Bank refuses BTL mortgage because tenant is current owner

flappy_mcwarbucks

Hows this for a wild idea: she pays what she can, and you cover the rest. On the condition that the house goes to you if *anything* should (god forbid) happen to her?

Thrugelmir

drjones69 wrote: »

Mortgage is high, and on account of her age cannot be extended in term (mortage is > £700), rental to be charge is 330-350 (still finalising depending on what I include in it). It's about a 7% yield, not outstanding but tbh I'm more interested in not making a loss and keeping my mum in her home.

So how much do you need to borrow to effect the purchase?

Yorkie1

flappy_mcwarbucks wrote: »

Hows this for a wild idea: she pays what she can, and you cover the rest. On the condition that the house goes to you if *anything* should (god forbid) happen to her?

It may not be a relevant consideration for OP and his mum, but that option would mean that if his mum went into care, the house will probably have to be sold to fund that care.

G_M

Yorkie1 wrote: »

It may not be a relevant consideration for OP and his mum, but that option would mean that if his mum went into care, the house will probably have to be sold to fund that care.

This would probobly be true even if OP buys the property. Either the capital mum received would invalidate a claim for LA funding, or the property transfer would be seen as 'deprivation of assets'.

Renting to mum is likely to contravene the terms of any BTL mortgage. So even keeping quiet about the intention and claiming to plan to use an agent, by subsequently renting to family there will be a breach of mortgage.

As well as CGT, there is also Income Tax.

And all the other legal requirements of a landlord.

I too would advocate leaving house in mum's name but helping out with her mortgage. A paper trail of payments can be built up and the Will adapted so that it gets re-paid in due course, even if there are other siblings inheriting equally.

puddy

cant OP be put on the mortgage with mother, it would mean a new mortgage application and probably a declaration of trust to specify which percentages are owned, plus an agreement on payments

geoffky

why not just pay mums mortgage? OR are there other children who will want some off the pot when she goes.

drjones69

Firstly thankyou for the many responses, my apologies in the delay of response. Hopefully I can cover a number of them in a single response.

puddy:
My original plan (or at least hope), was to do something similar - it has been my hope that RBS (her current mortgage provider) could be talked into transfering the mortgage into my name, and then extending the term. Alternatively the hope was that I could be added as a guarantor and the term extended - both these options would shot down. There is no point in (currently) taking out a join mortgage with mum, on account of this and other difficulties caused by this her credit rating is no longer good and I believe it would be harder to get a mortgage - although I do see your point, it would simply be a standard residential mortgage and thus would present fewer hassles.

geoffky:
I'm generous, but not that generous. I don't mind taking a chance to save her money, but a monthly commitment of an extra £400 for the next 6 years does not float my boat.

G_L:
I am aware of both the CGT and income tax demands during the rental period and should I dispose of the asset afterwards, considering the value of the property the CGT is not a problem (as a worked example if the property rose in value to 100K between now and disposal - a very optimistic view imho, CGT would come to just shy of 5.5K, acceptable on a 40K profit). The LA issue of care is (hopefully) not likely to be an issue for some years, I believe the LA only assess sales made within 5 years, although I will check this out. This whole issue is likely to be made moot though, as my mum and stepfather will inherit _his_ mother's house (fully paid off) at some point in the future (a slightly maccabre viewpoint, but I'm trying to be pragmatic).

puddy:
I'm afraid I'm a sucker for honesty ;-) If they asked who it was to be rented too, I'd have to tell them.

gms:
Yes I (now) understand the bank is viewing this as a 'sale and lease back' - you say 'they will not allow this' - is there any statutory or bank regulations that prevent it? If so, please can you direct me to them so I can assess if any bank stands a chance of not turning me away. I may well speak to a broker, and I shall certainly ensure this is made clear before they start any checking which will leave a credit footprint.

00ec25:
Please see response to G_M (earlier in this response).

I think that's all the response topics covered - kick me a (metaphorical) kick if you asked for clarification on something and I've not answered it.

Regards,
Ryan

drjones69

Thrugelmir wrote: »

So how much do you need to borrow to effect the purchase?

Sorry, perhaps should have given the figures earlier on,
Sale price : £58k
Deposit currently held : 17.5K (30%)

Regards,
Ryan