BTL Second Charge Mortgages / No Monthly Payments

BTL Second Charge Mortgages / No Monthly Payments

21:59 PM, 30th October 2013, About 8 years ago 145

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No this is NOT a wind up, it’s 100% genuine and is important that you know how it works so that at the very least you can make an informed decision about new financing choices which until now have been unavailable to buy to let landlords.

It really is a fantastic way to improve cashflow and rental profits or increase gearing without the need to remortgage.

A very credible mortgage lender (Castle Trust) is offering second charge buy to let mortgages with no interest charges and no monthly payments based on 20% of value subject to both the first and second mortgage combined not exceeding 85% LTV on BTL deals and 80% on your own home.

You can use the money in whatever way you wish, for example:-

  1. You can use it to pay down existing mortgages
  2. You can save the money for a rainy day
  3. You can use the money to buy more property
  4. In fact, you can blow it all at the local casino if your daft enough too!

So what’s the catch?

With no monthly payments or monthly interest charged, the lender must get paid somehow. This product works with a profit share basis, in that you borrow 20% of the value of your property the lender will take 40% of any increase in value – on sale or refinance.

You will also need to obtain permission from your existing mortgage lender for a second charge to be added.

Given that your equity in the property may represent as little as 15% of the value of the property and you will receive 60% of the capital appreciation you don’t need to be Einstein to work out that it’s better to use their money than yours, especially if you use the extra money raised to purchase more properties. Remember, you will not be making any payment or incurring any interest whatsoever until you sell or refinance.

Imagine if somebody put this deal to you …. I want to buy a property, you put 20% of the money and I will put in 15% and borrow the remaining 65%. I take all the rental profit/losses and when we eventually sell the property I will get 60% of the capital appreciation and you will get 40%. Oh and by the way, I will decide when we sell, OK? You would probably say no wouldn’t you? Well if you put that deal to Castle Trust, chances are they will say yes providing you have a good credit rating. It really is that good.

Basic criteria

The loan term can be up to 30 years if the equity loan is secured against your own home, 10 years if it’s a rental property.

Your total LTV must not exceed 85% on a rental property, 80% if the loan is secured on your own home..

There are no limits on the number of properties the lender will consider lending on per borrower and their maximum loan exposure to any one client is £1 million.

The minimum advance is £10,000.

For rental properties there is no requirement to have a first mortgage.

You must be able to prove that you have been a landlord for at least six months to qualify and you also need a decent credit score.

Pros and cons?

I can see several reasons why this will be attractive to landlords and I will be using this product myself for the following reasons …

  1. Deals may not stack up on rent to ordinarily qualify for an 85% LTV mortgage but may do so on this basis
  2. It’s a relatively easy way to raise capital against the security of your existing rental portfolio or your own home
  3. Improved cashflow when compared to a conventional mortgage for a higher amount
  4. Raise money without paying off an amazing tracker or fixed rate deal arranged pre-credit crunch
  5. Avoid potentially extortionate fees associated with refinancing
  6. Increase borrowing without affecting cashflow
  7. Use of other peoples money to increase leverage and returns on capital invested
  8. Castle Trust do not legal or valuation fees to arrange finance on your own home and their arrangement fees are only 1% of the advance. Valuations on rental properties cost £195+ VAT and conveyancing costs £216. This means that total fees are likely to be significantly less than arranging a conventional remortgage.
  9. Some landlords will wish to borrow 20% LTV via Castle Trust to partially redeem their mortgage with another lender and thus benefit from improved cashflow.
  10. Some landlords will wish to utilise this product to borrow more money
  11. Some landlords will wish to mix and match, i.e. reduce existing interest bearing debt and increase overall gearing to 85% LTV

Downsides

  1. Your risk is higher than that of Castle Trust because they get paid back before you do on the basis they have second charge over the property. Therefore, if the property decreases in value then you carry the majority of the risk. However, unless you’ve come to the end of the loan term it’s up to you to decide when you sell, they have no say in it.
  2. Future remortgaging may prove more difficult
  3. No new build property, i.e. properties built in the last two years
  4. The product is only available on properties located in England and Wales (not Scotland or Northern Ireland)
  5. 40% reduction in any future capital appreciation but you do need to consider that you may well be able to use the money to make a better return elsewhere
  6. The improved cashflow, in comparison to an higher traditional mortgage, will increase taxable income. However, many will see that it’s better to pay tax on profit than to have no profit at all
  7. Early repayment charge of 5% in year one
  8. If you wish to repay the loan without selling the property then you are committed to proving Castle Trust a return equal to the greater of 2% per year for the period which the loan has run or 40% of the rise in property price
  9. You will need to contact your existing mortgage lender before progressing matters to establish whether they will allow a second charge to be taken

We have no idea how long this funding will be available for so if this is of interest we recommend you to get in quickly. BTL Further Advances No Monthly Payments

We will be arranging introductions to brokers on a panel of specialist advisers which I have personally hand picked. The role of the adviser will be to review your portfolio and provide you with bespoke advice and quotations based upon your personal circumstances.

We are also considering the demand for free of charge introductions to a non-advised mortgage packager service. However, unless you consider yourself to be a sophisticated investor and in need of no advice and associated protection we strongly recommend you to obtain professional advice from our carefully selected panel of advisers.

