Mortgage on gifted house

happydylbob

We are in the process having a house gifted to me and my husband from my nan. We would like to do some improvements to the property but will need a mortgage to do so. I have heard that your name has to be on the title deeds at least 6 months before you can take out a mortgage. Does anyone know if this is true? We also already have a buy to let mortgage on another property. Any help or advice would be greatly appreciated.

holly_hobby

I am not sure if the 6 mth rule applies to non-mortgage/inherited properties - I don't think it does but an active adviser will be able to give you more guidance on that.

Obv you can't process any remortgage on the inherited prop unitl your names are on the deeds and all legal formalities have been completed.

Ignoring the 6 mth issue, if you proceed to remortgage the inherited property, you won't qualify for the fee free legal deals, as the property isn't currently mortgaged. (fee free deals usually involve the v basis, i.e a change in registration at Land Reg & a basic survey). You may have an issue with the property being unencumbered (mge free) - a whole of market mge adviser will be able to advise in one visit which lenders are open to unencumbered remortgages and who have the best deals to suit your requirements (check if they work on a fee basis).

You are classed as a remortgage, as you will at the time of application already own the property.

Alternatively, if the 6 mth period is an issue even on inherited properties, you could in the meantime, look to re-finance your current BTL property (subject to sufficient equity) to raise the funds reqd, rental income shall need to be 125% of mge payments (use 6% as a ballpark figure for initial calcs).

You could apply to your current lender for a further advance, or seek a new BTL lender completely - there are various fee free BTL remortgage deals about at the moment.

If you plan to sell your inherited property post refurb, without having lived in it or it being your main residence at point of sale, don't forget you will be liable to CGT (less applicable allowances to the situation) as you shall be when/if you dispose of your current BTL property.

Hope this helps

Holly

happydylbob

Thanks Holly that is useful to know.
We do have enough equity approx £50000 in the BTL property, however we were told we could not raise the money through this property to do improvements on the inherited property, but now you have said that it may be worth looking into.

We have looked into all of the CTG and plan to live in the inherited property and keep the BTL so should not be affected.

holly_hobby

As far as I know, the statement re you can't release equity on the BTL, to fund your Inherited Prop, is probably in relation to the fact that you won't be able to claim tax relief on the BTL mge interest, directly relating to the amount of equity released for the refurb of your residential property.

If I have that wrong, sure someone will happily correct me !!


H

Thrugelmir

holly_hobby wrote: »

As far as I know, the statement re you can't release equity on the BTL, to fund your Inherited Prop, is probably in relation to the fact that you won't be able to claim tax relief on the BTL mge interest, directly relating to the amount of equity released for the refurb of your residential property.

If I have that wrong, sure someone will happily correct me !!


H

The lender will have no interest in the personal tax affairs of the applicant.

More likely reason is that the lender is is unwilling to lend further based on current lending criteria.

kingstreet

On paging the oracle (or Halifax criteria) you get the following;-

A sub-sale occurs when a property is bought and then sold on within six months, i.e. the borrower is buying the property from someone who has themselves bought the property less than six months before. The date of registration at the Land Registry is how we determine the length of ownership.

This means that the current vendor must have owned the property for at least six months before we can accept an application to purchase that property.

The following cases are exceptions where it is acceptable for the property to be sold on within six months of acquisition by the seller.

Where sales are by:

A personal representative of the registered proprietor; or
An institutional mortgagee exercising its power of sale; or
A receiver, trustee-in-bankruptcy or liquidator; or
A developer or builder selling a property acquired under a part-exchange scheme.

however, the remortgage section seems to close the door on the OP's plan;-

You must ensure your client have owned their property for at least six months before submitting a re-mortgage application.

I would suggest a conversation with an independent or whole market broker to establish if anyone will lend.

getmore4less

what about this option

Buy the house with a mortgage and then have the cash gifted.

holly_hobby

Thrugelmir wrote: »

The lender will have no interest in the personal tax affairs of the applicant.

More likely reason is that the lender is is unwilling to lend further based on current lending criteria.

I wasn't actually referring to the lender having told the OP they couldn't do a FA in respect of tax reasons.

The OP hasn't actually stated who told her she would be prevented from doing a FA on a BTL for a res refurb, just that she had been told - I assumed it wasn't the lender who had told her this, just as you assumed it was.

Reffering to the important point I did make, re the OP being poss unable to offset the BTL interest on the extra borrowed against taxable rental income - I think that only £ forming part of the BTL mge, which was has been used in the purchase or improvement of the BTL property itself, may be offset under HMRC. (i.e as is the case where you raise £ on your res property to support the pch of a BTL. If a clear audit trail in place, the element of £ rasied on the res for the BTL may be duly offset against the taxable rental income). OP please get checked what is allowable for your next relevant HMRC submission .

In view of the v useful info to the OP that Kings has kindly provided, re lenders requiring a 6 mth ownership period, regardless of the source of ownership. I think the suggested BTL remge route is the only option the OP may have if they wish to peform the refurbs within the first 6 mths of ownership (and without seeking other personal loan avenues).

OP - whilst I am currently out of mge placement so don't have mge sourcing software, or recent lender criteria - Kings IS an active adviser and does have current market knowledge/lender criteria and also industry experience - and if he feels there is currently little option on the 6 mth ruling - then its probably correct throughout the market.

As suggested, speak to a WOM broker (check fees) to just bottom out the 6 mth issue, and seek some advice on raising £ on your BTL to assist with the refurb.

Hope this helps

H

getmore4less

Money taken out of a BTL business is offsetable upto the value of the house when first let.


If the rate was favourabe this would be the best option.

holly_hobby

getmore4less wrote: »

Money taken out of a BTL business is offsetable upto the value of the house when first let.


If the rate was favourabe this would be the best option.

Is this even if the monies are not re-invested back into the business i.e not used in connection with any aspect of the BTL ?

H

antrobus

holly_hobby wrote: »

Is this even if the monies are not re-invested back into the business i.e not used in connection with any aspect of the BTL ?

H

Yes. See BIM 45700 http://www.hmrc.gov.uk/manuals/bimmanual/bim45700.htm