Buy to Let for Relative

SaveMe2

Hi,

I am trying to help my Mum move out of her current accommodation (lodging with other relatives) and one option I believe would be a potential is if I bought somewhere Buy to Let.

She is pension able age, with little income and no savings therefore would she be entitled to housing benefit even though she would be renting from me? (A tenancy agreement would be in place).

If it is a small flat I should be able to supply a 15% deposit but would the mortgage company expect me to charge the going rent rate or can I charge whatever I like as long as the mortgage payments are met?

Many Thanks...

SaveMe2

Anyone's comments would be most welcomed...

Thanks.

owner

Most Buy to Let mortgages do not allow you to rent to family members. As for the rent charged as long as the rental valuation stacks up in the lenders eyes then you can charge what you want, ie. a lot less than the valuation.

SaveMe2

owner wrote: »

Most Buy to Let mortgages do not allow you to rent to family members. As for the rent charged as long as the rental valuation stacks up in the lenders eyes then you can charge what you want, ie. a lot less than the valuation.

Thanks for your reply. That's interesting that you can't rent to relatives! I didn't realise that the mortgage company took an interest in who was actually renting your place. So presumably once you have rented it out you have to forward the rental agreement to the mortgage company as proof?... That effectively stops me doing it then!

Regards..

zzzLazyDaisy

You could also have problems with HB. It used to be a definite no no, but these days although it isn't impossible to get HB if you are renting from a relative, but some councils are more cooperative than others.

It would be a good idea to speak to the local council.

As far as BTL mortgages are concerned, they definitely don't all ban letting to relatives as I know someone who has dome this to rent to her daughter. So you'd be best phoning around and see what they say. Or try a broker.

SaveMe2

zzzLazyDaisy wrote: »

You could also have problems with HB. It used to be a definite no no, but these days although it isn't impossible to get HB if you are renting from a relative, but some councils are more cooperative than others.

It would be a good idea to speak to the local council.

As far as BTL mortgages are concerned, they definitely don't all ban letting to relatives as I know someone who has dome this to rent to her daughter. So you'd be best phoning around and see what they say. Or try a broker.

Thanks. I'll give the local housing benefit a call. Even if I can't do BTL need to have a rough figure of how much she could get in HB if with another private tenent. Seems ashame that just because it is family they wouldn't go for it (I could lower the rent etc to make it more affordable etc).

Regards

1sue23

i am buying a property to let to my daughter,have been told that she will get HB so long as I am not living in property wiht her ,is this the correct information.

SaveMe2

midas_pooch wrote: »

I'm an independent mortgage adviser and there is nothing wrong with what you are trying to do. If the property is in your name then how much you charge in rent is up to you. A 15% deposit is a good start, that way you'll get better rates. If you have another mortgage ie your main residence then all you would have to take into account is the new mortgage payment and capital gains tax on the buy to let if and when you decide to sell it. Rental income is also taxable and has to be declared, however you can offset the monthly mortgage interest and repairs, bills etc against any income, so the chances are you won't have an income tax liability. If you want to chat give me a call tomorrow. My name is Carla, 07738 570444 and I can go through some info with you over the phone if you like.

Thanks sound advice, I do have my own residential mortgage. I would not look to make any profit from the monthly rent (just enough to cover the mortgage repayments) so presumably no tax to pay? An alternative would maybe to put it in my wife's name (doesn't pay tax, home with kids). Can you do BLT on 100% interest only? and assume the equity in the house would pay back the loan in 25yrs time?

Regards

SaveMe2

1sue23 wrote: »

i am buying a property to let to my daughter,have been told that she will get HB so long as I am not living in property wiht her ,is this the correct information.

Thank you that is exactly the answer I was looking for on the HB question, although from earlier comments this sounds like it may depend on the particular local council. I definitely won't be living with her!

Poppycat

That sounds very much like your drumming for business on here which is against the rules. You also not allowed to give out personnel information like phone numbers please see rules below

PERSONAL DETAILS AND THE OFFERING OF ITEMS FOR SALE/TRADE/EXCHANGE/SWAP/GIFTS

Please refrain from requesting the exchange of personal details either on the forum, via PM or email; particularly for the purposes of selling/trading/exchanging/swapping or giving as gifts. This includes posting links to your ebay auctions, or other forms of advertising.

If someone appears to be selling items on the board it may be deleted by the board guides/forum team. The aim is to protect site users as however honourable the intention, your safety is paramount.

midas_pooch wrote: »

I'm an independent mortgage adviser and there is nothing wrong with what you are trying to do. If the property is in your name then how much you charge in rent is up to you. A 15% deposit is a good start, that way you'll get better rates. If you have another mortgage ie your main residence then all you would have to take into account is the new mortgage payment and capital gains tax on the buy to let if and when you decide to sell it. Rental income is also taxable and has to be declared, however you can offset the monthly mortgage interest and repairs, bills etc against any income, so the chances are you won't have an income tax liability. If you want to chat give me a call tomorrow. My name is Carla, 07738 5xxxxxx4 and I can go through some info with you over the phone if you like.

silvercar

Hi midas pooch and welcome to the forum. You need to read the sticky thread about mortgage advisors using these boards and change your signature accordingly.

midas_pooch wrote: »

Yep, you can do 100% interest only on a buy to let.

AFAIK there are only one or two lenders who will let you do a BTL with 100% mortgage. The rates may therefore be uncompetitive.

midas_pooch wrote: »

If the main residential mortgage is in your name, it may well be worth putting the buy to let in your wife's name to avoid CGT

Putting the BTL in your wifes name won't help reduce CGT. You only get CGT exemption on your principal private residence. A married couple can only have one PPR. You can't claim your wife lives in the let property, especially if its got a BTL mortgage and a tenant!

The general advice is to put it in joint names so you can use two CGT allowances (worth £9,200 each) when you sell.

midas_pooch wrote: »

but I'd have to check that with an IFA regarding the new tax rules

A tax accountant, specialising in this area, would be better than an IFA.