Pens and paper at the ready for this podcast, here’s what you can do to find high LTV mortgages!
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Transcript:
Hello and welcome to the NC podcast. My name is Natasha Collins, and I am founder of NC real estate which includes its members club for landlords and property investors to come and build a profitable property portfolio that completely aligned with their financial goals.
[00:00:33] I want to let you know about this amazing freebie that I have got. I will send to you it’s a property investment expansion success formula. It is awesome. It is all the steps that you need to take as a property investor to keep growing your property portfolio. If you want that you have to head to https://ncrealestate.co.uk/flowchart, type in your name and email address and I will send that straight through to you again.
[00:01:05] https://ncrealestate.co.uk/flowchart, then once you get it in your inbox, I want you to download it. Print out hang it in a frame stick it puffy desk and every time you don’t know what to do. Next you go. Oh, I will go down this chart and I will have a look at what stage I am. I will answer that yes or no questions to give me Clarity on what my next step is.
[00:01:31] You’re welcome. It is awesome. You need it. So that is NC real estate co-taught UK forward slash flowchart to get your copy. Make sure you have it. Because you are going to need it to keep growing your property portfolio Okay this week. We have a very interesting topic that again if I was given a pound for every time I was asked about this, I think I could probably buy another property quite easily topic of the week finding High loan-to-value mortgages.
[00:02:06] I am always. I asked about this how Natasha do I find high loan-to-value mortgages? I’ve only got five k in the bank and I would like to borrow. Hundred thousand hundred fifty thousand. I don’t know whatever it is that you want to borrow. You would like that high loan-to-value mortgage. Let me tell you it’s very standard to get a 75 percent loan to value.
[00:02:28] That is the standard. That’s what most lenders are offering. Some lenders are offering 80 percent loan to value. I’ve seen that occasionally but most of the time you’re going to get 75% you will know that. That’s not me giving you any think that is out of the ordinary. But let me give you some points to think about now firstly my own highest loan to value mortgage that I’ve ever had is an 80% loan to value.
[00:02:55] I’ve always had quite high deposits because I saved and I put money together and I. Pads chunks of money from Here There and Everywhere that I’ve put together to put down height deposits. That was with Barclays. Actually. They’re very good at learning 80% and I’ve since pay down and on that property.
[00:03:12] It’s now a 75 percent actually. No, it’s 60 percent loan to value. But I am going to remortgage and take a little bit of money out of that. So it’s going to be a higher loan-to-value but not quite at 75% probably around 74. And then the flat that Chris and I had in London was on a ninety percent loan to value and that worked out fine because the pair of us had a certain salary we were both living in there.
[00:03:38] And again, we were paying down that in quite big chunks. So those are the biggest loan to values that I’ve had. Now I’ve also said to you before and I’m sure I’ve shared this on the podcast that the only place that I’ve found a hundred percent lending for landlords and property investors over the last two years is from older more bank and they offer.
[00:04:04] A system whereby if you’ve got enough equity in the rest of your property portfolio for them to take a second charge on it as a deposit for a property. They will lend you the other 70% on a first charge mortgage. And so therefore you’ve collected a hundred percent of the loan really rare massive interest cost probably around seven percent.
[00:04:28] I think it was slightly higher than that actually. So they’re all banks that might give this to you. I would not recommend it high loan-to-value is very very risky, but let’s have a realistic think about how you are actually going to be able to get yourselves the best possible product firstly it’s you will get as much.
[00:04:56] Money and as much lending as the stress test allows, so if you didn’t know about the mortgage stress test lenders are stress testing borrowers based upon their rental income. Add the stress test is that you need to be making sure that your rental income is a hundred and forty-five percent of the mortgage interest payments at an interest rate of 5.5% So let’s work that out together in real time.
[00:05:30] Okay, so you can do this along with me. I want you to get up your calculator on your phone so we can work this out so to know. Whether the mortgage that you are trying to get will work say you are looking to borrow 80,000 pounds. So if we type 80,000 in to our phones calculator and we Times by Naught Point naught 5 5 so that’s an interest rate of 5.5%.
[00:06:00] Equals 4,400 Pounds divided by 12 equals 366 pounds and 67 pens. So that’s how much you would roughly be paying in mortgage interest every month at an interest rate of 5.5%. Lenny wants to do what you want to do is Times by a hundred and forty-five percent equals 531 pounds in 67 pants. So that is what your rent needs to be an excess of in order to borrow that 80,000 pounds.
[00:06:37] Now then what you do is you go to right move and use you go. Let me look at the rental market. Could I get a rent on this property of 531 pounds? Yes Fab great tick I can get mortgage or no. Okay. Well, then I’d have to borrow Less in order to be able to get that stress test. So this is what you want to be doing fast rather than worrying about.
