Where have I been for 2-3 years???

I wish I could remember 11th May 2008.
It must have been a pretty slow day if you go by the length of my last blog on here. A great deal has happened since my last article for us all. Maybe your a totally new investor who has never heard about BMV Property, BMV Finance, etc or you maybe more experienced than me. I totally forgot about this blog if I'm honest and in some ways only started it to help with my google rank on my struggling buy to let mortgage business.

There was a good helping of bull sh*t in many of my posts and probably desperation to get client to use me for their buy to let mortgage.

We'll here's a brief run up to what I've been doing since along with what I plan for this site:

• Continued to struggle growing the buy to let business for a further 6-9 months along with struggle to keep all my highly geared portfolio tenanted and paying the crippling rates of interest.
• Towards the end of 2008 I realised that making a small proc fee on buy to let mortgages along with the high drop out rates from clients not completing I was working 12 hours a day for an OK salary but high risk business model.
• Still being fairly young I decided I didn't mind the high risks but I should at least be getting paid well for working under this kind of pressure. I was still being crippled each month with the buy to let mortgage payments on my "millionaire BMV property portfolio". If being a mortgage millionaire was the aim I was sure there but unfortunately many were untenanted and the gearing was at up to 100% real open market value.
• Being a big fan of property and still, against many negative vibes from property experts, I still felt/feel below market value property is a great place for people of all walks of life to become wealthy. I'm not talking millionaire but rather happy and not worrying about the credit card statement.
• I fell into looking at trading property myself from developers and vendors to sell to investors I had on my books or via other property clubs. Apart from the odd mortgage for current clients (there were not many) I focused all my efforts on helping find below market value property and structuring the deal with client, bridging lender, etc and making a fee for my efforts. I'd say through a mixture of luck and desperation I pulled off one big development which didn't make me a cash millionaire but did put me into a much, much better financial footing. I went from lots expensive un-secured debts such as credit cards, etc to £0 debt and a good chunk of cash in the bank.
• 2009-2010 I spent much of the time trying (un-successfully) to replicate the same bit of luck I had in first big deal. Although I did a couple of OK deals and my bank balance was not going down, it was also not going up much either. Probably around mid 2009 I realised that chasing after these big BMV property deals nationwide was pie in the sky and wanted to create a long term business rather than short term high risk gains. Up until this point all the deals I sourced were through third parties which resulted in lots of sharks stealing money, deals falling through, etc so the only way I could think to fix this was going direct to vendor myself.
• It was during this time I realised that sourcing 1 good local deal a month would make me a living, one a week was a very good business.
• Property Buyers Wales was born during this time and I started with 1 assistant, a load of leaflets, small website and plenty of mobile credit. It started slow but deals then started to come in and completing the first real deal I created from scratch was the best feeling I had in years. We slowly started to get a good local reputation for helping sellers sell property qucikly.
  
• Until late 2010 I have continued the same system and complete an average of 4-6 deals per month. My team has grown to 6 office and field based staff along with our first franchisee in North Wales in 2010. With our North Wales guys we now cover all of Wales. The whole business concept is in my eyes a small local bmv property investment company will look after their investors needs better than some National agent who had no local knowledge.
• 2011 - This is the year we want to grow out investor database. Up until now around 80-90% of our deals are sold via property investment clubs. I'd like to see us selling 50% of our own deals this year to ensure we can offer a much better personal service to both vendor and investor.
• During this time I've also become a bit of a builder as sourcing local deals mean you tend to find more referb projects which has given me the opportunity to cash buy horrible little houses fit for rats and turn them into lovely homes for local families.

Where is this blog going?
Not sure yet. Although I don't advise on mortgages anymore I still know a great deal about bmv property finance and buy to let mortgages in general. We run a couple of medium size websites which act as the day to day business so I'd love to somehow bolt this onto our property investors wales brand website to share with readers. If anyone has any ideas please drop me a line. Maybe we all decide this blog is best put to bed and I'll forget about it again for a few years but I do feel theres some good content in this blog so it would be a shame to delete it. In the meantime I set up a free property education portal on our main website. You don't need to pay anything and you may find it answers your questions better than a long post like this.
Please feel free to get in touch.
Kind Regards,
Daniel

End of One Day Re-Mortgages

As all you BMV Property Investors are in no doubt aware the party is finally over for one day closed bridging and re-mortgaging with Mortgage Express. I think we can all say we knew they would stop it eventually. Being the only real player in the market it was a risk the current financial markets could no longer pass to one lender.
You still have the likes of Nat West who offer the facility however the criteria is a lot stricter and the Pay Rate is based on Capital & Interest.
The question is what is next for BMV investors who seem to be the new target of lenders wanting to reduce "risk" on their balance sheets?
Any BMV investors who were already using Assignable Contracts or methods where the property was held for less than 6 months will also be aware (hopefully!!) that the CML Handbook has changed.
It now required solicitors to inform the lender if the property has been purchased with an assignable contract or if the vendors have owned the property for less than 6 months. Any readers who have used my company Fruit Finance LTD should be well aware of the issue we now face with the ownership of 6 months. This was the method we used up until 1 week ago.
We do now have new methods however our costs have increased along with the complexity of structuring the whole deal. It used to take me 10 minutes to explain the structure, it now takes me up to an hour.
It is becoming a very difficult time at the moment for BMV property investors and I must warn you all its sure to get worse before better.
However I never end on a bad note. The BMV discounts I'm currently seeing from my own BMV property and that of my clients have increase on average to 22% - 35%. I have not seen a BMV deal of less than 20% for several weeks.
This is good news on two fronts, with house prices set to decline further this year we all need to ensure we are not left in the same position as the vendors we purchased from. Secondly, we are seeing much less competition amongst fellow BMV investors, how many of use have been played against each other by the vendors who end up taking so long they get repossessed?
As I've been repeating in almost all my blogs over the last few months, this is the year to make some great deals in the BMV market. If you can ensure your deals are 25% BMV and work on the few products left on the market then your on to a winner.
Would any BMV investors still consider deals of 17% BMV where the rent just covers the 85% LTV mortgage at 5% fixed? I know none of my clients would!
Lastly we have some pretty good packaged BMV deals discounted to around 22% if any investors are interested. We get in around 5 - 10 per week which are shared between my clients.
The best bmv mortgage I'm currently recommending is at 80% LTV with C&G (one of the few mortgages still below 6%).
Good luck to you all in securing some great BMV property deals and remember to contact me if you require any help with your BMV mortgages and finance.
Regards,
Daniel Morgan

