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Unusual situation
TheOneTrueVlad
Posts: 3 Newbie
All figures are rounded for simplicity.
The background:
My partner owns a house and a shop.
I earn £25k gross.
She earns less than £10k net from the business.
It is, however, growing rapidly and this income is set to be much higher.
Outgoings for the shop are minimal, no rates, and very low bills.
The shop is owned outright, freehold - valued between 80k and100k.
I don't know the value of the house but it is Grade II listed Georgian in a prime location, currently 2 bed, 2 reception, 2 bathroom and a nice courtyard garden, no parking. Will be converting one bathroom to a bedroom and on-suite later. Probably in the £150 to £200k range once renovations are completed.
The house is mortgaged at 0.5% over base, fixed.
It is an offset mortgage and every penny that can be squeezed out has been.
This comes to £60k which is invested at 4.5%.
At the end of the mortgage term the only amount owed will be the loan part which is available in savings.
So right now we are sitting very pretty with this.
The scenario:
The leasehold for the 2 bed flat above the shop is available and has been valued at £100k.
My partner owns the freehold already with the shop.
The flat has not been put on the market yet, so we can save on agent fees and knock him down a bit. He paid £115 in 2005.
The tenants in the 1 bed flat in the building are happy with the address but want to upgrade to a 2 bed flat. So we have potential known good tenants lined up already.
The building is in very good condition and we can do most work ourselves should it arise.
Rent is likely to be unfurnished, no bills around the £550pcm mark.
I would be a first time buyer if I went in alone.
A major point is we are not married and are very independent with our finances. So any sharing of costs would have to be fair in the sharing of assets and protected from each other. She would loan me the money as long as there was a solid legal basis for recovering it from me if everything went bad between us (not likely, but you never know). I currently pay her rent, which covers bills and the mortgage costs. This means she does not have to have a lodger and I am contributing a fair share. If we make it to the end of the mortgage term together we'll pool everything without claiming a stake each.
Our thinking:
My partner was initially suggesting we went halves on the property. She could then lend me £10k for a deposit on my half . If she goes in for a 3rd property what are the tax implications? Can she lend me the money and I get the flat completely in my name? How is that possible and safe for her investment? If I borrow from her, I guess I have to declare that when getting the mortgage, especially if secured against the property.
Then again does this seem completely mad with the deal we have currently, should we not get the flat at all?
If we run into hard times, we can move into the flat and rent the house or take a lodger at the house.
My company has grown from 6 to 12 staff during the recession and is set to keep growing. The boss is going to put me through more training so my job looks more secure than many. So we are pretty confident in taking on any more responsibilities.
The questions are:
Would you get the flat or stick with our current situation?
What is the best way for us to get the flat with our available contributions and circumstances?
What happens if you are a first time buyer wanting a buy to let mortgage?
Thanks for your input, Vlad and Annabelle.
The background:
My partner owns a house and a shop.
I earn £25k gross.
She earns less than £10k net from the business.
It is, however, growing rapidly and this income is set to be much higher.
Outgoings for the shop are minimal, no rates, and very low bills.
The shop is owned outright, freehold - valued between 80k and100k.
I don't know the value of the house but it is Grade II listed Georgian in a prime location, currently 2 bed, 2 reception, 2 bathroom and a nice courtyard garden, no parking. Will be converting one bathroom to a bedroom and on-suite later. Probably in the £150 to £200k range once renovations are completed.
The house is mortgaged at 0.5% over base, fixed.
It is an offset mortgage and every penny that can be squeezed out has been.
This comes to £60k which is invested at 4.5%.
At the end of the mortgage term the only amount owed will be the loan part which is available in savings.
So right now we are sitting very pretty with this.
The scenario:
The leasehold for the 2 bed flat above the shop is available and has been valued at £100k.
My partner owns the freehold already with the shop.
The flat has not been put on the market yet, so we can save on agent fees and knock him down a bit. He paid £115 in 2005.
The tenants in the 1 bed flat in the building are happy with the address but want to upgrade to a 2 bed flat. So we have potential known good tenants lined up already.
The building is in very good condition and we can do most work ourselves should it arise.
Rent is likely to be unfurnished, no bills around the £550pcm mark.
I would be a first time buyer if I went in alone.
