Top 10 reasons why you will never bring a No Money Down property deal to completion (at the moment) ...
Still think you can do a No Money Down property deal? It might be time to think again:
1. Lenders have such little appetite to lend that they are cherry-picking who they lend to:
According to my personal reseach only one in 20 mortgage applications
where the person applying has the 25% deposit are going through to
completion. What does that mean for the NMD borrower?
2. Credit rating: Credit reports are now scrutinised more
than ever before by lenders. Any missed payments or adverse credit history, and they will think
twice about giving you a mortgage offer.
3. Source of deposit: Most lenders now ask for the source
and proof of deposit. They are suspicious of where this is coming from
and now check in more detail. This can include asking to see six month's worth of bank/savings statements.
3. Demise of the deal packager: Many NMD deals used to be
pushed through by packagers who oversaw the whole process and used a
"friendly" valuer who they could "influence". There are no deal
packagers left as far as I am aware.
4. Brokers no longer allowed to choose which valuer goes out:
Brokers used to be able to select a valuer from a "panel" of approved
valuers. This meant they could work with a "friendly" valuer. This
practice has now largely stoppped and many lenders are using an
in-house valuer who cannot be "influenced".
5. Property Valuation: RICS valuers have been briefed how
to spot signs that someone is trying to get a false valuation. If in
doubt, they will down-value. By law, they have to value the property at
the purchase price, or market value, whichever is the lower. By lying
to the valuer about the price, or not disclosing the net price or how
the deal is being structured, you are committing mortgage fraud!
6. Rental Valuation: Rents are dropping, making it harder to get a deal to stack. A down-valuation on the rent will stop any deal in its tracks.
7. Contesting a down valuation: Until recently, you used to
be able to contest a down valuation by supplying comparables. These are
now no longer accepted. The decision of the valuer generally stands.
8. Solicitors and lenders require full disclosure to all parties.
If there is any evidence of non-disclosure, or the lender gets wind of
anything fishy, they will withdraw the mortgage offer. This happened to
one person I know the day before completion, and that person has been
left on a bridging loan of £2K per month. It is extremely risky to buy
anything on a bridging loan for the above reason.
9. "Seasoning" of title: Lenders now require you to have
proof of ownership of the property for a minimum of six months before
remortgaging or re-financing. This means bridging loans are no longer a
vehicle for purchasing NMD, unless you are willing to stay on a very
high interest rate open bridging loan, which again, is a very high risk
strategy. The number of bridging financiers is also severely limited,
as most have left this arena.
10. Education: The internet has now provided education and
transparency to allow people to understand the truth about NMD deals.
This can only be a positive thing for the property industry as NMD was
simply not sustainable and was largely a factor in causing the first
Conclusion: No matter how positive a mental attitude, how many
courses you go on, how many NMD mentoring programmes you join, how any
times you pay NMD deal finders for a lead, how many times you pay for a
valuation, if you don't have the 25% deposit, it is very unlikely that
you will be able to buy a property.
sometimes life it tough and it hurts, but better find out now than
waste your money and time on something that is defunct. Strangely
enough, I am in the same boat as you as no lender will lend to me
anymore because I have too many mortgages, so I understand the
frustration. My advice is to keep on educating yourself, get to grips
with social media, try and set up some JV's, and maybe source deals for
others too time-poor to do it themselves, allowing you to build up your
Do others agree that there is a definitive decrease in "noise" on the
NMD deal front? Is the message that there are no legitimate ways of
doing NMD deals finally sinking in? Are the reports of more and more
people being jailed for mortgage fraud putting people off talking
openly about how they are doing it? With the transparency of the web,
only the most foolish person would post on a forum advertising their
We also know that the CML and the FSA are using forsensic accountants
to see which brokers are doing a lot of business in these challenging
times, and doing audits on people buying a lot of property to establish
the legitimacy of the money trail.
Are the purveyors of NMD schemes changing their business model or have
they just gone underground? Will they all start talking about lease
options as the "new NMD"?
I personally believe that the legitimate NMD deal was dead and buried
in April 2008, when Mortgage Express withdrew their bridge/same day
remortgage product. Is this finally having an impact on the NMD
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