BMV Financing gets wake up call

It’s almost been too good to be true over the last few months; we have market leading interest rates in the Buy to Let Mortgage market with rates below 5% and rental calculations of 100% of rental income.

BMV investors using one day closed bridging and same day re-mortgages with Mortgage Express were accessing rates of 5.39% which enabled deals to stack well very well.

BMV investors using different financial methods were accessing even lower rates of 5.07% or lower with rental calculations based on only 110% of pay rate. There were very few deals that I and other BMV mortgage brokers couldn’t get to stack up.

Unfortunately like all good things, this has all come to an end.

LIBOR rates

Although the Bank of England has reduced rates twice in recent months, with another cut expected within the next few weeks, the real cost of borrowing for banks have increase. The rates at which banks lend to each other has increased to record levels in recent months resulting in several buy to let mortgages being pulled.

BMV Market

The BMV industry in general has come under the spotlight over the past few months with several banks imposing stricter criteria on borrowers, particularly those buying at discount. One large building society will no longer offer mortgages if they feel the property in a Sell and Rent Back deal.

There are good reasons why lenders don’t like lending to BMV investors, invariably the investor has put little if any money into the deal. The risks to the investor are lower due to no personal capital being tied into the property making it easier for the investor to “walk away” from non performing properties.

LTV (Loan to Value)

There is a lot of focus on LTV’s being offered to buy to let investors in recent weeks. CHL (Capital Home Loans) recently reduced all its range to a max LTV of 80%, down from 90% last year and 85% this year. CHL then went on to pull all rates this week which will have knock on effects to other lenders.

Several other lenders have also reduced their maximum LTV’s in light of figures suggesting house prices are likely to fall further this year. Lenders are actively seeking to reduce their risks on the UK housing market as property values continue to fall and a number of high profile cases involving Surveyors over valuing in some developments coming to light.

Victims of our own success/greed

There are likely to be several consequences resulting from all our success in the recent BMV buying bonanza. Properties are likely to get more difficult to stack as higher interest rates and stricter criteria will make deals more difficult to work.

One underestimated problem faces Buy to Let and BMV investors looking to remortgage recent purchases. If you purchased your property 2 years ago on a CHL 90% LTV mortgage with high arrangement fees and decreasing property prices, how will you re-finance your investment if 80% LTV becomes the norm?

In my eyes this is more important that any other issue effecting Buy to Let investors as we may all be feeding an extremely difficult period.

The good news

Never one to end on a bad note, there is good news to all this doom and gloom.

Investors were more likely to buy bad investments when rates and rentals were so easy to stack. Properties with little positive cash flow or equity were being purchased due to little or no money down being required. The “nothing to loose” mentality has been strife in recent months without thinking above the underlining question on the value of the investment risk you have taken.

Now investors have little choice but to cherry pick BMV properties with more equity and increased positive cash flow. This will lead to a better long term model reducing the risks of a declining housing market or any spells of vacancy.

On the whole the market has become more difficult to stack but when has making money ever been easy?

There are winners and losers in every market change, losers include Lead Generators unable to sell leads without higher discounts. First time investors will find it more difficult to stack deals on offer (not necessarily a bad thing). Winners include buyers who can get deals to stack in the more difficult market – these investments are likely to yield higher returns along with ease of re-finance over the next few years.

Written by Daniel Morgan

Daniel Morgan is a BMV investors and Specialist BMV Finance Broker.

Sourcing BMV Property Leads in UK

The major problem facing BMV property investors today is no longer the finance but the quality of the leads along with increased competition in the BMV investor market. The more popular BMV purchase becomes with investors the harder it has become to get those big discounts and large cash backs to stack up.

BMV is not exactly rocket science and the problem today is to know which lead providers you can trust and which you should stay away from.

This article is designed to help inform BMV property investors on the various lead sources available to them. If you haven’t already done so, I recommend you read my articles on BMV Property & BMV Mortgages which will give you a good insight into the workings of this relatively new phenomenon.

Estate Agents
By far the most effective way to source local leads are through estate agents but don’t expect to pick up BMV deals from the shop window. If you have contacts within the estate agents you can achieve some great results from this lead source.
Remember most estate agents will already either be buying BMV property themselves or have investors lined up and waiting for properties. The only way to make this work is through incentives for the agents, if they know that a good lead and quick completion will earn them £500 - £1,000 as a finder's fee then you’re likely to get better deals than just asking for anything that they can't sell.
Either go direct to the managements of independent estate agents or negotiate deals direct with the agents of larger agencies.

Positives
• You have professional agents who are in the local area every day dealing with potential sellers.
• Long term relationships can be achieved with constant steam of leads to service.
• Agent can help flip properties for instant profit or negotiate on your behalf.

