to see that Bank Of China has now started to market its buy to let mortgages a bit more aggressively.
Finding their mortgages on the Net is hard though.
Possibly harder to find than a story about Tianamen Square on Google’s Chinese operation (Google goes along with Chinese censorship if you did not know – nice people Google eh?)

BANK OF CHINA BUY TO LET MORTGAGE RATES
Their mortgage rates aren’t bad but borrowers must have enough income to cover both their home mortgage, and that of the investment property, in order to qualify.
Also, maximum loan to values are just 65% on freeholds and 60% on leaseholds.
The rates charged depend on if you are buying a freehold or a leasehold property too and how much you want to borrow (whether the property is over or under £250K).
To keep it simple, for what usually I buy - which is freeholds and houses under £250K in value, the maximum LTV is 65% and the mortgage rate is 3.5% over Bank of England base for life.
However, you must take out a 20 year term and they will only do repayment mortgages, there being no interest only option.
The arrangement fee is a reasonable £1495 (and the valuation fees aren’t bad either) though you cannot add these to the loan.
Early redemption penalties only apply in year one and are 1% of the loan which is good compared to UK lenders.
The downsides for many people will be the low Loan to Value, the lack of an interest only option, the fact that your own private (non rental) income is looked at carefully too plus you have to attend an interview at a Bank of China office
Still at least it is some competition for the rogues at Lloyds and Nationwide.

GOOD LOAN TO VALUE DEALS
We, of course, offer some great rates through our affiliation with Mortgage for Business and these DO go up to 75% Loan to Value,
Try Mortgages for Business.co.uk by clicking on Great Rates on Buy to Let Mortgages and quoting LettingFocus for their special offer of £250 brokerage when you draw down a buy to let mortgage - set up especially for us.

LATEST ON EVICTING TENANTS OF DEFAULTING LANDLORDS
Talking of our dumb mortgage lenders, tenants who currently face immediate and unexpected eviction because their landlord faces repossession will be given two months’ statutory breathing space to find a new home, under new government proposals.
You may have seen my email correspondence with the Council of Mortgage lenders on my previous post on 30th May about this.
The problem is because tenancy agreements are deemed unenforceable in cases where the borrower has failed to inform the lender of their intention to let the property.
Under proposals from housing minister John Healey tenants in this situation will be given at least two months to find alternative accommodation, through new powers granted to courts in charge of possession hearings.
Unauthorised tenants will also have the right to be heard at these hearings.
In addition, the government is proposing to force lenders to provide unauthorised tenants with a mechanism to request a two-month delay in repossession from lenders. It also wants lenders to consider other steps instead of repossession, such as appointing ‘Receivers of Rent’ to collect rent and manage occupied properties.
About time too!
Shame the mortgage lenders have had to be forced into this by the Government.
In next weeks’ blog post (out 24th August) I’ll look at the Government’s well meant but silly plans to limit the number of shared houses in some areas.
Link to other posts on today’s post topics:
http://www.lettingfocus.com/2009/05/mortgage-lenders-evict-tenants-too.html
http://www.lettingfocus.com/2009/07/buy-to-mortgage-rates-deviod-of.html
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
We are LettingFocus.com - the landlord experts.
I’m, David Lawrenson, the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book.
What’s unique about LettingFocus is that I offer independent unbiased
landlord advice seminars covering property investment and letting because unlike most people in the buy to let and property “advice” business I am not linked to a property company, developer, agent or bridging loan financier.
I can tell you where to buy (which areas), what type of property to buy, when to buy, how to buy property at a low price, how to make sure you get tenants who are going to pay the rent and how to manage a rental property to make £s at my one to one consulting service.
I can also comment on “No Money Down” Schemes and “Buying Below Market Value” methods too.
I can answer all your questions on letting property too because I have been a landlord and property investor for over 25 years.
LINKS
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Copyright of Blog: David Lawrenson 2009.
This blog is updated roughly once a week usually on a Monday or Tuesday.
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Choosing Letting Agents / How the UK’s dopey banks made a mess of buy to let mortgage lending by David Lawrenson

Following on from last weeks’ blog, where I said landlords are not suffering too much, it seems that some landlords are suffering after all – even in the face of record low interest rates.
Latest figures from the Council of Mortgage Lenders now show investors’ arrears rates are significantly higher than for standard residential.
So, what’s the truth?
Well, the truth is there are landlords and there are landlords.
Unfortunately, lots of would-be landlords did not do their research and believed all the hype spun by the many Get Rich Quick gurus and have gone on to make a complete muck up of it – bankrupting themselves in the process.
Many of these will have been to a guru’s seminar and went out and either bought existing housing with No Money Down from distressed sellers using bridging finance with a back to back next day remortgage or they bought new build ghetto flats with gifted or hidden deposits.
Both techniques have finally been stopped as the UK’s rather dozy mortgage lenders finally woke up to the fact that they had in fact just lent on 100% of the property’s value (or at least what the buyer paid.)
(Many borrowers would also use credit cards and loans for non existent kitchens to finance deals.)
With little understanding about how to be a landlord quite a few of these would-be investors got into trouble - and therefore so did the banks and building societies that lent them the mortgage cash.
On the other hand, landlords and property investors who ignored the hype, hopefully the type who read my property investing book – and listened to informed experts of the likes of Richard Bowser, Tom Entwistle and myself at property shows will have done rather well.

