Buy-to-let mortgage problems
Buy-to-let mortgage problems don’t exist! The property market will recover!!
Clients may sometimes provide sketchy information and presenting it to us to be fact in order to justify a means to holding on to their property portfolios. We do not discourage such an approach and leave the door open for them to come back as and when they discover the truth.
Buy-to-let mortgage problems don’t exist! What if interest rates stay low for the next few quarters?
This situation is wonderful for clients with negative equity and low interest repayments because it allows the majority of property owners to enjoy day to day cash-flow. The unanswered question is what happens when interest rates do go up. Very few people have been able to answer this question
realising that unless they do not accrue the positive cash flow to off-set the interest rate increase then they will effectively end up paying out of their own pockets.
So the real question is do you delay the inevitable or do you take action now. Low interest rates will not guarantee capital growth. In simple terms you will become a slave to your mortgages and whether in the short-term there is positive cash flow it does not mean that money is yours to have, rather it is
yours to save and keep for when the interest rates increase. On average our calculations prove that the money you have accrued during the low interest rate period may only take you through 9-12 months during
the interest rate hike; after this period any shortfalls in interest payments will become your liability.
Assuming that you have been able to service 12 months of your interest payments after interest rates go up what will happen next? We have yet to meet a client that has cash-flow reserves to throw into this problem. Those clients who have cash reserves have come to the understanding that the cash in their hand will probably be worth more to them at a later stage. Where they will be able to purchase properties at a realistic price with good yields (worst case scenario 40% deposit for a Buy-to-let)
Many clients that have come to us had been purchasing their properties on capital growth formulae and are content with positive cash flows. Compounding this problem is the reduced rental values in the public sector which will invariably impact the private sector and drive down yields.
In the last 30 years, on average, interest rates have been much higher than in the last 10 years, going up as high 15%. During the financial crisis of the early 90s interest rates were well above 10% for more than three years. For example between July 1988 and September 1991 interest rates remained
above 10%. (Source: Bank of England)
Buy-to-let mortgage problems don’t exist!! I am making positive cash flow, do I need you to rescue my properties?
Positive cash flow is a short term solution. Having the title of a property which is losing value every day and the potential for interest rate increases does not allow for a clear strategy to hold on to a property.
I am not sure I have a buy-to-let mortgage problem! What will happen if I don’t do anything? What could be the implication?
You are sitting on a major catastrophe as the buy-to-let mortgage problems is here to stay. Hence, planning or being clear about your issues is important. The following need to be addressed:
- Your health implications due to the management of your Buy-to-let mortgages
- Stress and relationships due to your buy-to-let finances
- Impact on personal home/finances due to buy-to-let fall out
- Cash flow for business and its overspill on your buy-to-let portfolio
- Dealing with creditors e.g. credit cards, mortgages, overdrafts,loans, car finance, council tax, bailiffs, relentless phone calls from debt collectors etc. All this relating to your buy-to-let mortgages and their on-going payments
- Freedom from perpetual debt i.e. even if you give your keys into the
lender the financial liabilities are still yours. With negative equity and buy-to-let mortgages being a ball and chain situation this is neigh on impossible to achieve without professional advice from Rescue My Properties!
- Consider how to remove buy-to-let financial liabilities from your life
Buy-to-let mortgage problems are becoming a reality! How does Rescue My Properties deal with the Landlord and Property Act (LPA)/receivership?
The Rescue My Properties Programme has dealt with over 10,000 buy-to-let clients facing arrears or disposal. Hence, we can safely say we have seen every scenario the LPA Act is applied to.
Rescue My Properties experience has shown that the LPA act is wrongly implemented when dealing with Landlord’s rights and tenant’s rights.
There are many inconsistencies in how the LPA is presently being implemented. As a result of these inconsistencies both buy-to-let landlords and tenants in buy-to-let properties can face serious hardship.
buy-to-let mortgage problems? Not sure, I have 10 properties. Is it worth holding on to my properties for the short-term with the uncertainty of events? My portfolio is just about breaking even every month and has little equity and is being eroded by the day. How do I get out of all the liability I have taken on without it taking me under with it?
These are the points you need to reflect on:
- We haven’t had a client with properties that have had sufficient equity worth selling – most or all properties are highly leveraged. It is correct to assume that any equity available is being eroded by the day as the property market is further declining.
- This is the question for you to answer: if the property has little or no equity why would you continue managing something with no gains. Are you happy to be a slave to the property?
- Lowered interest rates do prolong the inevitable – they do not treat the cause.
- In most cases where disposal takes place in the market a shrewd buyer will be looking for a forced sale price or a below market value price which diminishes any equity available.
- Rarely do we find a demand vs. supply issue where a CHANCE BUYER is willing to pay the asking price for the property and in this case you are set to make a windfall.
Page 14 of 23
- You are chased for all the redemptions and short falls that properties in negative equity attract.
- There is no solution to the problem; merely a withdrawal from all the problems that will slowly and gradually become worse and worse. That is why earlier decisions are better because they put you in a position of strength with regards to the creditors.
Some of my properties are fantastic and the others are completely
useless. What do I do?
We will need to understand how you define ‘fantastic’. Any property that is higher than 50% LTV of today’s value would be regarded as manageable, but clearly not fantastic. The reason for this assumption is that we are in a declining market which means 50% of today’s value could end up being 70%
LTV within a year from now.
Normally most portfolios are joined in one way or another and therefore the problem is holistic. There may definitely be units you could hold on for longer but they will all fall into the same predicament one way or another.
The difference is timing. So we address everything from the now and say if a property can be disposed off earlier with some equity. We operate with pragmatism and practicality on behalf of the client.
The example we give of a fantastic unit at 50% LTV if this be the best
scenario? Then give a thought to the following points:
- When is the fixed rate due to expire?
- What if the employment market worsens?
- What if the property values fall further?
- How much money are you making from it?
Having a low LTV can be misleading as it doesn’t necessarily confirm that you can service the debt or whether you will able to raise any finance. In certain cases we have encountered properties that are very difficult to sell and therefore the LTV means nothing. There is one argument that can be presented and that is, a long term hold if the rental value can suffice the interest payments once the interest rates go up. Are you prepared to top up the difference that the interest payments will make? And for how long?
Rescue My Properties has extensive experience of helping landlords with Buy-to-let portfolios dealing with Buy-to-let mortgage problems.
Buy-to-let mortgage problems? – looking for free consultations?
Rescue My Properties have created a total solution for any buy-to let mortgage issues and can give you a free no obligation one to one consultation.
More Buy-to-Let Mortgage Problems News:
The Money Advice Service offer tips on buy-to-let mortgage problems: