Mortgage Express terms ending – Does this mean trouble?

by Readers Question

10:48 AM, 3rd October 2016
About 2 years ago

Mortgage Express terms ending – Does this mean trouble?

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Mortgage Express terms ending – Does this mean trouble?

My first Mortgage Express mortgage comes to an the end of its term September 2018 (it had a 20 year term from 1998). Then there is a batch due to come to term in 2022, 2023 etc. What worries me now and then is whether MEx can say when this one comes to an end and I pay it off – either with savings or by remortgaging in 2018 – that I have to redeem all the rest.trouble

I did try to remortgage 5 away from them earlier this year and I thought they’d jump at the chance but they didn’t. They said something like 17 out of the 30 with them would then not meet the LTV requirements and that I would have to pay for valuations for all of them and pay the amounts needed to bring down the LTVs. But I am hoping that a mortgage coming to its term and being paid off is different to redeeming a mortgage.

Can anyone throw any light on this?

Linda



Comments

Neil Patterson

10:50 AM, 3rd October 2016
About 2 years ago

Hi Linda,

It may depend on the overall Loan to Value that is outstanding with them in total.

Have you made a rough calculation of what you think this figure may be?

Linda Lane

12:40 PM, 3rd October 2016
About 2 years ago

Hi Neil.
I think my LTV is around 71% but from their reaction to my earlier attempt to remortgage they must disagree and at a guess they might think my LTV is around 80% or even 85%. Who knows? I did a remortgaging exercise on many of the properties in 2008 in order to buy more and so many of them had an LTV of about 85% at that point. Although some others were at LTV of about 70% and I didn't remortgage them as the yields were too low. Prices in my area have been fairly static but I have done work on some houses which would increase the value of them but they wouldn't know this.

Kate Mellor

15:59 PM, 3rd October 2016
About 2 years ago

You don't say what the lenders maximum LTV is on your loans.

You'd obviously need to know this along with the values they have on the properties so you can work out whether any changes will put you at risk of going above the stipulated maximum LTV. Ask them to provide you with a list of the values they have against each property so you can work out how much wriggle room you have to play with. If you are at all unsure you should contact them and find out their position in good time.

I'm sure that if they feel that the overall LTV is going to put you in breach of your terms they will make you rectify this regardless of the reason and from what I read on here about ME they are a lender whose terms you definitely do not want to breach.

Linda Lane

17:51 PM, 3rd October 2016
About 2 years ago

Thanks, Kate. I believe that the maximum LTV when I did the remortgaging in 2008 was 85%. I don't know if they're allowed to shift the goalposts and now say the maximum is the more common 75%... I would assume not. I am reluctant to contact them so will have to think about that. My aim is to save as much as I can for the next two years so that if I have to then bring all the LTVs to 85% LTV according to their valuations, that shouldn't be a problem. I say according to their valuations, but actually they said before that I would have to get my own valuations of the 17 they reckoned were not at the right LTV. I think this will be a damn cheek as why should I have to do anything other than pay off the one mortgage when it reaches term? Maybe I will only have to do that - one never knows with Mortgage Express.

H B

6:52 AM, 4th October 2016
About 2 years ago

Hi Linda,

It sounds to me like you are a victim of the anti-landlord agenda. Firstly S24 will hit you hard - will your portfolio be cash positive after taking the new tax into account? Secondly with the new rules about underwriting coming in, portfolio landlords are going to be looked at more harshly.

Many lenders are now moving to a much lower rent/interest payment ratio which could cause problems for a more leveraged portfolio.

You might want to consider deleveraging down to 10 -15 properties or so so that your LTV is 50 - 60%.

Jon Pipllman

11:42 AM, 4th October 2016
About 2 years ago

ME is likely take the opportunity of the first mortgage expiring to attempt to get you to redeem the whole lot in full and, failing that, to improve its position overall against your portfolio.

How serious it is in pursuing that is hard to guess and there is every possibility that you will simply be able to redeem that one mortgage after resisting very little pressure from ME to do more.

As HB asks, does an 85% LTV portfolio work for you under S24 regime?

Charles King is well regarded for his dealings with ME and it might be a sensible use of your time / money to seek his advice on your situation

My initial thoughts (FWIW) is not to "prod the bear" by contacting ME until you have to. But to use the time before your first mortgage does expire to develop an understanding of your options and best guess the position ME will take at that point.

Being able to demonstrate considerable free cash flow from the portfolio, full compliance with the T&C's of each mortgage and, by then, having a chunk of money to throw their way to reduce overall LTV can be no bad thing.

Maybe even pre-empting that its position will be to ask you to pay back all your ME mortgages and seeking an alternative lender in the meantime is worth a look too.

Be aware that now (i.e. the time since IR's halved to 0.25%, the Term Funding Scheme draw down window opened on 19 Sep and before the PRA guidelines need to be implemented on 1 Jan 2017) might be a sweet spot for BTL lending that isn't seen again for a long time.

Kate Mellor

13:38 PM, 4th October 2016
About 2 years ago

Reply to the comment left by "Linda Lane" at "03/10/2016 - 17:51":

I can certainly understand your reluctance to contact ME Linda and point this out. Unlike a high street lender you probably don't have a relationship manager appointed and it may well be that the redemption at term of one property may not even flag up...however, if you do ask the question they will certainly look at the overall position. It's a sticky one.

As you say, as long as you are working toward being ready for the 'worst-case' scenario you may be right to keep quiet and see what happens. The problem is knowing how much money you'll need to satisfy them if they insist on you getting valuations (expensive) & then making a capital repayment to bring the loans back to 85% LTV.

We've been in this position with Co-op Bank recently, we were forced to pay for revaluations (This was stipulated in our facilities letters) and had to relinquish all our overdrafts to reduce the banks overall position with us which was enough in our case. We then refinanced the whole Co-op portfolio (which were commercials) with Shawbrook Bank as we couldn't stomach having to pay for revaluations every two years as demanded by the Co-op!

Do your sums carefully and work to the worst case outcome to ensure you are ready for whatever they throw at you. A sit down with your accountant would be advisable.

This may even mean selling something which has an overly high LTV. It will mean you can reduce the LTV on the portfolio as a whole and are unlikely to pay Capital Gains tax on it as there presumably won't be a Capital Gain, or the gain after tax will be within your annual allowance. The important thing is to decide now whether you think this will be the best option and do it whilst there is time. All the best.


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