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In 2008, could I have become an overnight property tycoon? watch

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    Hi all,I have a general question about the Financial Crisis of 2008. I understand from many people that banks were giving mortgages of up to 110% of the value of the property. This means that not only do you not need a deposit for a home, but the bank will lend you money as a personal loan on top of your mortgage.In contrast, today, millions of young people in the UK cannot manage to save enough to place the minimum 10% deposit required to purchase a home.Comparing the two scenarios, I made an observation. What stopped someone from becoming a property tycoon overnight in 2008? Say I placed an offer on a property and got a 110% mortgage, I could use the remaining 10% to pay solicitor fees, survey fees, stamp duty land tax & all other remaining costs of buying a property. Then I could let it out. Then I could repeat this process for any number of properties, theoretically allowing me to place offers on any number of properties overnight. Now, even in crazy times, banks would see that I have a huge number of properties & in each I have little to no equity. So they may stop me from buying a ridiculous number of properties (say, 50). But I don’t see why this wouldn’t work for less than 10 properties, in a conservative mindset.Can you see any fault with my logic? Would this work in reality? Did this happen in 2008?
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    For starters, if you're buy-to-let then banks typically require a much higher deposit than if you're owner-occupancy. That was still the case prior to the credit crunch I believe. Even if you were after a regular mortgage, you'd definitely still be wanting to put money down or else be slowly murdered by interest repayments. 5% mortgages were more common but horrificaly expensive (as they continue to be now), especially when interest rates were at a record high.

    Sure, mortgages were easier to come by but that doesn't mean you could just walk up to the bank manager, pop a tenner in his pocket and sign up for £200k in credit. Things weren't that crazy, at least in the UK.
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    (Original post by Dez)
    For starters, if you're buy-to-let then banks typically require a much higher deposit than if you're owner-occupancy. That was still the case prior to the credit crunch I believe. Even if you were after a regular mortgage, you'd definitely still be wanting to put money down or else be slowly murdered by interest repayments. 5% mortgages were more common but horrificaly expensive (as they continue to be now), especially when interest rates were at a record high.

    Sure, mortgages were easier to come by but that doesn't mean you could just walk up to the bank manager, pop a tenner in his pocket and sign up for £200k in credit. Things weren't that crazy, at least in the UK.
    About the last part… my dad told me that’s exactly what it was like, although of course it was more value than £10 and was sometimes more complex than just handing over money
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    (Original post by Zxyn)
    About the last part… my dad told me that’s exactly what it was like, although of course it was more value than £10 and was sometimes more complex than just handing over money
    I guess what I should've said is that you couldn't do that and expect a decent deal out of it. Lenders would've been more than happy to sign you up with a terrible mortgage that basically amounts to you giving the bank a bunch of cash for a few years before defaulting and letting them keep the house. That sort of lending certainly changed with the credit crunch.
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    (Original post by londoncricket)
    Hi all,I have a general question about the Financial Crisis of 2008. I understand from many people that banks were giving mortgages of up to 110% of the value of the property. This means that not only do you not need a deposit for a home, but the bank will lend you money as a personal loan on top of your mortgage.In contrast, today, millions of young people in the UK cannot manage to save enough to place the minimum 10% deposit required to purchase a home.Comparing the two scenarios, I made an observation. What stopped someone from becoming a property tycoon overnight in 2008? Say I placed an offer on a property and got a 110% mortgage, I could use the remaining 10% to pay solicitor fees, survey fees, stamp duty land tax & all other remaining costs of buying a property. Then I could let it out. Then I could repeat this process for any number of properties, theoretically allowing me to place offers on any number of properties overnight. Now, even in crazy times, banks would see that I have a huge number of properties & in each I have little to no equity. So they may stop me from buying a ridiculous number of properties (say, 50). But I don’t see why this wouldn’t work for less than 10 properties, in a conservative mindset.Can you see any fault with my logic? Would this work in reality? Did this happen in 2008?
    Few observations.
    I don't think btl mortgages went over 100% ltv.

    But say you took a residential mortgage and rented it out anyway....

    It'd be based on your income, crazy days so day you could get a 6x income loan. So on above average earnings you'd be looking at £180k ceiling per property (minus stamp duty, solicitor, survey, so say £175k).

    6% interest so your 180k loan wouldve been about £11k a year, £900 a month.

    Would've been tad trickery to have let at that level to cover the interest let alone make cash.
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    (Original post by Quady)
    Few observations.
    I don't think btl mortgages went over 100% ltv.

    But say you took a residential mortgage and rented it out anyway....

    It'd be based on your income, crazy days so day you could get a 6x income loan. So on above average earnings you'd be looking at £180k ceiling per property (minus stamp duty, solicitor, survey, so say £175k).

    6% interest so your 180k loan wouldve been about £11k a year, £900 a month.

    Would've been tad trickery to have let at that level to cover the interest let alone make cash.

    It was a different time, but I think with the crazy equity growth in 90's and 2000's, making money from property was a lot easier overalll.
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    (Original post by ebam_uk)
    It was a different time, but I think with the crazy equity growth in 90's and 2000's, making money from property was a lot easier overalll.
    In 2008? (as per thread subject line)

    90s and early 2000s for sure, hindsight being a wonderful thing. Until about 2004 credit wasn't so easy, 04 to 06 being a sweet spot. Credit fuelled bubble though, after 2003 fundementals went out of the window.
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    (Original post by Quady)
    In 2008? (as per thread subject line)

    90s and early 2000s for sure, hindsight being a wonderful thing. Until about 2004 credit wasn't so easy, 04 to 06 being a sweet spot. Credit fuelled bubble though, after 2003 fundementals went out of the window.
    But a lot of people who could have bought property ( investments), probably took credit and went on nice holidays... and generally blew the cash on luxuries instead of investing it.
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    (Original post by ebam_uk)
    But a lot of people who could have bought property ( investments), probably took credit and went on nice holidays... and generally blew the cash on luxuries instead of investing it.
    Good on 'em.
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    (Original post by Quady)
    Good on 'em.

    Good or bad, tbh, we should be saying what investment is going to yield us enough to retire in our 30's..
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    In the US maybe, in the UK we still had fit and proper tests.

    Banks like northern rock didnt go bust because there they faced high defaults on loans (it was actually below average), their main source of funding in wholesale market dried up due to growing global credit crunch. Then as people began to lose jobs, defaults started to build up.

    In the US even part time strippers were flipping houses.
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    (Original post by ebam_uk)
    Good or bad, tbh, we should be saying what investment is going to yield us enough to retire in our 30's..
    Well bitcoin would have but boat have sailed on that.

    Pension missed lingerie seems like a good route right now.
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    (Original post by hannah00)
    In the US even part time strippers were flipping houses.
    I watched the big short too
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    (Original post by mattchaamp)
    I watched the big short too
    good for you
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    (Original post by Quady)
    Well bitcoin would have but boat have sailed on that.

    Pension missed lingerie seems like a good route right now.

    Oh Okay but is bitcoin/crypto currencies over now, or is it just warming up before it hits new ATH ( 50k+ type amount)..
 
 
 
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