There has been rumours abound of mythical hedge fund finance, hotmail addresses promising 100% buy to let finance and all sorts of deals promised but many of these are simply hot air.

And I should know – I follow these developments like a hawk because if these deals were available I know you would want to know straight away, and I would tell you.

Now I do feel strongly about giving you my view on this because I know many of you are considering doing these schemes because we are all desperate for more flexible finance and you’ve been told that this is a solution.

So lets look at whats on offer and I’ll tell you my thoughts:

85% loan to valuation

Upfront application fees to a hedge fund 85% on valuation deals.

Well theres a few of these doing the rounds at the moment however they currently seem to be in two categories.

1. Some are charging decision in principle (DIP) fees of several hundred pounds. You pay your money upfront often to an introducer (not usually regulated) who sends it to a lender (but they wont tell you the lenders name – why is that?) and it can come back as a decline and you’ve lost your application fee.

So, my questions on these deals are:

1.1 Why cant you say the lenders name? What lender do you know that doesnt release its name when deciding to lend funds?
1.2 Who does the application fee go to?
1.3 Why is it upfont and non-refundable just for a DIP? What comfort do I have on this that you arent just making it up?
1.4 And sometimes, and I kid you not I’ve seen it – why have you got a hotmail address. Surely if you a reputable lender/broker you could afford
your own domain name!

RB Verdict: Stay clear of sending any money until you’ve found out who the lender is and what their refund policy is.

Massive Application fees on Private finance 85% on valuation deals.

2. Other deals entering the daylight are ones where decision in principles are free but to reserve the funds you have to pay huge (and I mean huge) application fees (20k plus VAT ouch!) and that is only the beginning. There are also fees per property as well.

Now may questions on these types of schemes are:

2.1 Why 20k, isnt that a tad excessive!
2.2 Can I pay the 20k on completion of my first mortgage
2.3 What is the name of the lender?
2.4 Is the introducer involved regulated and therefore liable for any advice given.

RB Verdict: Why is the application fee so excessive? What happens if every property you try to buy is turned down at application stage and then the funds are withdrawn, have you lost your 20k.

85% loan to purchase/70% loan to value

And finally you have the entrance of two bridging companies Tiuta & Drawbridge – who have entered the 85% buy to let mortgage world – albeit only if you buy under market value and
the loan to valuation isnt over 70%

Now these deals are transparent and you know who the lenders are. However they’re still not cheap! Initial rates are coming in at 6.99%/8.99% (and has 3% fees) however a decision in principle shouldnt cost you anything.

RB Verdict: Both lenders have a strong track record in lending and you can utilise the services of a reputable directly authorised broker like ‘resident broker’.

So now lets drop to:

80% loan to value.

Well there been a lender offering this for a while but its costs and product have put alot of people off.

You are looking at a rate of 6.49% with 130% rental cover based on a capital repayment basis.

RB Verdict: Difficult to get this to actually fit many properties with the type of rentla cover needed. If you can find the extra 5% and drop to 75% lending you will have more choice.

75% loan to value.

OK so we are in more familair territory now. There are a number of lenders at this level. And one of our favourites BM Solutions often has very competitve products available at this loan to value.

RB Verdict: At the moment this loan to value is where you need to be for standard buy to let mortgages. You can get 9 from BM SOlutions/C&G and lenders like Natwest will allow 10.

60 – 70% loan to value.

You will now have access to almost all the buy to lenders in the market.

There are lenders like Godiva mortgages that really do have some very low rate/arrangement fee products.

RB Verdict: It is at this level where you may benefit from remortgaging away from your existing lender to help you save money. Always check with an expert though as the devils in the detail and its not always about rate.

Before I start on this week’s news I just wanted to confirm something.

I received an email last week from someone asking if we advise on buy to let mortgages. Now, I know this newsletter is jam-packed with salient information and crucial top-tips, but obviously one of the core messages has somehow fallen on stoney ground, as they say in the good book. So, just to make sure there is no doubt:

Resident Broker is an award winning mortgage brokerage that specialises in securing buy to let finance for the property investor and landlord.

You can call us from 8.30am to 5.30pm on 01424 205 373 or email us 24/7 and we will do our very utmost to help you find and re-organize finance for your investment properties. Indeed, our initial mortgage advice is always free and when it is time for us to submit a mortgage application on your behalf, we are always transparent about what fees are due.

In fact – some people have been known to call me up just for a chat! Anyway moving on…

Tenant enquiries jump by almost 50%.

Countrywide has seen a stark rise in the number of applicants registering to rent between January and March, with a 48% increase in the number of tenant enquiries. Well, if thats not good news to start the day with I’m not sure what is.

