First-time buyers. Unmarried, unequal deposit...

BitterAndTwisted

I think if this is such a marvellous plan your girlfriend should take out the mortgage on her own.

I can see nothing in this but risk and pain for you in the long-run with absolutely no discernible benefit whatsoever.

Yorkie1

joenitro wrote: »

All we are trying to do is take advantage of our situation here with very few outgoings, to get a foot on the ladder. As we can't officially get a buy to let mortgage (mortgage advisor told us that you can't get one unless you own another property already?) we are trying the next best thing.

For arguments sake, i suppose we could buy a house down here for a similar price, but we couldn't rent it out to anyone as not a buy to let mortgage. Also, we wouldn't want to be living in it ourselves, as we already have somewhere to live with the bills paid for us! And mortgage companies don't want you to buy somewhere if they know you aren't going to be living there, do they?

The two bits I've highlighted concern me a bit.

Firstly, your mortgage advisor is wrong in saying that you must already own one house (residential) before you can get a buy to let mortgage. This isn't usually one of the criteria.

The main issue, though, is that it appears from what you've posted that the proposed mortgage on the Scottish property will not be a BTL. Therefore, I assume you are applying for a standard residential mortgage?

These are only for applicants who will be living in the house themselves. To apply for the mortgage when you know that you will not be living there is mortgage fraud. Please take this seriously.

joenitro

BitterAndTwisted wrote: »

Please be advised that should you apply for Consent to Let from your mortgage lender it is likely to be for a defined period, usually for a fee but they could refuse permission altogether. Have you considered the consequences of that to you and your g/f's parents?

Have you considered what the consequences might be to have parents, not even your own, living in a property for which Housing Benefit could not be claimed?

What would happen if this lovely cost-free accommodation supplied with your g/f's employment ended?

What would happen if your relationship broke down?

Jesus, Mary and Joseph do you really appreciate the risks you could be taking?

Yes we do appreciate the risks, but to be honest we can't see many other ways to get a property really. Yes, if the relationship broke down it would be difficult, but hopefully a Deed of Trust as you suggested would make selling "easier" with regards to who gets what etc. And the parents would just be in the position they are in now. They have been given 2 months notice in the place they are in currently. They WERE going to be housed by the local authority housing, moved for free and have their possessions stored for free. But if we can house them in this new place, so much the better.
But yes, I can appreciate that you think it will be risky. But it's not the same as for arguments sake, just buying on a normal repayment mortgage and then illegally renting to someone we don't know is it?

DVardysShadow

joenitro wrote: »

But yes, I can appreciate that you think it will be risky. But it's not the same as for arguments sake, just buying on a normal repayment mortgage and then illegally renting to someone we don't know is it?

It is not the same. What you are proposing here is more risky. It is not strictly 'illegal' to rent out without consent - it is actually a breach of contract. If push came to shove and you needed your tenants out, you and your gf would no doubt agree at the drop of a hat - but this is unlikely in the case of her parents. And I can see no practical difference in the illegality or breachiness of contract between renting to your gf's parents and renting to tenants off the street.

Plans_all_plans

I think you are being rather too trusting OP. This is not a good plan. In your situation I'd be staying put in the rent free house and saving a fortune to 'get on the property ladder' at a later date.

Your plan is too convoluted, there is too much opportunity for something to go wrong and you should look after your financial future by saving more and buying for yourselves, rather than anyone else.

Henry_P_Chester

This is all very strange to me. If youre living rent free where you are now and have no plans to move out why don't you just stay they and keep saving? You already have £30k we so few outgoings that will increase rather quickly and, if eventually you do decide to move you can buy someone for the both of you to live potentially with a very small mortgage.

I can't really see what you are trying to achieve?

BitterAndTwisted

joenitro wrote: »

Yes we do appreciate the risks, but to be honest we can't see many other ways to get a property really.

Actually, I don't think you do. There are far more risks for you than there are for your g/f.
Yes, if the relationship broke down it would be difficult, but hopefully a Deed of Trust as you suggested would make selling "easier" with regards to who gets what etc.

It would make it easier to reach agreement about who gets what but it would not make it easier to secure a sale in the first place. Your g/f might refuse point-blank to sell the property and have to evict parents in order to do it. I know I would. You'd have to go to court to force a saled.