Negatives
• Most agents will already have a database of willing investors requiring less than 15% discount.
• Many agents will require larger finder’s fees due to the constant supply of investors.
• You need to achieve a high conversion rate to keep the agents happy and willing to continue sourcing BMV deals on your behalf.

Repossession Leads
Not an easy job but its here you can negotiate deals of 30% or more BMV. It involves long hours, street walking, spending time with people who are often in sad circumstances and then negotiating the lowest possible price before the property is taken into repossession.
This is not a route for first time investors and is often difficult for experienced investors to work successfully although if done right the rewards are often worth all the effort.
The process involves obtaining lists of homeowners due to attend court regarding repossession of their property and carefully targeting these homeowners with information about your services. Many investors will target the local area and hand post notes through the door stating they are looking for property to buy in the area.
The number one rule is not to personalise the letters as this will often scare the homeowners on how somebody else could know their personal business.
Buying BMV property through this process will usually take from 2 – 6 weeks to convert and you have to deal with a lot of time wasters along with homeowners agreeing when it’s already too late. You need to be a fantastic people person and show your empathy with people's situations, you could spend hours with someone only to leave with nothing other than a sad story.

Positives
• If successful you can achieve discounts in excess of 25%.
• You can target your local area.
• Opportunity to help distressed sellers avoid repossession.

Negatives
• Can be extremely time consuming with a lot of hassle from homeowners along with time wasters who are inevitably going to have their home repossessed.
• Many of the home owners have high LTV mortgages which often make the deal impossible for the seller, lender and buyer to agree on.
• Difficult to manage outside your local area as the best results are often achieved with hand delivers notes and home visits.

Unqualified leads
These leads come from a range of different sources and will generally include the homeowners full contact details, mortgage amount, property value, reason for sale and agreement to sell at a discount.
This is currently the most popular form of lead purchase which generally come from homeowners searching online for companies who will purchase property quickly. They will complete an online form and these details will them be sold on the open market.
My warning on these leads would be to find out if the lead generators buy BMV property themselves and if so why are they selling them?
Another thing to remember is that these leads are generally sold for £75 - £250 each which requires an amount of confidence on your part to know the leads are of good quality and will have a high conversion rate. The major problem with these leads involve the homeowners themselves, they will often submit their details to a number of websites, resulting in homeowners playing the buyers against each other for the highest offer.
Getting anything more than 15% - 20% BMV is extremely difficult unless you’re a strong negotiator. Remember that after winning the bidding war the seller could still pull out of the deal at any moment whilst their still contacting every possible buyer under the sun.

Positives
• Lower price for leads compared with ready made deals.
• Contain most of the information required to assess profitability.
• Often room for cash back.
• Some providers have lead replacement policies.

Negatives
• Extremely competitive market with buyers competing with unknown number of other bidders.
• Risk of sellers being time wasters and only interested in what they “could” get for their home.
• Hidden fees often attached such as sourcing fees often up to 2%.
• Number of lead providers will sell the same lead to multiple buyers.
• Leads are often ones which the lead providers are not interested in themselves.

Ready made deals
This is the armchair investors dream, go online, find a ready made deal, accept the terms and the BMV property, finance, lead, and legal fees are taken care of for you. They are packaged as one price with rental and valuation calculations already completed and then sold as packages generally in the region of £500 per lead.

Positives:
•Deals are ready made, no need to negotiate prices, work out rental & valuations or often arrange the finance.
•Great for first time buyers with little knowledge of BMV market required.

Negatives:
• Deals often carry hefty fees with £500 for the package, 2% set up fee and broker fees added on top.
• Cash back is often little if any and some deals require capital investment.
• Rental calculations are often 100% of the mortgage which could spell trouble if tenants don’t pay.

In conclusion I urge any BMV property investors to research their lead provider thoroughly before committing yourself and your money by getting answers to the following questions;
• What are the true costs including all the fees?
• What experience does the lead provider have?
• Where do the leads come from?
• Does the lead provider also invest in BMV property and if so why are they selling the leads?
If the lead provider requires you to use its solicitor, broker and agents be very cautious as there are a number of rogue traders out there searching for people new to BMV investment to prey on.

Get a good BMV mortgage broker who understands the BMV market and who can assess possible deals and give you guidance on its merit.
Don’t hunt for the cheapest lead prices; they are often the ones that no one else wants.
Join specialist BMV property forums and lead exchanges before beginning your venture into BMV as they are often filled with peoples experiences and advice.
Personally I use the following websites but remember that what’s right for one may not be right for another.

singingsig.co.uk
bmvpropertyleads.co.uk
leadsexchange.co.uk
discountpropertyauction.co.uk

I hope you found this article useful and I’m more than happy to talk to anyone new to BMV property along with experienced investors. I am a specialist BMV mortgage broker and property investor with a wealth of knowledge & experience of the market.

Written by,
Daniel Morgan
Buy to Let Mortgage Broker & Property Investor

BMV property mortgages & leads

With the current housing market as it is below market value or BMV property is starting to make big gains in the amount of business I and other mortgage brokers arrange for their clients. My previous article on what is bmv property? explains how the system works and how buyers can benefit from falling house prices.
I receive a number of emails every day seeking advice on BMV property finance and even more on BMV property leads. For BMV purchases to work you need to consider a number of factors to ensure you can get a great deal and secure BMV mortgages.