From personal experience I have a house in North London I rent out – 3 years ago it took me 2 to 3 weeks for it to finally rent. Last month, I let it on the first viewing withan additional increase in the monthly rent – no wonder I’m feeling chirpy. A sign of the times? Possibly.

Imagine having to remortgage this!

From 2011, lenders will have to find about £300bn to repay the government for the money it spot them via its emergency support schemes – the (snappily titled) special liquidity scheme and credit guarantee scheme – at the height of the banking crisis. As such, mortgage lending will continue to be rationed, the CML said.

And you thought you had problems raising capital. Flippancy aside, I think the key message is this:

If you are looking to remortgage and raise capital, now may well be the prudent time to arrangeit. As there is no guarantee the situation may me better next year. Even if you don’t need the money straight away, you can use techniques like offset mortgages to enable you to release the capital and not necessarily pay interest on it before you use it.

I received an email last week from someone asking if we advise on buy to let mortgages. Now, I know this newsletter is jam-packed with salient information and crucial top-tips, but obviously one of the core messages has somehow fallen on stoney ground, as they say in the good book. So, just to make sure there is no doubt:

Resident Broker is an award winning mortgage brokerage that specialises in securing buy to let finance for the property investor and landlord.

You can call us from 8.30am to 5.30pm on 01424 205 373 or email us 24/7 and we will do our very utmost to help you find and re-organize finance for your investment properties. Indeed, our initial mortgage advice is always free and when it is time for us to submit a mortgage application on your behalf, we are always transparent about what fees are due.

In fact – some people have been known to call me up just for a chat! Anyway moving on…

85% buy to let mortgage – on valuation

Is it a dream or is there really a way for investors to purchase properties for 85% of the valuation, regardless of the purchase price? It’s almost we’re back to the old days!

Now a number of these schemes have been around for a while now, and some have gone and new ones introduced, but none yet have delivered on their promises.

The latest one doing the rounds wants huge upfront fees (up to £20,000) in order for you to secure 85% finance on property valuation. However, the upfront fees are payable before you buy your first property.

Now, I’m not judging whether this is scheme is good or not (as I haven’t used it) but all I want to say is – be careful. If you are truly tempted, do your own due diligence and if any money has to change hands, why not put it in an escrow account so if you need a refund then it will be easier?
We are keeping our eye on this product very carefully and if it is all it seems then we will get involved promoting it, but at the moment we are standing back and waiting for proof – and I strongly suggest you do the same. If there was a honest, proven and legal method of obtaining 85% buy to let finance, then you dear readers would be the first to know. OK, I know; rant over!

Marketwatch

It’s been a great week for rate cuts. On the residential side we have had Abbey and Woolwich and on the buy to let mortgage side Godiva.
I know I may sound like a broken record ,but if you are on you lenders standard variable rate (SVR) then give us a call right now, we may be able to save you money, and how’s that for service.

The impact of such a move shouldn’t make too much of a difference from a mortgage advice point of view, (here at Resident Broker we treat buy to let mortgages in a similar way to regulated mortgages anyway), however it may have connotations from a lending point of view – after all if the concept of affordability is passed onto buy to let mortgages then it may tighten the amount lenders are prepared to lend to any one person. Better get those buy to let mortgages in quick then!
On the subject of the Financial Services Authority, I also read this week that the FSA will have to demonstrate its value to the National Audit Office next year -  the FSA’s current budget stands at a cool £437m a year. We have the greatest of respect for our regulatory masters and therefore have no comment to make.

And finally Kensington has today announced it is back in the market. Even though it will be a small re-entry, it is a good sign that the lender has managed to secure funds and is tentatively dipping their proverbial toe in the post-nuclear financial pond. Lets hope more will follow.

He muses, “Regulators see lenders and intermediaries as the sweetshop owners – or worse, the drug-dealers at the school gates of the mortgage market, enticing innocent consumers in and then getting them hooked, for their own evil profit-driven purposes.”

I just wanted to assure you that in no way, shape or form do I see myself as a sweetshop owner.

The commission has demanded a break up of both the Royal Bank of Scotland and the Lloyds Group – RBS is to sell off 318 branches, while Lloyds will dispose of more than 600 branches over the next four years.

Northern Rock was also told by the commission last week that it must not appear in the top three of the mortgage best buy tables until the end of 2011. These requirements don’t come into force until next year, however since the ‘relaunch’ of Northern Rock mortgages, they really have been very competitive in the market (see best buys below) so it really will be a case of snapping up these deals whilst they are still available.
One way round it, of course, is that most best buy mortgage tables don’t include broker exclusive deals. Mind you, as discerning and intelligent readers that you already knew that and more importantly you knew that there’s no substitute for tailored, specialist advice from your resident broker!

