Unusual Mortgage

Bazman

Hi there,

I recently inhereted several properties all of which are commercial in nature.

They are all curently let out some on leases of 15 years or more.

I want to use the cash flows from there properties to fund a mortgage for a residential property.

So if I use the cash flows from the rental of the comercial properties I could set them up as a business and therefore only pay coprorate tax on the rent (I think still checking this). I would then use these rental cashflows to pay the mortgage on the residential property with no further tax to pay? The properties are currently taking in £5k a month.

The problem is the underlying values of these commercial properties is not that great and would not allow me to buy the property I want anyway. Moreover I am a full time student so could not get a regular mortgage in any case. Also as I am using these properties as collateral to buy a different property its not buy-to-let either.

Therefore I need a mortgage seucured on the cash flow of the rental incomes (I am OK with the underlying properties being repossed if things went tits up). What would such a mortgage be called and where could I find such a mortgage in this market?

I assume the closest thing would be a mortgage for someone who is self employed?

If anyone knows of a type of martgage that I can use and or lenders who offer such mortgages I would like to hear from you.

fyi I also have a very healthy deposit which I would be using.

Baz

herbiesjp

There are quite a few lenders that could look at this for you potentially.

As you say, it would be based on your income being the income from those properties.

As such, it would then be subject to normal income multiples.

You should find a good whole of market adviser, to see if the figures you are looking at are possible.

Bazman

OK cool, can you recommend someone in the London area?

Also can you recommend some good websites that would allow me to reaearch this further. Wanna make sure I'm as clued up as possible by the time I see the advisor!

powerwin

If lenders can see that you have a secure income from rental properties on long leases, I expect that they will take that into account and not worry so much about you being a student.

I'm not sure how you are holding the assets involved here, but given you earn £5k a month from them, it is probably worth looking at which holding structure would be most tax efficient.

Rgds

Bazman

The tax structure is obviously something I am looking at.

Clearly the more efficient the better whilst staying on the right side of the law!

Again if you can given me a couple of ideas that I can investigate I'd be most grateful.

powerwin

Bazman wrote: »

The tax structure is obviously something I am looking at.

Clearly the more efficient the better whilst staying on the right side of the law!

Again if you can given me a couple of ideas that I can investigate I'd be most grateful.

Tax efficiency is not an area of expertise for me. I do know that if you were an individual receiving profits of say £60k, you could save approx £3k in tax by forming a Limited Company and paying yourself through a combination of small salary (around £5k) and then a large dividend which is subject to Corporation Tax.

Another thing I'm aware of is the Real Estate Investment Trust (REIT), which is designed for property investment holdings.

Those are just thoughts to start you off, I'm no expert here.

Rgds