Open Market Value
Many BMV websites in the UK will quote the open market value, OMV, as being substantially higher than the true amount, often because the cheaper lead suppliers allow the seller to guess what their house is worth. How many people who know they are going to give a discount off their property will give a true reflection? How many people would undervalue an asset which they may have spent over 10 years building and investing in?

I often find the true OMV is only really known often the surveyor has assessed the property, usually after spending over £300 on a non refundable survey report.
You need to do your research, HomeTrack is one useful tool along with RightMove and local agents. Use all of these resources before deciding to pay the mortgage valuation.

Rental assessment & mortgage available
This is the one major sticking point when we try to stack up if a property in worth buying or not. The only real mortgage lender currently offering same day remortgages is Mortgage Express which currently require 125% pay rate to offer the mortgage on the property. Time and time again deals which have looked promising fall through due to either investors or agents over calculating the rental return. To work out how much rent you need to borrow a fixed amount or visa versa there is a helpful formula below based on a Mortgage Express mortgage of £100,000 with an interest rate of 5.39% which is currently accurate and a property which can rent for £575 per month.

What rental would you need
Take the amount of the loan: £100,000
Multiply by the lenders interest rate: 5.39% (100,000 * 0.0539)
Divide by 12 which gives monthly: 100000 * 0.0539 = £5,390 / 12 = £450
Multiply this by the pay rate (125%): 550 * 1.25 = £560
This amount is how much rental you would need to achieve to be offered the £100,000 mortgage.

How much can I borrow based on rental
Take the monthly rental: £575
Divide this by pay rate (125%) : 575 / 1.25 = £460
Calculate annual amount: 460 * 12 = £5,520
Divide by interest rate: 5,520 / 0.0539 = £102,411
This example shows you could borrow up to £102,411 or 85% of the OMV, whichever is lower.

Speak with local letting agents to get an idea of how much you will rent the property out for and even see if its possible to have the letting agent asses the property your interested in. They will often offer to do so at no cost due to potential future business.

Negotiating Property Discount
Some BMV lead providers will negotiate the purchase price for you and others will simply supply the lead details and calculate the open market value. For BMV property investors new or inexperienced then make sure the price have been agreed and fixed before hand, you want to make sure you get the biggest discount available which means you need experienced negotiators agreeing a sale price.

For a true no money down or cash back deal you need to be achieving a discount of at least 17.5% off the OMV and still have the rental stack up.

The current mortgage lenders will offer up to 85% of the OMV on same day re-mortgages with broker, bridging loan and legal fees generally around 2.5% of the purchase price this would mean an agreed discount of 17.5% would mean a true no money down deal minus the valuation costs. Any discount above this and your looking at the possibility of cash back which is why many BMV property investors look for deals which are discounted over 20%.

Sourcing BMV property leads
This, by far, is the most common question asked when looking at BMV property. For true no money down or cash back deals you have to be proactive in sourcing leads. Calling a broker or lead generator and expecting to sit in you home while people bring you deals with 20% is not realistic. Why would I offer you BMV property leads with 20% discount when I'm also a property investor? I wouldn't and neither would most people involved in BMV, I can offer you 100's on 15% deals but that's not a true no money down deal. My best advice would be get out and be proactive in your area such as leaflet drops, local store adds, auction fall through, etc.
For long term success sign up with a data supplier rather than negotiated lead supplier which is far cheaper along with profitable. If your going to use BMV lead providers find out who they are; Do they invest in BMV property? Where do the leads come from? How do they value the OMV and Rental? What is their returns policy?
I know of two reliable lead providers which are bmvpropertyleads.co.uk and discountpropertyauction.co.uk both offer different services by I have spoken or met the owners and can say their business is selling property or leads, not buying and selling the weak ones.

Other financing methods
There is another option to buying and financing BMV property which is through an assignable contract using a third party. It's rather more complex than same day re-mortgages so I wont go into too much detail but you can contact me is you would like to find out more.

A third party will buy the BMV property at discount and sell to the investor at OMV with an assignable contact giving the client for example an upfront rental guarantee of the discounted amount which is paid after completion.
This allows the investor to purchase the property with any buy to let mortgage as its no longer a re-mortgage its a purchase. This type of structure is getting more popular due to the lack of buy to let mortgage lenders offering same day re-mortgages without high fees or rental requirements.

I hope this article on BMV finance and property purchase has helped you gain a better understanding of how it works and what factors you need to consider before deciding on a property, broker or lead provider.

BMV Mortgage Brokers
There's a never ending supply of stories regarding deals gone wrong due to the mortgage broker not truly understanding how BMV finance works. A client will call them and explain what their planning to do and the broker, never one to turn down business, offers their services. BMV mortgage brokers tend to charge higher fees than normal brokers, me included, due to the contacts and experience they have in getting mortgages through and deals completed. People will often shop around for the cheapest broker but "buyer beware" if they are charging NO BROKER FEES as one of two things are generally the case;

(i) They are relaying on the mortgage lenders commission only making them volume brokers, try getting hold of these people when things go wrong. They operate by moving to the next deal as quickly as possible leaving any issues behind. They don't have the time to talk deals through.

(ii) They make their money else wear via bridging lenders or conveyancing. Its the same as a broker fee except wrapped up differently. If they hide how their paid what else are they hiding?

There are hundreds of good brokers and a useful place to start is by looking on the SingingPig forums. Just remember that like most things in life you get what you pay for. Question how their paid, what experience do they have and are they BMV investors themselves, if you don't feel you can build a long term relationship then move on. A good broker can help you succeed in your BMV property investments, its in their interests that you do well!

