BM Solutions scraps minimum income rules on buy to let mortgages

BM and Lloyds Banking Group showing signs of understanding the BTL market, finally!

Hmm. All well and good but my view is that with still only 3 properties allowed it doesn`t match up with the tag line about providing a service to `experienced` property investors. That restriction can in fact stunt ones portfolio growth. So they will capture some business yes but someone who does not have an income and lives off property is likely to want more than 3 properties and if they cant have them with the Lloyds Group they will go elsewhere.

They should show some courage and lend up to I think it was on 12 properties in the good ol days!

Hello Jonathan.

Please would you clarify how opening up their criteria to someone who has never had a BM Sols mortgage before (because previously they would not have met the £25k criteria) can "stunt ones portfolio growth"? Surely that by adding a further 3 deals (and with BM Sols excellent service and rates, this would also prove very financially attractive too), that 3 more properties actually enhances a portfolio and does not stunt or reduce it?

I totally agree that 3 however is not enough, and in the good old days - I can tell you from experience because my Firm has been dealing with BM for many, many years - that actually they did not restrict it to 12, in fact it was unlimited. One of my Clients used to buy about 15 properties a month using BM at one time, and I remember remortgaging 60 properties for another Client all to BM in one week ...... ahh, yes, the good old days! 🙂

All in all though, I think BM Sols relaxation of criteria is excellent news for property investors, many of whom show little or no profit but who can of course afford the mortgages via their portfolio income.

You do make a valid point about investors going elsewhere too, using a whole of market Adviser of course 🙂

ps - Other lenders are available; BM Sols now join a small band of other lenders who also all lend to BTL property investors without a need to meet a minimum income threshold.

Howard.

This is very good news in so much that it will hopefully encourage other lenders to waive the minimum income criteria as well.
As has previously been said, it would be better if the Lloyds group also lifted the "3 across the group" limit but I'm sure that will come pretty soon too as the BTL lending market starts to hot up. I was very interested in a Halifax product recently but as I already have 3 BMS mortgages I had to pass on it.
Howard, it would be helpful if you could let us know who the other lenders are that do not have an income criteria just in case investors are missing out on anything?

Hi Howard

I agree it beneficial to some but for me it was precisely because of their good service , rates and for me the fact they accepted LHA that I would have been very disappointed if during my growth phase they had said go elsewhere on my 4th property. They were very good to me at the time and would have stunted my growth simply because during that period they had the best product on the market for what I wanted. And their reversion rates were to die for! They couldnt be matched eleswhere

I stand corrected though, I was always under the impression that they considered you maxed out at about 12. Was 12 their max at any stage then I wonder? or has it always been unlimited.?

If so all the more strange they go from unlimited all the way down to 3. Your man who did 60 at once did very well then. Is there another lender to step in to do 60 at one throw. If BM were the best rates at the time , then now that same persons growth would have been curtailed some what. An extra say 0.5% on 60 properties hurts somewhat

Hi Jonathan

BM Sols were always unlimited .... but this was BEFORE the credit crunch and at a time when they were owned by the HBOS Group. Now (ie post credit crunch, hence now in a world of 'computer says no' - unless you know a whole of market Broker who can help 🙂 ), BM Sols - and Halifax and BoS and TMB and C&G etc etc etc - are all now owned by the Lloyds Banking Group. The unlimited to 3 restructure is a consequence of a new Group taking over, so BM Sols in themselves have not made the change, but instead Lloyds have implemented it.

And yes, I totally agree with you that if you already have 3 mortgage accounts with the Lloyds group that this would not help, but for many, many people (including the very many new enquiries we've received since Friday when the announcement was made), this is a godsend.

And yes (again) I agree with you - my chap who did his 60 mortgages in one go did indeed do very well - he chose an excellent Broker! 🙂

DC - I could list all lenders and all their criteria, but of course lenders and deals change on a daily basis, so I would simply recommend that anyone who is considering a BTL mortgage and doesn't think they meet 'minimum income' criteria, to contact a whole of market Broker who will carry out a full assessment of not only income but also credit status, investor experience, 'background' portfolio, rental affordability etc etc (ie all of the pieces of the jigsaw needed for the lender to consider the 'whole picture', not just income) and an updated and researched formal recommendation can then be made.

Sorry to sound a bit elusive here, but it's not just about who does what, buy far more (in todays world) about are you eligible in the first place.

As always, I recommend that BTL'ers talk with an experienced, professional and knowledgeable whole of market Broker whether recommended via Property118.com or ask around and choose your own.

Property118.com works with whole of market Firms who are also Full Members of the NACFB.