Darling (no, not you, I’m talking about our Chancellor) has said that the break up could result in three new high street banks over the next three to four years. For example, Lloyds is understood to be looking to sell off TSB Scotland, Cheltenham & Gloucester and Intelligent Finance. Importantly, the banks assets will only be sold to new entrants in the mortgage market to help boost competition.

Darling tells us, half a dozen big providers was not acceptable. For once, we agree.

Still, to mix my metaphors, with every silver lining theres a dose of reality. The latest data from the Bank of England has revealed that major lenders are expecting to increase mortgage fees in the coming months, to compensate for a reduction in spreads. Or, to take another view, because they can.

What does this mean? Well, it will probably effect the residential mortgage market the most, as lenders will be looking to reduce their rates as the market gets more competitive but may well be countering these rates with higher fees.
At the moment though, we are seeing (almost on a weekly basis) a reduction in residential mortgage rates, and if you have a low loan to value with provable income, then there are some very competitive rates about. For lifetime trackers rates, they start from 2.79% (free legals and valuation, £995 fee) to 5 year fixed rates from 4.99%. Worth considering for the Tip of the Week 1 below.

The FSA published their Mortgage Market Review which contained their proposals for the future of the mortgage market, and reflected their intention of a more obtrusive approach. So, here I offer a quick rundown of the points and my own take on their impact:

Banning ’self-cert’ mortgages.

Up to 1 million of mortgages were arranged on a self cert basis. As I have mentioned before, if self cert is banned, then these people will be at risk of never being able to get a mortgage again, even when the market improves. So, unable to move OR remortgage, they are left to sell up or stick with their current lender.
Now, as most mortgage interest rates are low this may not intially be a problem, but as rates rise it will become more of an issue – some may be able to switch to a fixed rate (if the lender is gracious to offer a product transfer) but if you are with a lender who doesnt offer product transfers, or a lender who has left the mortgage market, then you will be at the mercy of those interest rate rises. In fact, the irony is that for someone stuck in this trap, it could result in mortgage arrears and ultimately being repossessed – and this will be a direct consequence of new regulation to protect the consumer!

Lenders will be required to hold more capital and liquidity.

This has certainly happened already and the effect is simple: fewer and more expensive funds available within the mortgage market.

Regulation to cover buy-to-let mortgages (and all lending secured on a home).

I haven’t quite got my head round the impact this may have. From a brokers point of view (which I have) most of our buy to let advice is treated as regulated anyway (best business practice etc), however it all depends on what impact it has on the lenders. For example, if stricter affordability practices are adopted, it could lead to even more restrictions on the number of buy to let mortgages anyone person can have.

Imposing affordability tests for all mortgages and making lenders ultimately responsible for assessing a consumer’s ability to pay.

I can only imagine this is going to mean more comprehensive underwriting, which no doubt will lead to longer application time lines and possibly more rejections.

So lets get cliched here – where there’s a change there’s opportunity (and other such motivational ramblings), so if you have solid provable income, keep your credit clean and have access to cash deposits then now’s the time to take advantage of a market in flux.

The remaining lenders, namely Platform and Beacon, will almost certainly follow suit, and then there will be none.

Rumours have been rife that as part of the FSA review they will potentially ban self-cert mortgages, and so it looks like lenders are pre-empting this decision by simply withdrawing these types of products. Not good to be seen to be last man standing, so to speak. Fast-track mortgages (which were never really meant to be self-cert but fast-track as in fast track underwriting) are also being withdrawn by various lenders across the board.
The Council of Mortgage Lenders are saying self-cert shouldnt be banned but that we should all revisit the definition of self-cert and take practical steps to make sure affordability considerations have been taken. Hmm.

What does this all mean? Well, going back to my newsletter in April (What, you cross reference your own newsletters? Sad, isnt it) I spoke about the self-cert trap.

It seems that self-cert trap is well and truly here. How?

Anyone who took out a self-cert mortgage within the last few years and now wants to move will have great trouble, unless they can now prove their income. Apart from the option of porting their existing self-cert mortgage, they could be trapped in their property for quite a while that is until the FSA and the lenders decide that self cert mortgage are valid again. It is not only those who are trapped, but there are thousands of new applicants that, for whatever reason, will find it difficult to prove their income who now will be unable to get a mortgage.

Lenders like The Mortgage Works, Platform, Godiva and Northern Rock have all reduced their buy to let mortgage products in the last week, and some by up to 0.5%.

The residential mortgage market is experiencing an even greater amount of competition which is fantastic news for you, and seems to reflect a greater appetite for lending and increased competition in the market. This should hopefully have a knock-on effect with the other lenders most notably BM Solutions who seem to have cornered the 75% LTV market for months now.

So, the question is have we reached the end of the mortgage ice age? And are we at the beginning of the long thaw (sorry that is an hackneyed analogy but I couldnt think of anything else!)