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The monthly magazine providing news analysis and professional research for the discerning private investor/landlord

Change = Opportunity

Veteran international investor John Corey comments

As you will have read in this month's edition, the regulations are changing for residential loans with the introduction of the Mortgage Market Review (MMR). The Financial Conduct Authority now thinks it is important that people can afford a mortgage before a lender grants them one. What a novel approach!  

While some will find the questions from their lender a bit intrusive and revealing in terms of what an applicant spends on entertainment, transport and other details, at the end of the month, you cannot pay the mortgage payment if you do not have the cash, given your other expenses. Rather than depend on statistics such as a third of your salary, no more than 36% for the mortgage payment, the idea with the MMR is to understand the individual. A borrower who is frugal should be able to obtain a mortgage compared to someone whose spending on entertainment is out of control. You may see it as responsible due diligence or responsible lending.

While researching the education and training providers for the UK property sector recently, it was rather enlightening to note what is visible through Companies House. For the most part you do not see too much detail from any of the names that you might recognize. One of the larger providers does have their accounts audited even though they are not a PLC. For the last two years the auditor has stated that they are not sure of the educational company's 'viability'. Due diligence before you buy might be appropriate before parting with your cash.

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