Buy to let or residential Buy to let?

billytheflish

We would like to buy a property in order for our daughter and partner to live in and pay rent to us. We have a small amount of mortgage left on our own property and would like advice on how best to fund the house intended for our daughter.

We are able to fund the deposit on the property but unsure as to which mortgage to go for. Our current lender suggested adding to our current mortgage but was quoting interest of 6.29 over a ten year period! I would be grateful of other peoples advice and experience in this area......Thank you

holly_hobby

Hi there,

You will not be able to purchase the property with a buy to let mortgage due to the fact that the property will be more than 40% occupied by an associated family member (daughter). The reason for this is that BTL funding is unregulated (as it is in essence semi commerical finance), however once let to a family member, it becomes regulated lending - and I don't know of any regulated BTL providers in the market.

The best way to do this would be to raise the finance on your own property, and pch the 2nd home for daughter with the released funds.

Now, you could do this with your own lender, but seeing as you aren't too keen on the offered rate, you could remortgage to an alternative provider (subject to you wishing you absorb any ERPs on your current mge).

You can also pch the property in Ds name - meaning that when it is sold you won't be exposed to any CGT liabiity - neither will you D as long as it is her primary res at point of sale, if not, there may not be any liability due to reliefs and allowances.

If you wanted to hold it jointly with D and your partner- then be warned that when sold, and gain will be split 3 ways for CGT - D will have no liability, but you and hubby will suffer expoxsure on any gain.

If she is at uni, then there is another way of doing this I can discuss.

Any private rental agreement & income should be declared for income tax purposes in your annual tax return.

Hope this helps

Holly

CLAPTON

a normal residential mortgage on your own house would probably be the cheapest but 6.29% is not cheap

maybe indicate the property value and the required mortgage would be useful

your age and income might be significant too

bigmouse

Does anyone know how or if we could use a buy to let mortgage to fund a house purchase to live in - or could by spouse buy the house with a BTL and then rent it to me and live their too?

holly_hobby

Well that would be a fraudulent mortgage application .... so you may want to re-think that !

H

greenface

#2 by holly hobby is brilliant advice with great options . That would have cost you time and money for information like that .. use it .

holly_hobby

Thanks GF :A:A

The advice re CGT remains unchanged ... but I have been told that Princapility BS will consider a family let, however as its essentially regulated finance under FSA regs, income will still need to be sufficient to cover the mge.

Hope this helps

Holly x

Dave_Ham

BM will also let you rent to a family member, it just becomes a regulated mortgage and the kfi looks slightly different...

Good luck

kidmugsy

holly_hobby wrote: »

Hi there,

The best way to do this would be to raise the finance on your own property, and pch the 2nd home for daughter with the released funds ...
You can also pch the property in Ds name - meaning that ...

Meaning that your money is gone and your daughter owns the house. Would you really want that?

holly_hobby

kidmugsy wrote: »

Meaning that your money is gone and your daughter owns the house. Would you really want that?

Lets not mis-represent the context of that statement - which was in relation to mitigation of CGT.

I also discussed owning the property as a party of 3, or just the couple themselves - and how that would affect CGT - but of course I am coming from giving tax guidance.

A rmg was suggested if a regulated BTL arrangement could not be sourced for the D's purpose, (where by a 20% dep is reqd in any event).

Your comments appear to be isolated to the parents level of trust with the D, and retaining full ownership of the asset themselves for capital protection .. I think ?! Where as mine were in respect of solutions to the issues, as the trust issues were a little obvious to comment on.

Nevertheless, its of course worth voicing.

Thanks

Holly