Back to the BM Solutions announcement and I personally think that this is yet another sign of the increasing confidence in the BTL sector and with a few other announcements coming in the next few days from other lenders too .... 2013 is continuing to be an exciting time ... watch this space!

Howard

Hi Howard

Is it three per person or three per family?

I already have more than 3 BM mortgages in my own name, however, my wife and my step son have none.

Another angle on this one is that it often makes sense to buy properties in the name of the lowest earner for tax purposes. Previously, a person working part time earning say £10k a year would not have qualified but presumably will now.

Are there any other common sense checks? For example, if a person was showing say £10k in rental profits but had a £500k personal mortgage would BM Solutions say no or is their underwriting still a very shambolic computer based system which uses credit score and little else?

I always said BM Solutions was great in the short term for wannabes but they never could get their acts together in terms of common sense lending in my humble opinion. They didn't even used to cross reference valuation reports between Colleys surveys and BM Solutions, both of which they owned!

Their decision to waive the £25k minimum earnings could land them in trouble again I suspect.

Sadly, not all IFA's are as conscientious as you are and they will no doubt exploit BM Solutions by introducing mortgages which should never get approved but probably will.

Hi Mark

3 per person.

As you can imagine, the BM Sols lending criteria is comprehensive and contains many 'hoops to jump through' and so a very brief extract of their updated criteria manual is as follows;

"AFFORDABILITY
Affordability is assessed using the anticipated rental income from the property.

CRITERIA
Monthly rental income must cover a minimum of 125% of the mortgage interest at initial product pay rate, or 125% of the mortgage interest at a notional rate (currently 5%), whichever is higher.
A £2,000,000 lending limit applies to all Buy to Let, Let to Buy and House 2 House borrowing across the Retail Division of Lloyds Banking Group (The Retail Division of Lloyds Banking Group consists of Bank of Scotland, Birmingham Midshires, C&G, TMB, Halifax, Intelligent Finance, Lloyds TSB, Lloyds TSB Scotland and Scottish Widows).

DEFINITION OF INCOME
There is no minimum income requirement.
Rental income cover requirements can be found by using the Buy to Let rental income calculator. (NOTE FROM HOWARD - use your Broker for this calculator) Monthly rental income must cover a minimum of 125% of the mortgage interest at initial product pay rate, or 125% of the mortgage interest at a notional rate (currently 5%), whichever is higher."

So, for all potential BM Sols BTL borrowers, you can see that many calculations, checks and assessments are carried out before formal acceptance. Use a Broker!

Thank you Mark for your comment re being conscientious, but of course people will still unfortunately try and cut corners to 'get a deal through' however with BM Solutions, by the way, BM won't talk direct with a borrower (it cuts out the tyre kickers and liars), so borrowers do have to go via a Broker.

When we achieve 'approvals', the applications do go through (unless the valuer comes back and downvalues the deal - but that's a whole other thread!)

One final BM 'criteria' note for any FTB'ers;

"Not available to First Time Buyers.
The applicants must currently own a property in the UK; this will need to be validated before an offer can be made.
Where possible, we will use the credit reference search to validate property ownership"

So, for existing property owners, with income less than £25k, and fewer than 3 Lloyds mortgages ( 🙂 ! ), it's still very good news!

Howard

Howard.

As you've probably gathered Howard, I'm really not a big fam of BM Solutions and their Mickey Mouse underwriting.

For the right circumstances, for the right borrowers and via a responsible intermediary this announcent from BM Solutions is great news. For wannabe investors who can't afford these loans but may still qualify this is a financial disaster in the making.

As you know Howard, I am one of your biggest fans. I couldn't resist the opportunity to have a pop at BMSolutions though after the devestation of what their incompetance caused to many of my former employees.

Calling all BM Sols mortgage holders.....

TIP NO.1

Are you a joint borrower on 3x or less BM mortgages?

Now that BM Solutions has relaxed the income criteria, there is an opportunity to DOUBLE your 3 to 6x BM Mortgages between you and your partner.

If you needed to be a joint borrower to satisfy the previous £25k min income requirements, you can now change this around (with a Brokers guidance) and increase your portfolio by another 3x properties!

TIP NO.2

Are you hoping to become a First Time Landlord?

BM Sols are one of the few BTL specialist lenders who allow FTL's with no minimum income requirement, too. (you do have to be a property owner already, this is not available to FTB'ers)

TIP NO.3

Further advances for existing BM mortgages - if you've been putting off taking a further advance on your BTL property(ies) because your income at this time did not reach the £25k min income, you CAN now apply and release the equity (within usual LTV and rental limits, of course) to assist towards deposits etc for further purchases too!

Howard