Obviously we want to make some money out of this too so we are charging a fee of for introductions to our panel of professional advisers. By charging for the introductions we, and the advisers we are referring to, recognise that only serious enquirers will progress matters. This is a good way to ensure that our advisers are not bogged down answering questions from time wasters and also provides a very a good reason for our recommended advisers to prioritise our referrals.

Our fee for arranging an introduction to a professional adviser, who will visit you to provide face to face advice if that is required, is £200, payable to Innovative Landlord Solutions LLP (the legal owner of Property118.com) either by credit/debit card or via PayPal. You will then be contacted within 7 days.

Professional Adviser Introduction Request Form

  • Price:
    Fees are non-refundable



Comments

by craig singleton

8:16 AM, 31st October 2013, About 8 years ago

Morning Mark, I really wish I could of attended them. I really need help from a guy like you to become a success in life. I don't have anyone to help me find my way basically. I'd love to meet you for a chat and sit over a coffee. I no you're a busiy guy but I'd be so grateful. I just need someone that I can trust in property and that is you. I no I can trust you. I've spoke to lots of property investors and companies. But you're the only one I trust and like 100%. I'm fully committed to property but I just can't move forward as I need that bit of help

by Mark Alexander

9:06 AM, 31st October 2013, About 8 years ago

Reply to the comment left by "craig singleton" at "31/10/2013 - 08:16":

Sorry Craig, it's really not what I do.

I was in exactly the same position as you when I started out. I was desperate to find an investor but I never managed it myself so I'm probably the worst person to ask about how to go about that. Maybe you should post a guest article asking how to go about finding a wealthy business partner?

I do not want this forum to become a soliciting ground for people without money to seek investors though.
.

by Mark Alexander

9:14 AM, 31st October 2013, About 8 years ago

Reply to the comment left by "craig singleton" at "31/10/2013 - 08:16":

One further point Craig, I became an accidental landlord in 1989. I saw people all around me making money out of property and I was desperate to get into it. I was far worse off than you too. I had no money whatsoever, I was in negative equity and my parent were standing as guarantors for my £24,000 overdraft. I actually wanted to declare bankruptcy but I couldn't as it would have pulled my parents under with me. They were not wealthy people either. I took me 6 years of very hard work, 18 hours a day to repay my debts and accumulate enough money to buy my first property. I truly believe those tough times stood me in good stead although there is no way I saw it that way at the time. I feel your pain, I've been in a far worse position than you I can assure you. If you maintain a burning desire and clear goals then you will get there with a lot of hard work. It's the hard work that pays off though, you need to earn money and be successful another way first. In your case you may become very good at finding wealthy people to partner with you. I wasn't, I had to graft for every penny.
.

by craig singleton

10:34 AM, 31st October 2013, About 8 years ago

ok well is it ok then if I post an article to try and find someone to invest in me. I can make the investor a very good return without having to do any work at all. I no the key areas to make money in. And I could build a very good portfolio for the investor. If I get interest will you please allow me to some how get in contact with them

by Mark Alexander

10:41 AM, 31st October 2013, About 8 years ago

Reply to the comment left by "craig singleton" at "31/10/2013 - 10:34":

Hello again Craig

No, such as article would NOT be acceptable and would not be published, please re-read my previous comment.

You write an article asking how others have managed to find private investors but we will not allow articles soliciting for private investment to be published on this website.
.

by Alex Chard

11:24 AM, 31st October 2013, About 8 years ago

Hi Mark
Is it possible to pay back this second charge without selling the property?
Regards
Alex

by Mark Alexander

11:31 AM, 31st October 2013, About 8 years ago

Reply to the comment left by "Alex Chard" at "31/10/2013 - 11:24":

Hi Alex

Good question.

Yes I believe it is because that would have to be done if you were to refinance. I am not aware of how the valuation would be determined to calculate the lenders returns at this stage though.

I have a teleconference with the MD of Castle Trust at 10 am tomorrow so I will raise the question then and report back once I have the definitive answer.
.

by Alex Chard

11:38 AM, 31st October 2013, About 8 years ago

Reply to the comment left by "Mark Alexander" at "31/10/2013 - 11:31":

Thanks Mark.
I'd be interested in knowing all ways to settle the second charge, and how the value is determined at that time.
Thanks
Alex

by Mark Alexander

11:52 AM, 31st October 2013, About 8 years ago

Reply to the comment left by "Alex Chard" at "31/10/2013 - 11:38":

Leave it with me Alex, I'm sure it will be clear, fair and reasonable and may even have an arbitration service linked to it because Castle trust have a very good reputation which they are very keen to protect. However, I'm sure you would rather have the exact answer rather than speculation and I hope to have that within the next 24 hours.
.

by Gillian Schifreen

12:25 PM, 31st October 2013, About 8 years ago

Spoke to Castle Trust this morning. I was informed they run the loans for a maximum of 10 years and you are committed to paying 2% per year or 40% of the rise in property price which ever is the greatest. Should conditions remain as they are now then it is likely that outside London you may well be paying the 2% per year. so at the end of the 10yr period a £50000 loan would incur £10000 'interest' payment even if the value of the house hasn't risen. The figures do still seem to stack up though. There are various valuation, arrangement and brokers fees on top.

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