Any help with a slightly complicated house buying issue

nelpha

Hello,

This one is complicated, to me at least. Hope you can help with some advice or to let me know if you've been in a similar situation and what happened to you.

- I earn 40k
- I have a house worth about 110k and a m ortgage on it of 82k. It's currently under my name but actually at the moment my mum lives there and pays whatever rent is neede to cover the mortgage.
- I want to get a new mortgage with my partner in another town, of about £120k

To get that second mortgage will I have to kick my mum out and sell the house or is there a way to turn it in to a buy to let or get a second mortgage somehow? I know that I don't earn enough to pay for both mortgages and so assume a bank wouldn't lend to me, but I wonder whether if I got my mum to sign a contract at the property it might help.

Any advice at all would be great!

Thanks
Nel

Annisele

I think your best bet is to take that to a mortgage adviser. Unless your partner earns enough to afford the second mortgage on her own, I think you're going to struggle.

Buy to let loans are usually unregulated. However, because you'd be renting to a dependant relative, you wouldn't have access to most buy-to-let products - because mortgages for properties with dependant relatives living in them are regulated.

I don't think that getting your mum to sign a contract would help, though I'm ready to be corrected. If you have an agreement that she will live there and pay you enough to cover the mortgage, then you already have a contract with her, just not a written one.

Do you live with your mother at the moment? Does your lender/insurer know that you're letting your property? Does your mother have anywhere else to go (i.e. does 'kicking her out' mean 'kicking her onto the street')?

nelpha

Thanks a lot for that. Really helpful.

I'm not sure what "dependent relative" means in finance speak. She's not actually dependent on me in any real sense. She can look after herself and if I sold up she'd be fine to move so no, I wouldn't actually ne kicking her on to the street at such! I just don't want to make her move for obvious reasons.

I don't live with my mum at present no, I rent elsewhere whilst I organise myself. My lender doesn't know that I'm letting property no.

By the way if it helps, when looking to get the 120k mortgage, that would be for an approximately 200k mortgage, the rest of which would be paid in cash, which is perhaps more attractive to a lender? Probably not though ...

Annisele

Does your insurer know that you're letting the property? If not, tell them - otherwise, you might find that if your house burns down the insurer won't pay out.

You should also check the terms and conditions of your mortgage loan. If you're letting the property to your mother without telling your lender, you are almost certainly in breach of the terms and conditions. If that's the case, then I think that you should tell your lender - on the grounds that breaching a condition of the mortgage you agreed to is a bad idea - but others on this site would advise the opposite. It's also worth checking that you're all above board with HMRC. If your mother's rent is equivalent to a repayment mortgage (rather than an interest only) then it's possible that you've made a profit that you should have declared to HMRC.

The LTV doesn't make much difference to affordability. Certainly better deals would be available at 60% LTV than at 90%, but if the lender thinks that you can't actually afford to borrow another £120k then the substantial deposit won't matter.

Is there any way that your mother could buy the first property from you? That way she wouldn't have to move and you could be released from that mortgage.

herbiesjp

This is a complex situation.

You may well be able to have both properties.

However, far too much information would be needed by an adviser to look into this for - much more than you would want to post on an open forum.