The parents would just be in the position they are in now. They have been given 2 months notice in the place they are in currently. They WERE going to be housed by the local authority housing, moved for free and have their possessions stored for free. But if we can house them in this new place, so much the better.

NO! So much the worse. Let her parents take up the offer of LA accommodation. They won't be any worse off but you would be much, much better off.

But yes, I can appreciate that you think it will be risky.

I don't think that it's risky I KNOW THAT IT IS. This could be financial suicide for you and the repercussions could go on for decades.

But it's not the same as for arguments sake, just buying on a normal repayment mortgage and then illegally renting to someone we don't know is it?

No, it isn't: it's even more risky.

PLEASE DO NOT DO THIS!

tbs624

Sounds like a contrived tenancy to me, ie one set up specifically to take advantage of the benefit system, especially since you say that the local authority has already offered a property.

Your future in-laws would need to convince the benefits officer that this was not the case if they were to be successful in claiming LHA. Do you know what the LHA rate is and what local market rents are up there? Many LHA claimants have to pay a top up each month to cover the real cost of their rent.

You would also need to register as LLs ( offence to not do so in Scotland) plus ensure that you complied with the usual LL obligations. You would also need to declare the rental income to HMRC - note that only the interest part of a mortgage can be set against rental income not the capital element.

Do you have a contingency fund for necessary repairs? In Scotland there is a specific repairing standard which all rented properties must meet and Ts can report errant LLs to the Private Rented Housing Panel.

OP - you say you want to get a foot on the ladder but breaching the Ts and Cs of your first residential mortgage is hardly the way to go about it. Worst case scenario is that the Lender could foreclose as a result of your lie
(because that is what it is) and you get to sell at a loss. Many Lenders would probably view it as more indicative of a deliberate attempt at fraud if you have known from the start that you were buying to let out rather than intending to be living there yourselves. This is because to a Lender there is far greater risk lending for a property which is to be tenanted - that is why the BTL mortgage products require a hefty deposit plus a higher rate of interest. the Lender will insist that an AST/SAT is in place and will expect you to be able to show that the rent will = around 130% of the monthly mg repayment.

See http://forums.moneysavingexpert.com/showpost.php?p=39866624&postcount=10

Then there's the insurance - you need special LL insurance cover. Perhaps you were going to lie to an insurance company too?

On a more personal level , how would you feel if you and your GF split , either/both of you lost your jobs, your GF became pregnant etc - any of which may mean you wanted the property sold asap but found that her parents were hell bent on hanging in there for as long as possible? Ts don't have to go the minute a LL serves notice - they can and do wait until a court order is in place.

You need to sit down and reassess unless you are willing to run the risk of a very expensive unravelling at some point along the line.....

hazyjo

Jeez... so you want to obtain a mortgage by saying you're living there when you're not? That in itself is problem enough. Let alone putting in family members (hers, not yours). Yet you say your mortgage advisor is aware you're letting family members live in the house? Will they be paying you rent? Is it a permanent arrangement or short term? What happens if they don't pay a bill - the house certainly won't be bill-free. I pay my mortgage, plus that sum again just on bills. Would you even know if they didn't pay? Would the debt from any outstanding bills or whatever be in your names rather than theirs? Will they be putting their own names down on the council tax, etc? I'm a bit confused as to the exact set up here. You're paying for renovations on a house you won't be living in. Are you planning to keep it for a short term and sell it on as an investment? What happens to them then? What if it's worth half of what it's worth now or if you can't sell it? You seem to presume it'll go up in value. If it drops, will you lose more cos of your greater deposit? Why couldn't you both just put in £10k each? That would have been more than a 10% deposit - enough surely, and much easier than drawing up contracts, etc for the sake of another £10k. I'm presuming you'll be needing cash too for the works plus a contingency fund. Is that out of joint money? I just can't see this working - maybe it's my fuddled brain after the excesses of Christmas, New Year, etc, but I just don't get the point. They'll lose their housing benefit, so how do they think they can afford to run a (your!) house with no income?

Jx

BadgerFace_2

Stupidest idea of 2011 so far.