Help with btl please.

holly_hobby

A residential mortgage will have a lower interest rate and costs, than securing a BTL mortgage, which is actually semi-commercial finance, and accordingly will have a higher payrate and fees.

So a residential mge on your own home (subject to status inc benefit income), would naturally be the most competitive rate wise - but you are using the equity in your property, for a property that (if put in Ds name), you have no legal ownership over, inc the rent if it goes straight into Ds account ..... so lots of trust if the rental income is to pay the mge you are to effect.

The other issues I can see are that, as (with your current plan) you will not be on the mge deeds or in reciept of rental income due to your wish to retain benefits (ie you will not be a beneficial owner), then you will not have the benefit of mge interest being a permitted deduction off recieved rental income for tax purposes, and also you are not recognised as a legal owner of the property.

This may not be an issue for you right now (notwithstanding trust - and Ds income as a student currently being below her annual Personal Allowance (PA) ), BUT may be an issue to consider when she commences work and her earned income exceeds her PA or when she is 20 (even if still in college) and the CTC automatically ceases if still in payment .

Of course you may still be in reciept of working tax credit even when your CTC entitlement ceases, so you will need to consider which will be financially benefical to you. To leave the rent with your D, and continue paying higher income tax (when applicable) under her schedule, or if you will be financially better off by declaring the rent, and offsetting your mge interest to get the net rent for income tax reduced to mitigate due income tax under your own submission.

Obviously if you are the receipient (direct or in direct via Ds bank account) of the rental income, legally you should be delcaring this to the DWP, to be taken account of re any means tested benefits you receive. Please don't take offence by my saying this (as I have also tried to assist despite this), but if having it in Ds name with rental ncome filtered via her bank account, is for the direct purpose of its concealment from DWP, to support your on gonig qualification for means tested benefits, such action can really neither be supported nor condoned on a forum .....

Putting that to 1 side, you also need to consider if you go ahead, that if the property will be solely in Ds name - she is the legal owner, so trust is a requirement too - unless you are actually buying it for your Daugher as a outright gift (inc any derived income), then of course she can sell it, secure a loan on it, etc, etc, without any cause of concern to you ...... so you can see where trust needs to be considered.

Goes without saying, being a landlord isn't a piece of cake, aside from which if would be wise to effect landlords b&c insurance, a tenancy agreement (AST) is vital, together with a contingency fund for essential repairs and periods of loss of rent. With an annual self assessment return to HMRC from those in receipt of rental income declaration (which is net of deductions) for HMRC tax calc purposes.


I've tried to cover areas of importance, so sorry if lengthy .... but lots to consider with your circs.

Hope this helps

Holly

kingstreet

BTL lenders typically have a minimum valuation well above £40k/£50k.

kingstreet

... and following my 12.35 sweeping statement, I can now confirm that BM Solutions and The Mortgage Works minima are £40k and £50k respectively.

What do I know, eh...?

I'm tired, that's my excuse.

hateshousework

Thanks Holly, there is a lot to consider there. Trust and uni fees aren't an issue and I have been advised that BM solutions will to a btl for £40k, I have asked DWP if the property was in my daughters name and the rent was paid to her and she paid the mortgage if it would alter my tax credits and to my suprise was told no. I get that from a moral point of view it stinks but I am just trying to figure out all the options atm.

hateshousework

You are forgiven kingstreet, it's late

hateshousework

dimbo61 wrote: »

You have an interest only mortgage at the moment but if you borrowed more I bet the skipton would want you to change to a repayment mortgage.
Good Luck

Actually they have said the interest only would continue but have to be extended to the life of the further advance (do they even call it that these days) So I guess those extra interest payments have to be included in the sum

holly_hobby

hateshousework wrote: »

I have asked DWP if the property was in my daughters name and the rent was paid to her and she paid the mortgage if it would alter my tax credits and to my suprise was told no. .

Could that be because they assume your daughter will also retain the income, and are under the impression that you won't actually receive any of it (thereby MT benefits unaffected) ?

Just be super sure ..... as you don't want to fall foul because the real situation was "lost in translation" by DWP.

Hope this helps

Holly

holly_hobby

kingstreet wrote: »

... and following my 12.35 sweeping statement, I can now confirm that BM Solutions and The Mortgage Works minima are £40k and £50k respectively.

What do I know, eh...?

I'm tired, that's my excuse.

You clever boy ....

H x

hateshousework

I think you are right Holly, we talked about her retaining any left over income and giving it back to me in 2 years for my 50th birthday pressie

NowI am even more confused though because I realised I will have to continue my £217pm interest payments onmy own mortgage for another 15 years if we go down that route so it looks as though a new btl mortgage would be better.

Wish it was Monday already so I could talk to a broker

holly_hobby

hateshousework wrote: »

I think you are right Holly, we talked about her retaining any left over income and giving it back to me in 2 years for my 50th birthday pressie

NowI am even more confused though because I realised I will have to continue my £217pm interest payments onmy own mortgage for another 15 years if we go down that route so it looks as though a new btl mortgage would be better.

Wish it was Monday already so I could talk to a broker

Ah I see, when D will be 20, and as gifts don't affect eligibility for tax credits .... clever way to work the system.

There are however 1 or 2 fly in the oinment here ....

1

Unless YOU obtain a BTL mortgage (which rather scuppers your wrangles to avoid losing your tax credits), your D will not meet standard industry criteria, as she is a First Time Buyer and has no earned income.

She could go on the mge (subject to min age requirements), with the purchase effected as joint tenants basis, which means for HMRC the rental income is equally split.

2.

If this isn't attractive/possible, that brings us to another issue, in that you say that your D will retain the net rental income, and return it to you as a "gift" in 2 yrs.

Net being after I assume she has already forwarded to you the amount of rental income reqd to pay the increased mge on your own home (which funded the purchase).

If so, I would hazzard a guess that this will be classed by DWP and HMRC as income (from a property) - which does from part of the DWP eligibility tax credit assessment of you. As just because you won't be able to use the monies for pleasure, and it will be going to directly pay the mge commitment, doesn't equate to it not being income ..... but this does not necessarily mean that the amount of tax credits will change or reduce (depending on DWP calcs).

As stated above and in prev posts residential FA mge (subject to status) or BTL in your own name, but not D in her sole name (jnt mortgagor subject to age) .... which may rather scupper your DWP and tax credit plans afoot I'm afraid.

Hope this helps

H