Mortgage eligibility on a 2nd property with a guaranteed tenant.

NickM_3

Hi all,
My first post as usually I can find an answer to any Q by searching but I cant seem to find anything regarding this issue:

How do mortgage providers assess an existing mortgage on another property when making a decision?
In my case I would have a guaranteed tenant (close family member) long term. As it is a close family member the rent will be subsidised by myself and so may not cover the mortgage cost fully as I would not feel happy about their money paying into my investment.
In this case would the provider count the outstanding balance and deduct it from any amount I would previously have been eligible for? Or would they consider the difference between the rent and mortgage and class that as in income / monthly cost?

Another issue is that they will not be able to move in until I move out and into the new house but I wont be able move out until I have a new mortgage in place. Now I really dont think a mortgage provider is going to be naive enough just to take my word that I will have a full time tenant in place providing an income day 1, so how is this managed?

Ordinarily I dont think I would go through the hassle of renting but under the circumstances if I was to do this then it would benefit both parties (Myself = a subsidised retirement fund without the usual hassle of renting, other party = subsidised rent and long term security).

Any advise would be much appreciated
Thanks in advance,
Nick

NickM_3

55 views but no replies.... possibly meaning there are people in a similar position?
If so I have done a little digging and found out the following:

Irrespective of the income generated from renting out my first property, if it has a residential mortgage and is not ran as a business then it will be classed solely as a monthly outgoing (i.e the income will not be counted at all.) This will obviously effect an application and certainly mine as I was planning on gaining "consent to let", not re-mortgaging. The only way to minimise its effect on another mortgage application is to have it under a buy to let mortgage and run it as a business. Even if the property is self sufficient (income = cost) it may still have a negative effect on an application. It is also preferable to have at least 3 years books behind you when making an application.

This obviously removes the need for an answer to my second question as the above shows having a guaranteed tenant would have no effect anyway, but if the property was under a buy to let mortgage and ran as a business then a valid tenancy agreement should help.

Hope this is of use to someone.

Nick.

orangina

If your income allows you to borrow the total combined lending mortgage amount you could potentially take the loan on a residential rate for a close relative......Woolwich, A&L, Halifax

If not then you need a buy to let loan, however....

If you are renting to a relative this is considered a REGULATED buy to let and not meny lenders will offer these - Nat West and Standard Life used to

I understand why you feel you have a guarenteed tenant but commercially this is not the case as your relative could choose to leave the property for any number of reasons, new partner, change in income/job etc...at any time

Your best option is to go see a good mortgage broker who will crunch the numbers (as you dont give them here) and tell you if its possible, and if so how it would look

NickM_3

Thanks for taking the time to reply...

I'm not sure I understand your first suggestion / option. Essentially I would be taking on the loan for someone else to live in the property? Or are you suggesting that I remortgage for the total of the outstanding mortgage on my first house + the value of the second house - deposit? Is that even possible? Forgive me if I am being a little slow here!

As for the guaranteed tenant part, my intention would be just to sell the house if the family member decided to leave for whatever reason. although I do realise in the current climate this is easier said than done.

I also didnt realise that lenders differentiated between different tenants i.e the regulated buy to let, although in all honesty I do not want to re mortgage to a buy to let one.

Thanks again.

orangina

You would have 2 seperate resi loans - one on own your residential property and one on the property that is for the benefit of your relative. these can be with different lenders

eg....£100K on yours and £50K on the relatives equals £150 total & you would therefore need to be able to support the TOTAL lending on your sole income 3.5X etc... What monies your relative then gives you is irrelavent

Its and FSA requirement re regulated and non regulated B2L's - not the lender

NickM_3

So I still own the property as normal I just allow someone else to live there and any monies transferred between ourselves is non official / contractual? Is it a concern for the lender who inhabits the property or just the insurance company?