Reply to: BTL Margin calls

[Pickle2]

Is this a new thing as I don't recall this happening in the late 90's property downturn.

There was no BTL in the crash of the 90s. It just didnt really exsist, not in the form it does today anyway. BTL is one of the reasons this bubble blew even bigger than the 90s one, and thus why the pop will be bigger too.

Anyone who thinks buying a pile of bricks and sitting on them (whilst getting in rent that doesnt even cover the mortgage for some) is in anyway "investing" was nuts. The whole "business" model was based on cheap credit, which was only a temporary abberation.

Oh no, my mistake, its different this time. A whole new paradigm...

[Clippy]

Is this a new thing as I don't recall this happening in the late 90's property downturn.

[GreenerGrass]

So its only for BTL mortgages - that's good to know.

Mate here thinks it also applies to some conventional mortgages but I can see there being an outcry if ordinary homeowners were asked for extra cash to top up their LTV ratios, esp if they've maintained their monthly payments. Sounds harsh if that were true.

I think Nationwide's system calculates your interest based on current estimated house prices, so if your LTV changes band (from under to over 75% or 90%) they can automatically increase your interest rate (I had assumed LTV was fixed between remortgages).

Anything over 90/95% won't require a margin call, but your interest will increase to the highest rate if not on a fixed rate deal.

[bobhope]

It was in my BTL contract (when I used to have one)

[BrilloPad]

So its only for BTL mortgages - that's good to know.

Mate here thinks it also applies to some conventional mortgages but I can see there being an outcry if ordinary homeowners were asked for extra cash to top up their LTV ratios, esp if they've maintained their monthly payments. Sounds harsh if that were true.

How would they know on a conventional mortgage?

BTL's have a surveyor revalue I believe.

[BankingContractor]

So its only for BTL mortgages - that's good to know.

Mate here thinks it also applies to some conventional mortgages but I can see there being an outcry if ordinary homeowners were asked for extra cash to top up their LTV ratios, esp if they've maintained their monthly payments. Sounds harsh if that were true.

[Moscow Mule]

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?

I believe it's a specific clause in BTL mortgage contracts.

Conversely, when I had a 100% mortgage in 2000, the company wrote to me and said they we decreasing the interest they were charging because my LTV had reduced (based on the house price index). Odd, but most welcome.

[BankingContractor]

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?

[Pickle2]

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.

[Moscow Mule]

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

[Platypus]

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.

[Dow Jones]

Thanks but...

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

[ittony]

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.

[Dow Jones]

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.

[Cooperinliverp00l]

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.