BUT WHY WERE BRITAINS MORTGAGE LENDERS CAUGHT OUT ON BUY TO LET?
That’s a very good question.
At a recent seminar I heard from John Corey, an American property expert about how in the USA, the types of techniques that borrowers were pulling here to raise big buy to let mortgage loans in which the borrower had no equity, had long been known to mortgage lenders and had either been stopped by law or through the use of intelligent underwriting techniques.
For example, by requesting up to a years worth of bank statements the American lenders could really assess a borrower’s true financial position. In the USA, it would have been impssible to raise say, £25K on a loan for something else one month and then use it as a deposit on a house the next month.
But in the UK, these kinds of things and many other sneaky tricks went on for years.
I suspct that many mortgage lenders in the UK did not have a clue about back to back re-mortgaging as a technique for someone to acquire a property with “No Money Down.”
OK, by sometime in 2006 and 2007 they had all finally woke from their slumber and have now stopped this kind of thing.
But if you get a buy let mortgage loan today, you will still walk out of the bank with virtually no help, no guidance or anything else to help you be a good landlord.
Unless you have read the right stuff you will have a good chance of becoming another arrears statistic on their buy to let loan book a few years hence.
A few years ago I contacted some senior figures in some of the banks (not easy – even getting their names is hard enough) and suggested that as a leading property author I could help them correct this failing. I’m still waiting for the call back.

MIND IF WE KICK YOU AGAIN SIR?
Don’t tell my partner but I have subscribed for most of the rights issues in the shares I have.
Many of these shares are well down on what I paid for them, so it’s a bit like asking a mugger if he would like to hit you and rob you again.
But the shares are all very heavily discounted and I figure that after the RBS’s famous 200 pence a pop rights issue surely, no one would be allowed to put out a rights issue prospectus which was so clearly full of nonsense.

TIPS FOR USING LETTING AGENTS
Don’t go with the letting agent that charges the lowest fees or one who claims he can get the highest rent. It is important yes, but not the only thing that counts. If the agent says they can get a premium rent. Fine. Ask them to prove what rent they have achieved for properties like yours by showing you comparables.
Ask other landlords which agents they use and trust. Then check if the agent is a member of a recognised trade association such as The Association of Residential Letting Agents which has a code of practice for members and client money protection schemes in place. Others bodies offering similar protection include The Royal Institution of Chartered Surveyors and the National Approved Lettings Scheme.
Landlords should check what protection the agent’s membership of a trade body gives them and if the agent is really still a member.
True, there are some very good and long established agents who are not members of any trade body for good reasons - like the very high cost of membership.
If you are set on using one of these, that’s fine, but make extra sure to check references and find out how long they have been in business.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - the landlord experts. Read Property Articles.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book - buy Property Investment Book. The new edition is for both accidental landlords and more experienced residental property investors and is fully up to date with all the recent changes to tenancy deposit schemes, landlord registration and capital gains taxes.
I’m a property expert and property speaker - and I run the well known property blog that you are reading now.
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general advice on property letting to anyone looking to buy property for themselves or to let.
What’s unique about lettingfocus.com is that we offer independent unbiased advice on renting out property because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier other than through the links we have on our affilate scheme page. Find out about some great deals we have arranged at our Property Affiliate page.
For landlords' insurance products such as rent guarantee cover and property insurance click on Ukinsurancenet. Don't forget to quote our reference code, LFOC, to get the best rates from them too.
Copyright: David Lawrenson 2009. This blog is updated roughly once a week.
WANT TO BE KEPT UPDATED WITH OUR LATEST BLOGS?
Over on the right hand side under all the previous blog entries and the bit where it says “Links” and “Subscribe” you will see a button saying “Site Feed.”
Just copy the site feed link into your News Reader or News Aggregator. Even a non techie like me managed to do this.
Please note if you have a website & are thinking of reproducing material here - that’s fine but we DO require a link to the blog to be included, including also the links in this section. The full article including all links must be available to ALL VIEWERS of your site and not restricted.
WANT TO ADD A COMMENT
To add a comment to this post, you just click on “link to this post” then simply add your comment.
To view past comments, once again you’ll need to click “link to this post” and view the comments (which appear at the bottom of the post.) All comments are moderated.

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