[00:07:04] Learn to Value you need to be doing the calculations as to whether you’re actually going to be able to borrow as much as you want. Anyway, it may be that you can’t even get a 75 percent loan to value anymore because your stress test doesn’t work on the rental income that you’re getting in which case you’re going to need to be paying down on your mortgage.
[00:07:25] And this is also where a lot of investors are really struggling at the moment because we’re as a couple of years ago. The stress test wasn’t in effect. So you would have been able to get a higher loan-to-value then you are at the moment. So when you come to remortgage the mortgage lenders going well.
[00:07:43] No, we’re not putting you back in that fixed time best price because the stress has doesn’t work. So now you are a risky commodity. We’re going to be charging you with the higher interest. So again, I repeat you need to be figuring out if the stress test actually works before worrying about what the loan to value is.
[00:08:05] Now, you could say to me that I should but actually I have a HMO property and I want a commercial valuation now we have to go right back around the cycle of commercial valuations that I have. Gone through with you before not every HMO gets the commercial valuation the test for a commercial valuation on the HMO is whether the property in question can easily be turned back into a single dwelling house or not.
[00:08:34] If it can so say you’ve literally just turned the living room into a fourth bedroom or whatever you’ve done. So just living room is turned into a bedroom. That doesn’t constitute a commercial. Really for you to get the commercial valuation on this property you need to have on sweets on every single room.
[00:08:53] They need to be almost small bed sets the house could not easily be turned back into a single dwelling house. So you need to really consider that and I’ve seen really true commercial values on hmos for hmos have got little elf in kitchens in the room. For example. They’ve got basically small bed sets with just maybe a shared kitchen or maybe maybe a shared living room, but most often they don’t have the shed living room element.
[00:09:27] So just be aware of that. now again. You might be able to get the higher loan-to-value on them because obviously you’re getting a higher income because you are being valued based upon an into each individual’s room creating a monthly income. So say every rooms getting 500 pounds per calendar month.
[00:09:50] You’ve got four rooms five times four equals 20, so that’s two thousand pounds a month that you’re getting in so. Yes, you might be able to achieve higher lending on that because you have a more room for the stress test. But always please always start with the stress test. Secondly. You also need to show usually now that you’re earning at least 25,000 pounds in order to get these higher lending.
[00:10:19] So make sure that you have if you’re self-employed, you’ve got a couple of years accounts which are showing that for you or if you have a job you’re in employment which isn’t a bad thing. We all have an element of employment. I’ve told you this before that I am employed by the university because I have been employment on my record which means I can get higher lending.
[00:10:41] It is very tactical very very tactical. So I don’t anybody from the University live listening. I also love teaching it’s not just because I’ve got a salary to side note to put it out there and but having that income of over the 25,000 pounds also helps you because. The land is going. Okay. Well if there’s a void period then this person can pick up any additional costs.
[00:11:08] Ideally you wouldn’t want to do that because you’re going to have enough in reserves and saved so that. you can you can afford to pay for a couple of months Boy period hmos I would hope that you have less void periods because hopefully you will tenants are moving in and out a different times which I would really advise happens.
[00:11:29] This is very good way of reducing your risk if say the tenancy agreements came up at different times of the year because then you’d only have one room void at a time Fab reducing your risk. See you were covering so many topics in this book us today. So the less risky you are the less risk your property the more rental income you’re getting compared to the price that you paid for a property the higher the loan-to-value that you will get but can we also side note that point with the fact that the higher the loan to value the higher the interest and so the more you’re paying.
[00:12:17] Each month in expenses. So really if you do end up with a high loan-to-value, then you do need to be trying to get that loan to value down hopefully to 75% and if you can work on getting that down to 60 percent even better. So that’s how you would get the high loan-to-value on a purely by to let basis now another way of doing it which some investors do do it in at this is especially relevant for you if you’re a developer and you don’t mind living in a building site, you could always take advantage of homeownership products where.
[00:12:59] You get your 90% or 95% mortgage you buy a development or a reefer product that you are going to live in and you’re going to live in the property you do it up you sell it or no, you put it on a buy to let products when you’ve got that 25% equity in there. You take the money back out and you move on to the next property.
[00:13:19] So that is a good way of having your High loan-to-value prom. Property if that’s what you want to do now admittedly. That’s not always easy. If you’ve got a family who would be living in there with you just for ease of having piece of Life. They can’t. They call her stomach living there with you, I guess it but it is a way around that height at loan-to-value product.
[00:13:49] If you do want to be taking out massive mortgage on that again, just remember that a higher mortgage is very risky. Another way that you could potentially do. This is if you’re buying an auction and you have to put the 10% deposit down it may be that you could find short-term lending to. To purchase the rest of the property now this usually happens and just to go back that short-term lending is bridging or its peer-to-peer lending, or maybe you’ve got an investor you could.