Here's the sales bit ;)
I'm a BMV mortgage broker and investor myself so if you have any questions or would like to find an experienced BMV broker then give me a call and we can discuss your finance and property needs.
I charge a 1% broker fee and can offer packages where the total costs add up to 2.5% of the purchase price. After the first deal my broker fee is negotiable due to most of the work such as applications, ID, sharing of my knowledge & experience, etc happening during the first deal. My standard fee is 0.5% - 0.75% of the purchase price. I feel this is honest, upfront and fair for my experience and contacts in the BMV market.


Written by Daniel Morgan
Mortgage Broker & Finance Writer

Business Finance & Commercial Mortgages

I recently attended a seminar on commercial finance, which is an area I’ve started to concentrate and specialise in over the last few months. I am still surprised by the number of small to medium sized businesses, SME’s, who do not have access to good commercial finance advice. I have started to work with a Welsh business support company can Business in Focus which runs training programmes through its training arm the BIF Academy throughout Wales. Business in Focus deal with SME’s all over Wales from helping construct a business and marketing plan, sourcing funding for their business, help with business contract laws and regulations along with arranging networking events for the businesses to meet suppliers and clients. I fit in by helping the SME’s recognise business needs in funding and other aspects such as insurance, factoring, cash flow loans, etc. It is fantastic to see a new start up find finance in the form of grants and loans and develop its business over the course of 1 – 3 years.

There first few years are generally the most important in term of getting the right finance and advice as if the wrong advice is taken and auctioned it can have a detrimental effect on the future success.

Business insurance is another any which many businesses fail to consider in enough depth before going into business. For self employed people and company directors what happens to their monthly income if they cannot work for 6 months? If a business partner dies what would happen to their share of the company? There are various forms of insurance to cover these problems such as income protection, partnership protection and key man insurance.


Over the next few days I’m planning to go into more details on the different types of commercial finance available, how it works and what the benefits and pitfalls can be to a business. If there’s any type of commercial finance & insurance you would like me to discuss then please leave a comment and I will cover it in future articles.
Written by,
Daniel Morgan
Mortgage Broker & Finance Writer

Interest Rates Stay at 5.5%

It has just been announced by the Bank of England that interest rates will remain at 5.5% resulting in surprise by most of the market. Many analysts predicted interest rates to be cut a quarter percent (0.25%) today after evidence suggesting the UK housing market has seen a slow down with some areas reporting property price reductions.
It is still believed interest rates will be cut in the near future with the next review taking place in February.

Interest rate fall to 5.25%?

There is a strong feeling in the current market that interest rates will be cut when the Bank of England meet again this Thursday.

It is widely expected that rates will be cut to stop the countries house prices falling this year, many analysts predict further cuts throughout the year which would be a well received by homeowners who have or will be coming off low fixed rate mortgages.

Many homeowners had a nasty surprise this year when they came of low fixed rate mortgages, many well below 5%, to find that they were likely to pay more than 1% more for the same product due to interest rate increases over the last 2 years.

Unfortunately many of these homeowners, scared of interest rates continuing to increase, fixed them selves into another fixed rate mortgage above 6%.

In September the lowest interest rate you were likely to pay for a fixed rate mortgage was 6% without paying high fees. You can now expect to pay around 5.8% with lower arrangement fees and a likely hood of the fees continuing to fall over the next few months.

Homeowners who signed up for Track Rate Mortgages over the last few months have gained the most and a likely to do well this year.

The concern in the market however is how many times can interest rates be cut before inflation gets out of hand? I predict we will find out towards the back end of 2008.

***Come back tomorrow where I will be discussing the difference between the various types of mortgages on the market and how each one may effect you***

Daniel Morgan
Independent Mortgage Broker

Buying property below market value (BMV)

There have been countless reports over the previous months, from me included, that the UK's property market is heading for a significant market adjustment with property prices expected to fall over the coming months. Whilst this, if correct, will be bad news for homeowners looking to sell their home it may have a silver lining.
If you’re looking to invest into below market value (BMV) properties you may have a prosperous new year ahead.

What are BMV properties and how can you benefit?
BMV properties are homes which are being sold for below the current market value, hence the purchaser could benefit from equity and long term rental income along

Why would someone sell their home BMV?
There could be a number of reasons ranging from the sellers being unable to maintain their current mortgage payments. Although the seller will receive less than the current market values the property many will have sufficient equity in the property to still make a profit. The seller may also need to sell fast due to job or family relocation in a different part of the country or different country altogether. Bereavement of the homeowner will often result in family members requiring selling the property quickly to settle the deceased person’s estate and payout the fund to beneficiaries.

How can this be financed?
There are two main options depending on your investment goals;
(i) Place a 10% – 15% deposit on the property and take out a Buy to Let mortgage or even a residential mortgage and move in yourself.
(ii) Buy the property with a one day closed bridging loan and remortgage immediately, this will often allow you to purchase the property without a deposit in place.

How do one day closed bridging loans work?
The theory is simple; if you purchase a property for the first time you can get around 85% of the purchase price or market value, most importantly, whichever is lower. If however you’re re-mortgaging your property you can get 85% of the current market value. The one day closed bridging loan works by purchasing the property first, then you re-mortgage the purchase with a buy to let mortgage thus releasing the discount you have received off the purchase price.

How much does it cost?
Generally you are looking at around 2% of the property purchase price when you take into account the bridging loan, mortgage, legal & broker fees. You may also need to pay for BMV leads from property sourcing companies if you can’t or don’t want to find your own.


What are the drawbacks to this financing method?
(i) It is ever more difficult to find properties which are over 15% BMV
(ii) The rental calculation can be difficult to stack up
(iii) There are very few lenders willing to fund this sort of purchase
However with 2008 expected to be a difficult year for the property and mortgage market don’t be surprised if you start hearing more about this type of investment in the national media.

