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BTL Margin calls

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    BTL Margin calls

    Any of you budding rockerfellers brought a BTL in the last couple of years with just 20% down (financed by your credit card if you believe the hype on here)? Prepare to find some spare cash to top up the equity as prices fall, or be forced to sell. But its me pension init!

    Buy-to-let landlords will have to raid their savings and inject extra capital into their homes, under an obscure clause in their mortgage contracts, if house prices continue to fall.
    ...
    buy-to-let mortgage providers, require customers to top up their initial deposits if falling house prices mean the size of their mortgage rises above 85pc of the value of the home.

    In a decade of rising house prices, the clause has been largely irrelevant but analysts are concerned that it may now convince landlords, who are already facing higher mortgage costs, to sell large chunks of their portfolios.

    Under the terms of the contract, if a £100,000 home with an £85,000 mortgage falls in value by 10pc the landlord has to find another £8,500 to maintain the lender's maximum 85pc loan-to-value rate - even though there is still £5,000 of equity in the property.
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    http://www.telegraph.co.uk/money/mai...ortgage114.xml
    The Mods stole my post count!

    #2
    Something about fools and their money being parted springs to mind.

    Could anyone actually be so idiotic?

    You've come right out the other side of the forest of irony and ended up in the desert of wrong.

    Comment


      #3
      when i moved house we kept our old property on and moved it to a BTL mortgage. We have 37% locked up in the property and know i certainly can't afford to move more money into it so looks like i may be one that has to sell up.
      Thats the way the cookie crumbles

      Comment


        #4
        Pretty stupid

        Not the poster but whoever came up with it. So if the prices fluctuate up or down, one should top up or get a cashback? Not bothered really, all my stuff is pretty close to 60% LTV. Loads of rubbish, more like tWAt stuff.

        Comment


          #5
          Originally posted by Dow Jones View Post
          Not the poster but whoever came up with it. So if the prices fluctuate up or down, one should top up or get a cashback? Not bothered really, all my stuff is pretty close to 60% LTV. Loads of rubbish, more like tWAt stuff.
          The point is, even if your current LTV is 60%, if prices fall by 30% - which if your stuff is new-build is pretty much a cast iron certainty - then you may be forced to top up.

          Comment


            #6
            Thanks but...

            Don't touch new-build. All traditional stuff, Victorian to Edwardian, built to last.

            Comment


              #7
              Originally posted by Pickle2 View Post
              Under the terms of the contract, if a £100,000 home with an £85,000 mortgage falls in value by 10pc the landlord has to find another £8,500 to maintain the lender's maximum 85pc loan-to-value rate - even though there is still £5,000 of equity in the property.
              I'd just let the mortgage co repo the house.

              Comment


                #8
                Originally posted by Platypus View Post
                I'd just let the mortgage co repo the house.
                Not a great idea because:

                1) If they don't sell it for the amount you owe, you're still liable
                2) It knackers your credit rating
                ‎"See, you think I give a tulip. Wrong. In fact, while you talk, I'm thinking; How can I give less of a tulip? That's why I look interested."

                Comment


                  #9
                  Originally posted by Dow Jones View Post
                  Not the poster but whoever came up with it. So if the prices fluctuate up or down, one should top up or get a cashback? Not bothered really, all my stuff is pretty close to 60% LTV. Loads of rubbish, more like tWAt stuff.
                  Getting "cash back" is what lots of landlords did when prices where rising. ie they would remortgage to release the new equity, and use that as a deposit on the next property.

                  But a few of these wise guys will soon find leverage works both ways. The smart, low geared, no new-build landlords will be fine. Its the jump on the bandwaggon, make an easy buck sort that will come unstuck.
                  The Mods stole my post count!

                  Comment


                    #10
                    Anyone know if these "margin loans" also apply to conventional mortgages?

                    Do any conventional mortgages have this type of clause, or is it illegal for consumers, but ok for businesses?

                    Comment

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