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Investors bend deposit rule
1st Aug 2005, a Monday
Property investors have been circumventing the rules on buy-to-let lending by counting discounts on new flats as deposits, according to an article published in the Financial Times.
Under the strict criteria of most lenders, investors can only take out buy-to-let mortgages if they have a large deposit, typically 15% or more. It is understood that many members of property investment clubs have secured large loans with tiny deposits, exacerbating the risk that they will wind up with mortgages exceeding the value of their homes.
The FT said that one large property investment club, which did not wish to be named, said it was common for members to obtain a buy-to-let loan with a deposit of about 5%. This was possible because loans were measured against the original asking price, which was sometimes reduced by up to 15%.
The Council of Mortgage Lenders is concerned that difficulties in the new-build apartment sector could unfairly tarnish the reputation of the buy-to-let industry
News Source:
Investors bend deposit rule
1st Aug 2005, a Monday
Property investors have been circumventing the rules on buy-to-let lending by counting discounts on new flats as deposits, according to an article published in the Financial Times.
Under the strict criteria of most lenders, investors can only take out buy-to-let mortgages if they have a large deposit, typically 15% or more. It is understood that many members of property investment clubs have secured large loans with tiny deposits, exacerbating the risk that they will wind up with mortgages exceeding the value of their homes.
The FT said that one large property investment club, which did not wish to be named, said it was common for members to obtain a buy-to-let loan with a deposit of about 5%. This was possible because loans were measured against the original asking price, which was sometimes reduced by up to 15%.
The Council of Mortgage Lenders is concerned that difficulties in the new-build apartment sector could unfairly tarnish the reputation of the buy-to-let industry
News Source:
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