Written by Daniel Morgan
Mortgage Broker & Property Expert

Housing market gap between north & south England

There has been an increase of over £15,000 in the north-south divide in England's house prices during 2007, this comes despite growth in all regions of the north except Yorkshire and Humberside, Nationwide stated this week.

Figures from Nationwide show typical house in the south of England is almost £90,000 higher than in the north which was originally a £75,000 difference.
The gap has been opening since 2004, and widened in 2007 as prices in the south grew by 9% compared with an annual growth rate of 3.4% in the north.

Nationwide stated that the recent years saw prices in the north catch up with those in the south, however the gap is now back to a similar level to 10 years ago.
Its figures, which focus on prices in the last three months of 2007, show the London market remaining buoyant, despite a recent slowdown in the economy.

The annual growth rate in the capital fell from 16.5% to 12.8% in the last quarter, but it remains the highest in England and second in the UK with Northern Ireland experiencing the highest increases.

Nationwide stated the property market fell by 0.2%, the fist quarterly price fall in five years in Northern Ireland. This still resulted in an annual growth rate of 24.2% which makes it the highest in the UK.

In 2007 property prices in Northern Ireland have increased by almost £120 a day.
Across the UK, the annual rate of price growth is believed to stand at 6.9% which is considerably lower then previous years yet still substantially higher than annual inflation.

0% Growth predicted by the end of 2008
Although shortage of housing stock will ensure demand in some areas it is unclear how the market can continue at rates experienced up until last year.

Nationwide building society, the largest lender in the UK, has predicted house prices increases will fall to 0% growth in much of the UK by the end of the year.
Nationwide BS’s chief economist, Fionnuala Earley, stated;

"While insufficient supply is supportive of house price growth, it does not mean that prices will continue to increase at the pace of recent years.

"In a period of poor affordability or uncertainty demand can become more elastic, and even those who want to start up an independent home can be frustrated by financial or other constraints.

"In the short term, supply issues are likely to provide some support in the areas where supply constraints are most critical, but over the longer term the growth in pent-up demand is likely to mean that the market will turn around more rapidly once confidence and affordability have been restored to more usual levels."

This is following the latest figures from the Bank of England showing new mortgage applications down from 89,000 to 83,000 which represents a three year low.

Written by Daniel Morgan
Independent Mortgage Broker

Been overcharged for your mortgage or insurance?

Here's an interesting video on the Northern Rock issue along with tips on how to find out if you've been over charged for your mortgage or insurance products.
This is external content so please remember these may not represent my views!

Scottish Property Market Up 39%

It may have seemed all doom and gloom for the UK property market in 2007 however not everyone in the UK has been experiencing a slowing of property prices.
Scotland has seen some amazing property price increases over the last 12 months, the Scottish coastal town of Montrose saw average property prices shoot up from £123,494 to £172,156, a 39% increase in what many property experts are calling a housing recession.
The figures taken from a Halifax report attributed the increases to improved transport links, rising immigration and a strong employments market.
Scotland wasn't the only region in the UK to see property price increases, Winchester came out top in England with average prices up 38% putting the prices at just under £400,000.
Stourbridge in the West Midlands was the only town in the top 10 outside Scotland and the South East. Prices there have risen by 31 per cent to an average £264,130.
The Royal Institution of Chartered Surveyors added that upfront costs are now proving particularly problematic for new buyers as banks have begun to tighten their criteria and asking for bigger deposits with 100% mortgages becoming a thing of the past.
2008 should be a testing year for these kinds of returns and although it is unlikely the the market will continue at this rate, there are still areas such as Nelson in Lancashire where price of a property is £108,320.
Unfortunately the report also stated that first time buyers are at the lowest rate since 1980, which may start having a knock on effect this year.

Daniel Morgan
Independent Mortgage Broker
FruitMortgages.com

New mortgage video post

Happy new year to everyone and hope you all had a great holiday.
I have been dragged kicking and screaming in Web 2.0 so you can know find video content on my site which is supplied by you tube.
The content will be mortgage and finance related and you'll find it by scrolling to the bottom of the page.
Here's to a prosperous new year to you all.

UK and US property & finance market

The UK and US property & finance market has been talked about greatly over the last few month, by myself included. I would like to point out however that there are several major differences between the UK housing and mortgage market and than of the US, suggesting that the UK should not feel the same house price and credit crises currently faced by the US.

Fixed Rate Mortgages & Stepped Rate Mortgages
There is a conservative tendency in the UK for homeowners to prefer fixed rate mortgages, as opposed to variable rate products on the market, historically due to the consequences many homeowners felt in the 1990's with interest rates above 12%. More importantly there are few independent mortgage brokers I know of who recommend mortgage products with stepped rates*. Stepped rate mortgages are rare in UK with little popularity due to several factors;

(i) - Rates tend to be extremely low to begin, usually around 3%.
(ii) - Rates will generally increase once per year of around 1% - 2%
(iii) - Homeowners will be fixed for generally 3 - 5 years at which point the interest rate is well above other competitor rates
(iv) - Stepped rates tend to carry severe redemption penalties**
(v) - The interest rates tend to be variable which means calculating what your payments will be in 3 years time near impossible.

These factors have led me to shy away from recommending such products, the product providers have a good concept, create a mortgage for people who are on low incomes to buy their own home and as household income historically increases over time clients will be able to afford higher monthly payments. On paper it makes sense but in reality, as we are now seeing in the US, homeowners simply don't appreciate or think about how they plan to pay for next year or the year after.

