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NMD -What do the LENDERS say on the matter?

23/11/2010

A really interesting debate blew up at the weekend on the social web. It seemed to originate from the posting of a video interview between Vanessa Warwick & Lisa Williams (Orme) for PT-TV.

This lead to one of th most censored and abusive threads I have seen on a property forum, you can read the current thread on Singing Pig here

Following on from the PT-TV video, Phil Martin recorded his own three part series apparently looking to dispel the ‘NMD scaremongers – Your time is up!’

It’s been claimed that if you purchase a property that is worth 100k, for only 75k the 25% equity can be used as some or all of your deposit, we are talking about ‘existing stock’ here.

I contacted the following mortgage lenders. Each one is a member of the CML and there contact details were obtained from their respective websites. All names used are actual names obtained during the telephone calls.

I asked the question…………..

“Are you happy with me using an equity deposit of 25% of the value of a property that I may consider purchasing?”

Here are the answers obtained…..

Aldermore Bank Plc – 0333 321 1000

If the valuer values the property at 75k we would require a full deposit. If the valuer values the property at 100k we would require a minimum 5% cash deposit from you. However, we would not accept the application as the maximum vendor gift is 5% of the value, you are asking us to allow 25%

Santander Bank – 0800 023 2761

A very nice lady called Michaela told me ‘Irrespective of the value of the property, we would require a minimum 25% deposit against the ACTUAL PURCHASE PRICE PAID

Accord Mortgages – 0845 1 200 882

Theresa said ‘We don’t actually provide Buy To Let mortgages at the moment however, in any event you we wpould only provide you with a maximum of 85% funding against the ACTUAL PURCHASE PRICE of the property.

Birmingham Midshires – 0845 300 2627

According to Michelle, they will only finance up to 75% of the ACTUAL PURCHASE PRICE PAID and are not interested in the value of the property apart from THE ACTUAL PURCHASE PRICE PAID, the rental coverage and the applicants income as well as credit history etc.

Lloyds TSB Mortgages (Cheltenham & Gloucester)– 0800 783 3534

Debbie told me that they will only lend up to 75% of the ACTUAL PURCHASE PRICE PAID irrespective of the value of the property, they would require a minimum 25% deposit and the use of existing equity was not allowed

Natwest Home Loans – 0845 702 3845

‘All lenders require a minimum 25% deposit for Buy to Let mortgages’ according to Bal, the maximum loan to value is 75% of the ACTUAL PURCHASE PRICE she said. No lenders to the best of her knowledge would allow equity in the property to be used as some or all of the deposit for a Buy to Let mortgage.

Paragon Mortgages – 0845 849 4040

Michelle Bailey went and checked with their underwriters who confirmed that they would only lend against the ACTUAL PURCHASE PRICE at a maximu loan to value of 75% and not the value of the property.

First Trust Bank – 0845 6005 925

Again, Brian went off and checked with the mortgage retention team to check, he came back and advised that they would only provide a maximum loan to value of 75% of the ACTUAL PURCHASE PRICE and that the balance must come from the purchasers own funds.

The Mortgage Works – 0845 45 45 400</u>

I spoke to Andrew on the telephone who was very thorough it obtaining questions asked by the underwriter. Firstly, they will not lend against any sort of financially distressed sale. Secondly, they will only lend a maximum 70% against the <b>ACTUAL PURCHASE PRICE PAID</b> they will NOT take into account any equity acquired as part of the purchase.

From the study undertaken, its quite clear that…

  • You can’t use conventional High Street (CML member) finance to purchase No Money Down!
  • Lenders will not accept equity that you have gained in the property as some or all of your deposit!
  • All lenders require you to disclose the actual price paid and base their offer of funding on this, not the value

Please feel free to challenge any of the above, I have provided all of the links to enable contact to be made. I’m intrigued as to which BTL lenders are allowing these ‘legitimate’ NMD practices to proceed.

My findings are also published on the Property Tribes forum

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