[00:14:31] Decide on a price that you’re going to pay at auction. So this is the maximum value. So say you’ve got a property that is. You’ve decided that a hundred K is the maximum you’re going to bid for it. And if you do have a cap on this I would strongly recommend that before the auction starts you put in an offer and see if you can buy it before it goes to auction so that you definitely know you’ve got it at that price.
[00:14:52] But remember auction conditions did apply so you have to put down 10% at the point that the that the the bid is accepted. Then you could get the short-term lending. And if you’re going to be doing the property up and say afterwards the property is worth. I don’t know hundred and fifty thousand pounds.
[00:15:16] It could be that the short-term lender would lend you up to 75% of the end value. So the hundred and fifty thousand pounds so that would then mean that they could lend you a hundred and twelve thousand five hundred and. That would include potentially development costs as well. Now. Just remember that when short-term lenders lend to you.
[00:15:40] They lent you net of the interest that you would be paying throughout the term of the lending. So for example, if there’s going to be ten thousand pounds worth of interest on that loan that actually only lend to you a hundred 2500 because they’ve taken their interest up. Front but then you would need to repay the hundred twelve thousand five hundred.
[00:15:59] So be very aware of that. But that’s a good way of getting the higher loan-to-value then after six months you could remortgage out onto the onto a product whereby you can take all of the money back out and you can repay the short-term lender that’s another way of doing it. or you can go out and find investors to invest in your project and.
[00:16:23] Again, they may lend you up to a hundred percent depending on how much of a stake they’ve got in your property portfolio. So that may be another way for you to get the high loan-to-value now for that to happen. You have to be super good at networking building trust and finding people who definitely want to invest with you.
[00:16:43] We’ve talked about this at length about how to find investors and joint venture Partners, but usually, An investor or joint venture partner isn’t particularly worried about how much of a percentage of the property you are looking to raise how much of a percentage of the purchase price of the property you’re looking to raise instead.
[00:17:06] They are looking to figure out if it’s a good deal and figure out if they can make something on their money and find out if you are a trustworthy investor for them to invest with. So you do have to get creative with this, but again the higher the loan-to-value that you are looking to find the more time and effort.
[00:17:27] You need to be putting in to prove that this is a good enough deal. You are never going to get high to high loan-to-value lending if the deal does not stack up and give good returns you’re not because it’s too risky for a lender to lender. You need to make sure that there’s a lot of money that you can take out of this deal or you’re getting significantly High rental income and that’s where you need to make sure that you’re good at deal analysis and that you can present this well because you’re going to need to provide a case and the facts behind why this property is really worth that lender Landing.
[00:18:08] So that’s your homework if that’s what you’re looking to do your you want Highlander value or the first thing you need to find the property. Secondly, you need to make sure that it’s a great deal whether you are looking to buy do I print out or buy rent out or by refurbish Salon whatever you’re looking to do you then need to make sure that you are putting together a.
[00:18:31] Investment pack for it for the lenders that you can present to them and make sure that they know that this is a good deal and that it’s worth them putting in a lot of money on it and then you need to put together an exit strategy. Now the exit strategy I would always recommend that you have a b and c options, you know a can you get out of this by remortgaging and refinancing?
[00:19:01] Baby, can you get out of this by selling or C? Can you rent the property out and hold onto it for a little bit more time until you can either sell or remortgage to get the cash out, but you’ll also need to be presenting this in order for it to look like an incredibly secure investment. So hopefully this has given you some really great insight into.
[00:19:27] Hi, learn how to get a high loan-to-value mortgage and what you need to do. So just a quick rundown. Remember you need to make sure that the property passes the mortgage lending the stress test and I gave you the calculation for that. or you could buy the property yourself as it’s. I own property do it up remortgage it in a couple of years time and let it out and then use the capital to move on to the next and you be able to get potentially a high loan-to-value mortgage on that you short-term lenders to bridge the cost of the purchase price until you’ve refurbs or you’ve refinance.
[00:20:10] Oh go on walk with investors and joint venture Partners who are going to be less interested in the loan-to-value and more interested in the fact that the deal Stacks up. So hopefully that clarifies for you how you can get high loan-to-value mortgages. So I hope this has been a useful podcast. I hope it’s given you action points that you can now take away with you and go and start looking for these products if that is applicable to you.
[00:20:38] Now if you love this podcast, don’t forget to subscribe so that you get this into ever podcast platform you listen to this one every Tuesday morning at 7 a.m. And I would also love for you to leave a review. If you love this podcast, please it means the world to me that you at leave a review on this.
[00:20:56] I want to hear exactly what your key takeaway. Thank you so much for joining me this week. I cannot wait to catch up with you again soon!