Federal Reserve and FSA
The UK's FSA have far more sweeping powers and controls compared to the US self regulated style system, although the self regulated system can have great benefits to competition, marketing flexible lending criteria this can have devastating effects when things go wrong.
The FSA done great work in ensuring customers are treated fairly along with brokers & lenders being accountable for their advice and services.

The US Sub prime & UK Adverse Credit Market
Going back to the earlier factor on fixed rate mortgages and stepped rate products, due to supply and affordability US mortgage brokers have offered sum prime clients, generally classified as higher risk, a high risk product. In the UK clients with Adverse Credit who are also classified as high risk will be offered several options with the fixed rate being favorable due to the monthly payments remaining the same.

The major problem currently facing the UK mortgage market is money or rather lack of it.
Take northern rock as a prime example, traditionally Northern Rock doesn't lend to clients with adverse credit. On their high LTV products the credit check is of high importance, however they have still found them selves the victim of the current money market.
Although house prices may stay stable in the UK along with few missed mortgage payments, we still have to tackle the issue to bringing new money into the market at a lower cost.
Hopefully the new year will bring a new LIBOR rate***.


Daniel Morgan
Mortgage Broker & Finance Journalist

* A mortgage product which increases interest rates over a specified period
** Penalty fees for redeeming the mortgage before an agreed date.
*** Interest rate at which banks lend to each other

Mortgage and property market in 2008

There is growing concern coming from experts on how the mortgage and property market in 2008 will turn out.

Although not guaranteed house priced are likely to fall in early 2008 by at least 1-2% as first time buyers are unable to enter the market and second time movers are unable to sell their home. There was incredible housing inflation from early 2006 to mid 2007 of up to 100% in some areas such as the North of England and East Wales.

Thankfully, for long term stability, these unsustainable increases have come to an end, this will hopefully lessen the extent to which the UK's slowing economy will be effected in the long term.
Predictions are that house prices will fall flat over the next year with the possibility of another interest rate cut ensuring UK home owners don't face negative equity there are some positive signs that this market correction will ensure stable growth over the next 10 years.

The possible changes in the mortgage market are more people looking at remaining in their current properties for longer which should see an increase in long fixed rate mortgages, a product being purchased by the current government as a way to stabilise the mortgage market.
Long term mortgages are generally fixed for between 5 years to 25 years which could give added security to homeowners fearful of fluctuating interest rates and house prices. The obvious negative being as the products hints, you are fixed for that period. There are several 25 year products which will only penalise you for the first 5 to 10 years, which is still a considerable amount of time, with the other disadvantage being many independent mortgage brokers may see the recommendation of long term fixed rate mortgages as commercial suicide to the lose of custom many are used to.

If you are considering a long term fixed rate mortgage please remember to fully understand the consequences of tying yourself to one lender for such a period. They can be a good choice for some homeowners but without thinking all doom and gloom, what happens if you need to move for family, work or other social reasons?
Many will offer a porting facility, a feature which allows you to take the mortgage to the next home, however what if your new property in overseas or has a lower value?
For more information on long term mortgages you should seek an independent mortgage broker from my mortgage portal site.

End of Adverse credit mortgages?

Adverse credit mortgages are coming under increasing scrutiny since the recent credit crunch which has effected the current liquidity markets on both sides of the continent.
An adverse credit mortgage is a mortgage product designed to aid people who have had problems with credit is the past, the lending criteria varied from allowing one or two missed payments to lending money to bankrupts and repossession cases.

They would invariably have high interest rates and lend on a low LTV, loan to value, of the property which ensured high profits for the lender along with security on the property.
Unfortunately clients started having difficulty keeping up with the monthly payments, especially since rates rose in total 1% last year. Even with the recent interest rate cut there are ever more cases in both the US and UK of homeowners being unable to maintain the payments.

What happens when adverse credit mortgage holders want to remortgage?
Last month Kensington, the specialist adverse credit lender, pulled out of the market.
For clients coming off fixed rate mortgage deals onto the SVR, Standard Variable Rate, we may see even more homeowners facing repossession due to higher monthly payments.
Its put the whole industry in a catch 22. One the one hand adverse credit lenders need to tighten their criteria to ensure future borrowers are of lower risk. One the other hand homeowners coming off fixed rate mortgages may find it difficult to find an adverse credit lender prepared to take on the old terms.

Does this mean the end of adverse credit mortgages?
Whist there must be a re-evaluation of the lending criteria used by the likes of Kensigton we must also remember that stopping the money is not going to solve the problem, as we can already wittiness with the current LIBOR rate at an all time high and the effect this is having on lenders such as Northern Rock.

Flat Rental Demand Falls - BMV Troubles

Flat rental has fallen dramatically according to a survey carried out by The Royal Institution of Chartered Surveyors (Rics).
Demand for flats have been falling over the last 3 months to 17% - down from 37% in the previous quarter which could have an impact on investors holding large flat portfolios.
The Rics stated the report highlights the sluggish market in the new build flat sector, this sector has been under increased scrutiny of the past 6 months as many first time investors with large LTV buy to let mortgages are finding it increasingly difficult to make the rental stack up.

Many investors were purchasing property BMV, below market value, and in effect not requiring a deposit - A high risk strategy as often the rental barley covers the monthly mortgage payments.
Many new build flat investors are also finding it extremely difficult to sell the property at the price they originally paid due to the new appeal value and resale value differing.

The other problem with the resale of the properties is they also fall short when stacking up the buy to let mortgage for rental calculations, many buy to let mortgage lenders now require 125% rental calculation on the mortgage payments which makes it difficult to achieve, especially now with the fall in demand.

