Releasing equity – please help!

by Readers Question

17:04 PM, 9th July 2014
About 4 years ago

Releasing equity – please help!

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Releasing equity – please help!

I am new to BTL and have a question about the concept of releasing equity. My situation is the following: Releasing equity - please help!

I own a three bedroom house which I bought six months ago with a residential mortgage with Nationwide. The mortgage has 2 year fixed interest rate and is for £188K which is 80% of the purchase price (£235K). I had a market valuation done on the property just last week and the report from the estate agency suggest that the current market value is between £275-285K.

I am in the process of buying my first BTL property but the problem is that I need to show that I have £25k deposit which I do not have as savings so want the use the equity from my current property. I will not going to use this money because I am buying the property with 25% discount which is exactly the deposit but in order to get a BTL mortgage I need to show that I have the amount.

It can literally be just for 24 hours- just to show that I have the deposit.

The problem is that I called Nationwide and they told me that they don’t do further advances to fund BTL purchases.

Can you please advise what other options I have? Short term lending? Remortgaging? Bridging?

I have only heard about these concepts but have no idea how they work and which one will be best for me.

Any advice will be much appreciated!

Thank you

Milena



Comments

Mark Alexander

17:15 PM, 9th July 2014
About 4 years ago

Dear Milena

I hate to tell you this but your questions have set off just about every alarm bell I can think of at Property118 Mission Control 🙁

The deal you are being offered has SCAM written all over it and whoever has told you to structure your finances in this way is leading you to committing mortgage fraud, probably without a care in the world for you and with pure self interest just to make a sale. Chances are they will have recommended their own mortgage advisers and solicitors who are in on the scam too.

I can assure you that the only reason you are being asked to prove that you have a deposit is because your mortgage lender has been mislead to believe that you will be paying one. If you doubt that, call them and tell them how the deal is really being structured, what the true purchase price is and see what they have to say. You will find that your mortgage offer is withdrawn immediately. If you are dealing with a solicitor who is telling you the structure that you've been offered is OK then he/she too is in on the scam or at least incredibly naive, incompetent and negligent.

Obtaining mortgage funds via deception is mortgage fraud and carries a penalty of up to 14 years imprisonment. Please, for the sake of your own freedom, walk away from this deal and report the advisers and sales people you have been dealing with to their local trading standards office, the Police and any regulatory bodies or networks they are members of.
.

Yvette Newbury

17:51 PM, 9th July 2014
About 4 years ago

"The problem is that I called Nationwide and they told me that they don’t do further advances to fund BTL purchases." Is this what others have found too I wondered?

Mark Alexander

17:55 PM, 9th July 2014
About 4 years ago

Reply to the comment left by "Yvette Newbury " at "09/07/2014 - 17:51":

Hi Yvette

This issue was discussed here on Property118 when the Nationwide policy was first announced - please see >>> http://www.property118.com/nationwide-scraps-remortgages-for-buy-to-let/63510/

Fortunately, other residential mortgage lenders have not seen to follow suit.
.

Jeremy Smith

18:39 PM, 9th July 2014
About 4 years ago

Reply to the comment left by "Yvette Newbury " at "09/07/2014 - 17:51":

I think you'll find they do still do mortgages.....Just under another name....

(email)
Yours sincerely,
Cara McCrossan
Mortgage Underwriter
The Mortgage Works
********************************************************************
The contents of this email etc, etc....
....
Nationwide Building Society is authorised by the Prudential Regulation
Authority and regulated by the Financial Conduct Authority and the
Prudential Regulation Authority under registration number 106078.
Nationwide Building Society, registration no. 355B. Head Office:
Nationwide House, Pipers Way, Swindon, Wiltshire SN38 1NW.
********************************************************************

Milena Toncheva

22:43 PM, 9th July 2014
About 4 years ago

Dear Mark, thank you for your advice. The property developer selling the flats has been on the market for more than 10 years and has developments throughout the UK. Yes, you are right that they work with their mortgage broker and solicitors so I will seek another opinion. The thing is that I already paid substantial fee which will cover the broker and solicitors fees but for my own peace of mind I will have someone else checking the deal. Can you recommend a mortgage broker who can help? Thank you

Shakeel Ahmad

0:22 AM, 10th July 2014
About 4 years ago

Their buy to let arm is called " mortgage works " .

Mark Alexander

7:31 AM, 10th July 2014
About 4 years ago

Nationwide will not do further advances on residential property if the purpose of the loan is for raising deposits for BTL.

Yes TMW do BTL mortgages and yes they do further advances on BTL but that's not the same thing.

The key issue here though is that it seems very obvious that Milena is being advised very badly with regards to the property purchase and funding structure she appears to have committed to. Clearly she cannot afford to buy the property and the funding is being structured to deceive the mortgage lender into providing 100% BTL mortgage funding. There is a word for that - FRAUD!
.

Mark Alexander

7:37 AM, 10th July 2014
About 4 years ago

Reply to the comment left by "Milena Toncheva" at "09/07/2014 - 22:43":

Dear Milena

Any good mortgage brokers will tell you that you have been the victim of a scam within minutes. I have several very good mortgage broker contacts and I would rather not waste their time on this case but I will drop a few of them an email asking them to comment on this thread. Look out fort comments from Howard Reuben, Adam Hosker, Mark Edwards and Simone Gilks. They all have member profiles here and are all sponsors of Property118. They are good people, totally honest, please listen to what they have to say.

It doesn't surprise me at all that you have paid large up front fees. These are recoverable. Please contact Mark Smith at Cotswold Barristers for some free initial advice - see >>> http://www.property118.com/member/?id=1945
.

Mark Edwards

8:55 AM, 10th July 2014
About 4 years ago

Dear Milena

I am afraid Mark is right, you would do well to heed his advice and avoid any involvement with any of the individuals involved. Just examine for a moment what you said in your initial post.

"I am in the process of buying my first BTL property but the problem is that I need to show that I have £25k deposit which I do not have as savings so want the use the equity from my current property. I will not going to use this money because I am buying the property with 25% discount which is exactly the deposit but in order to get a BTL mortgage I need to show that I have the amount.

It can literally be just for 24 hours- just to show that I have the deposit."

You are saying that you will show the BTL lender that the deposit is coming from your own funds, but really it is not as you have a 25% discount. If the lender was aware of how the purchase was really being funded they would not lend. This IS mortgage fraud.

My advice to you is to steer well clear of all the individuals concerned. If you have any doubts then simply email your original post to the BTL lender and ask them if they will be happy to lend.

Howard Reuben CeMap CeRER

9:03 AM, 10th July 2014
About 4 years ago

Reply to the comment left by "Milena Toncheva" at "09/07/2014 - 22:43":

Hi Milena

This process of buying 'below market value' is a fallacy.

As soon as you buy at the lower value, that in itself determines what the new value is, because your purchase price (not the previous OMV) now becomes what that house is 'worth'. Where's the benefit in that for you? All you've done (and what these property clubs do) is to essentially lower the intrinsic value of all surrounding houses as valuers will typically use recent sales figures for comparables anyway.

And of course, if you're having your property registered as being sold to you at the higher price then quite simply that's mortgage (and poss stamp duty) fraud too.

I wrote about the issues of 'no deposit' (or as the lenders call it 'pain money') as a reply to a previous article > http://www.property118.com/loan-to-value-or-loan-to-purchase-price/62746/#comments

Hope this helps.

By the way, the loss of a fee to that Firm (although possibly recoverable as Mark says above) is nothing compared to the penalty you'll incur if this transaction is not totally legal.

Howard

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