How To Stay Legal

  

Back in the early 2000's the mood for lending was extremely buoyant as property prices roared ahead and investors could be seen to do no wrong.

In that investment climate making No Money Down deals work was easy. There were few checks, little regulation and finance was easy to obtain.

As a result, No Money Down investing became very popular and many investors with little asset backing or cash resources were able to build substantial portfolios.

Then came the property crash and the credit crunch of 2007 to 2010. Property prices dropped substantially. For a period interest rates were extremely high. Rental levels also fell.

Not surprisingly, investors who were highly leveraged found that:

• They were in negative equity
• They couldn't cover the mortgage payments

As a result many found themselves in the worst possible squeeze - unable to afford to subsidise the monthly shortfall in rent to cover the mortgage and other costs, unable to remortgage elsewhere because they didn't have enough (or any) equity in the property, and unable to sell without taking a thumping loss and receiving less than the outstanding mortgage.

No wonder that repossessions spiralled amongst Buy-To-Let landlords as well as owner occupiers!

New Restrictions and Legislation

As a result of these problems and lack of available finance, lenders changed the rules and made borrowing far more restrictive.

Some of the changes included:

• New CML (Council of Mortgage Lenders) incentive disclosure form
• No same day bridge and remortgage facility (aka Mortgage Express)
• New borrowing rules for deposits (eg. Secured borrowing is fine, unsecured is not allowed)
• Disclosure of source of deposits
• And much more

If No Money Down Caused Problems, Why Do It?

We explain elsewhere the huge benefits of Low and No Money Down Property. The key to success in 2010 is to understand that the massive fall in the property market creates new opportunities for No Money Down investors that are far less risky and far more profitable than they ever were in the heady days of 2004-2007.

The two big changes are these...

• Buying property at low, low prices - at the bottom of the market rather than the top of the market
• As a result of buying cheaper property, rental returns have soared, thus covering mortgage payments and usually leaving a positive balance, even after full No Money Down financing!

As a guide, if property prices fall by half, rental yields double. In some cases that's what Axis No Money Down deals offer investors in 2010. A remarkable difference from the peak of the market.

With these two changes the risk/reward ratio for investors changes enormously in favour of smart investors providing that they invest wisely and choose property that meets the four criteria specified by Axis!

What Do The New Restrictions Mean For No Money Down Purchases?

It means that many of the techniques and approaches used in the period 2000-2007 are no longer legal or not available. This is either because of new legislation, new rules from mortgage companies or restrictions on lending.

However, when a technique so valuable to investors as Low and No Money Down lending is under threat then new options usually spring up, as has been the case in the last 12 months.

In this Smart Guide we cover all the methods which Axis believes are legal and acceptable in the market conditions of 2010. Rules, regulations and finance offers continue to evolve, so it's up to the investor to ensure that any financing techniques they engage in comply with rules and regulations at the time that they participate.

The challenge for investors and funders is that the No Money Down proposition creates 'grey areas' where the interpretation of the current regulations is open to doubt. In this space investors will need to decide if the benefits of participation outweigh the potential drawback of the transaction failing if the lender disagrees with the specific process being used.

At Axis we take great care to stay compliant with current guidelines and only offer Low and No Money Down property deals where we comply with all current regulations and guidelines.

Don't Sign What You Aren't Happy With!

Finally we'd like to offer one piece of advice to readers. Ultimately you are responsible for your actions, and you are most certainly responsible for what you sign.

So take care, read the small print, get ALL your questions answered, and then only sign various documents / applications / agreements / reservation forms etc if you are satisfied that they are legal. Take professional legal advice if you have any doubts. 

The buck doesn't stop with the sourcing company, or the mortgage broker, or the vendor.... It stops with YOU.

Next Steps

Learn More... No Money Down Property Purchase

Browse our UK Investment Property

Download the No Money Down Smart Guide

Download The 100% No Money Down Finance Guide

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