Buy to let needed?

sensiblesaver_2

Hi

To make a very long story short, found out at the weekend that the father in law is in serious debt. We are getting in touch with Citizens advice and various other agencies but we suspect the end result will be him selling his house.

My fiance and I live in a small 2 bed which is on the market but we're not getting any interest. Ideally, I'm thinking sell both houses and the 3 of us living in 1 house for a while. But while our house isn't selling, this is a non starter. Another of many options we've discussed over the weekend is for the father in law to live in our house and we will buy a new house. This is still a vague idea but want to understand all our options.

My question is, do we have to make our house into a buy to let mortgage, even if the father in law wasn't paying rent? We currently have very little equity and a great svr right now. To make it buy to let, we would have to sink a lot of our savings into this house to get the equity needed and would get nowhere near the rate we are currently on.

Any advice would be greatly appreciated

holly_hobby

You may not have to remortgage and change this to a buy to let mortgage - in the first instance approach your lender for their "consent to let".

There normally isn't a issue with this (but I can't promise of course !), your lender may well take you off any mge deal you are currently on, and/or add a loading to the rate you pay too. So if you think that you will keep your residential rate - you may be in for a surprise. Which may well put a spanner in the works if you are supporting both this mge and your new one.

So, in the first place have a general enquiry chat with your lender to establish how they approach Consent To Let - if this is a viable plan based solely on the current int rate you are on, you may need to reconsider.

Secondly, technically a let to buy mortgage would not reallly suit you for the pch of your new main residence, as you will not be recieving rent from your 1st propety, so this commitment will need to be deducted from your income for affordability issues. (as in essence you are simply buying a 2nd property).

You also need to consider if/when int rates start to rise, will you be able to afford both mges ?

Anyway, first call to your mge lender and take it from there ....

Hope this helps

Holly

sensiblesaver_2

Thank you for the reply. Our current lender (GE money) will now allow us to change to buy to let. As I understand it, they are moving towards different markets altogether. I understand that the rate would be much higher than the rate we are currently on (2.04% above base) and that the mortgage on the new house will also be higher.

I see what you're saying about not receiving rent and so technically just buying a 2nd property because of affordability issues. Was possibly thinking of putting either this house in my dads name (good credit, no mortgage, willing to help!) or keeping this house in my name (never bothered to put fiances name on it) and putting the new house in my dad and fiances names?

As I said, they are all just very vague ideas at the minute. We have a lot of options to go through and I'm out of my depth.

holly_hobby

Are you saying that you have approached GE for their CONSENT to let (forget buy to let at the moment) - and they have refused your request ?

To "transfer" your property into you Dads name - his income will need to be sufficient to service the mortgage & he must pass the lenders status checks too (inc max age criteria).

You have also stated that you could leave the flat in your name (put dad in there to live I assume from your first post), and apply for a mge for your new main residence in the name of your partner and your Dad. This would be a breach of your mge contract if you do not have consent to let from your mge provider.

Further to which, the mge application of Dad & your partner, would be fraudulent, as the residential mge application is based on the property being the applicants main residence. But it won't be Dad's main residence, nor will he live there at all, and your parnter knows this at the time of application ... so both parties would be found guilty of taking part in a fraudulent application.

Even if you ignore the above and proceed, there would be further complications in relation to CGT tax, state funded long term care provision for Dad (application of mge charge in the event of jointly held mge), and how the property would be administered in the event of your Dads death. Which I won't go into now - as i don't want to be seen to condone what your propositions are ...

You are asking your lender for CONSENT to let, not a buy to let mortgage - a lender who gives consent to let on an exisiting residential mge does not have to be in the buy to let market. - so don't assume because GE have told you they are moving out of the BTL market, they will automatically refuse your application for consent to let - if you have not asked this question of them, make this your first step and see what comes back.

Hope this helps

Holly

sensiblesaver_2

I asked my lender about buy to let a couple of years ago under different circumstances when we were toying with the idea of keeping that as a buy to let and then buying a new property. I see what you mean now, I wasn't aware that consent to let and buy to let were different things so thanks for clearing that one up! I will talk to my fiance and then maybe talk to GE again.

Taking your points on board, I don't think this option is going to work and I hadn't even condsidered CGT or what happens upons death. I think this maybe one idea to cross off the list of options. It looks as though if we go down this route regardless of whether or not we can afford it, we won't pass affordabilty criteria for both properties.

Appreciate your advice