125% Rental Calculation Example
Mortgage amount: £100,000
Monthly payments: £500 (at 6% interest)
Rental required: £625 (£500 x 1.25)

In the current market it is extremely difficult to find new build flats under £150,000 in the current market with an even more difficult challenge to find properties that would rent for over £700 per month. Another factor effecting the buy to let mortgage market is that many lenders, having seen the problems with rental and resale of new build flats, will not lend money if the property is under a certain number of years old.

There are still good buys to be had where rental stacks up will with easy resale, be cautious of the hundreds of websites offering large discounts of new build properties whist also offering 100% mortgages, most will require a membership fee, finders fee and deposit. In my own experience I have found it near impossible to find a buy to let mortgage of these offers.
Be warned.

For more information on Buy to Let mortgages and ways to put little if any money down then you can visit my website or contact me for more info.

ECB to offer unlimited funds to banks at fixed rate

The ECB, European Central Bank, today stated it would offer unlimited funds to European banks at a fixed rate in the hope of encouraging banks to start lending to each other again.

What effect does this have on the UK?
It could possibly reduce the LIBOR rate which is currently at an all time high due to the limited supply of lenders willing to lend out their money. Most are keeping hold of their cash due to possible liquidity problems in the future.
If the funds can reduce the LIBOR rate it would make it easier, if not cheaper, for banks such as Norther Rock to borrow money to lend to its customers.
It will not solve the issue of the sub prime market but will ease the consequences the sub prime and adverse lenders have had on the market in general. It is still too early to tell if a reduced libor rate will help or hinder the current situation.
It all now lies with European banks to take up the fixed rate offers and start to lend to each other again.

How does this effect my Mortgage?
Well if you were looking for a fixed rate mortgage a few weeks back with a high LTV, the majority of the lenders were sourcing their finances from the LIBOR market. Now if the LIBOR rates falls due to more money being freely available you could see one of two things happening in the UK mortgage industry;

(i) Mortgage lenders make more profit.

(ii) Mortgage lenders pass on the savings to Mortgage borrowers in reduced interest rates.

With the number of mortgages available on the market I would predict more lenders leaning towards the 2nd option due to increased competition and vigilance from mortgage brokers who give independent advice.
If you use a good Independent Mortgage Broker he should be able to conduct a mortgage search for cheap mortgage with lower interest rates.

Daniel Morgan
FruitMortgages.com
Mortgage Broker Search

Need to re-mortgage your fixed rate mortgage?

Need to re-mortgage your fixed rate mortgage?
Your not the only one, 1000's of homeowners have or will be coming off their fixed rate mortgage this year and early 2008. Many have been on fixed rate mortgages as low as 4.4% and most will be re-mortgaging on a rate over 1% higher in the next few weeks!

Even with the recent interest rate cut by the Bank of England it is thought that homeowners may soon feel the pinch of 4 rate rises whilst they were safe in a fixed rate mortgage.

It doesn't have to be doom and gloom though!
There are several ways in which you could remortgage on a cheap mortgage with similar monthly payments that you've had before.

High Arrangement Fee & Low Interest Rate
This maybe an option if you have a small mortgage and will benefit from the lower interest rates, although the higher arrangement fee may not justify the low interest rate unless its for a long period.

Fee Valuation & Free Legals
Many mortgage lenders now offer free valuations and free legals for people remortgaging, helping reduce the overall cost compared with paying upfront.

Offset Mortgage/Flexible Mortgage
These tend to allow the borrower to over pay their mortgage or offset savings against the mortgage balance. This can significantly reduce the monthly payments or reduce the term of the mortgage. It also gives the flexibility to withdraw money if required.

The one thing to remember is to seek an independent mortgage brokers advice on the best and cheapest mortgage option for you. Most importantly if your coming off your fixed rate mortgage, seek advice sooner rather than later. If your mortgage changes to a Standard Variable Rate before you arrange your re-mortgage you will see a steep increase in your monthly payments.

Don't give the lender a penny more than you need too!

For more information on the 1,000's of different mortgages on the market and to find a local independent mortgage brokers near you then please visit my website FruitMortgages.com

House prices down 3.2% in December

Rightmove, the property website, reported a "3.2% asking price fall exacerbated by seasonal factors and HIP-avoiding first-time sellers" today amid fears in the market that property prices may continue to fall. There have also been reports that the National Network of Independent Surveyors are advising their members to value properties conservatively fueling difficulties in people getting high Loan to Value (LTV) re-mortgages.
January is set to be a trying time for the British housing market with areas such as Wales being the worst hit.
A growing sector in the current market are Discount Property Purchasers (See article on Discount Purchase Properties) who are seizing the opportunity of distressed sellers and purchasing well below the current market value. The average discount is between 15% - 20% which counts high LTV borrowers out but are a lifeline to homeowners with enough equity in their property.
Mortgage rates may fall again after Christmas but it is still unknown if this will help stable the market in its current condition.
The US Faderal Reserve has started to look into regulating the mortgage market, particularly the Self Cert mortgage sector amid concerns that adequate checks are not taking place.
This will hopefully quell the current credit crunch, although it may stop some people from re-mortgaging, fueling further the dropping property prices.

Overseas US property investment
Overseas investors have started to invest heavily in the US property market as they have predicted that property prices are currently undervalued and maybe a good potential investment.

If you would like to learn more about property investment and mortgages in general why not visit my mortgages a-z website.

To view the full copy of the RightMove.com December price index report click here.

Daniel Morgan
FruitMortgages.com