A major point is we are not married and are very independent with our finances. So any sharing of costs would have to be fair in the sharing of assets and protected from each other. She would loan me the money as long as there was a solid legal basis for recovering it from me if everything went bad between us (not likely, but you never know). I currently pay her rent, which covers bills and the mortgage costs. This means she does not have to have a lodger and I am contributing a fair share. If we make it to the end of the mortgage term together we'll pool everything without claiming a stake each.
Our thinking:
My partner was initially suggesting we went halves on the property. She could then lend me £10k for a deposit on my half . If she goes in for a 3rd property what are the tax implications? Can she lend me the money and I get the flat completely in my name? How is that possible and safe for her investment? If I borrow from her, I guess I have to declare that when getting the mortgage, especially if secured against the property.
Then again does this seem completely mad with the deal we have currently, should we not get the flat at all?
If we run into hard times, we can move into the flat and rent the house or take a lodger at the house.
My company has grown from 6 to 12 staff during the recession and is set to keep growing. The boss is going to put me through more training so my job looks more secure than many. So we are pretty confident in taking on any more responsibilities.
The questions are:
Would you get the flat or stick with our current situation?
What is the best way for us to get the flat with our available contributions and circumstances?
What happens if you are a first time buyer wanting a buy to let mortgage?
Thanks for your input, Vlad and Annabelle.
0
Comments
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Can't help with your questions but puzzled about how you have a commercial premises and not pay business rates on it.This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com0
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You are a FTB and want to get a BTL mortgage !
Now most BTL lenders want you to own your own home first ( problem!! 1 )
You are using a gifited deposit from your OH ( problem !! 2 )
You are buying a flat above a shop with what a 20% deposit ( problem !! 3) most BTL lenders want 25/30% deposit.
Time for you and your OH to see a Good " whole of market mortgage broker" who deals in the BTL market as many BTL lenders only deal with brokers0 -
I don't think buying the flat is a good idea.
Currently you and your partner have kept your finances separate, which suits you both and you want to continue until you are more sure of your future together (fair enough BTW). Neither of you are able to buy the flat individually, you because you don't have a deposit and your partner because she doesn't have a high enough income. So the only option is to buy it jointly as a buy to let investment. This contradicts your wish to keep your finance separate.
+ the mortgage problems highlighted by dimbo above0 -
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Issues I see are the flat being above commercial prems (albeit your partners prems - surrouding area and amenities/comm prems will influence its sucess at survey).
Compounded by you being a FTB, which isn't impossible, but you are lookig at a min of 25% deposit, rental income 125% of mge, 25k min income (is common with most BTL providers) - so you can see the issues starting to build.
The gifted deposit may not be an issue, if it is a gift (ie made without reservation), otherwise its a no-goer.
H0 -
Maybe we'll go in together to make things easier. We'll find a btl broker and see what floats to the surface.
Why the problem at survey? There are a lot of flats over the shops here, so how does that work if they all fail at survey?Issues I see are the flat being above commercial prems (albeit your partners prems - surrouding area and amenities/comm prems will influence its sucess at survey0 -
TheOneTrueVlad wrote: »Maybe we'll go in together to make things easier. We'll find a btl broker and see what floats to the surface.
Why the problem at survey? There are a lot of flats over the shops here, so how does that work if they all fail at survey?
Because a flat over commercial prems can be harder to sell due to desirability (although it doesn't always have a negative effect).
In respect of a resi/BTL mge - the surveyor (whom is acting on behalf ofhte lender) will be looking for what kind of businesses are in close proximity - the likes of those with late night traffic (restuarants, take aways, licences prems such as pubs/wine bars, etc) will have have a negative effect on survey (even a refusal to lend) due to the potential noise etc. This is because such points will be perceived as making it more difficult for the lender to dispose of the property in a relatively quick time frame following any possession order.
The other flats, may well be under sep title deeds and on a resi mortgage, which is a positive for your own appliction OR may be part n part (i.e - same title deed) of the commercial prems itself - where on a commerical mge, the above considerations aren't largely relevant.
The fact that the flat is currently mortgaged is a further positive, although acceptable property criteria can and does change (ie even the current lender may not accept a new mge application on the property)
Your broker will explain ....
Hope this helps
Holly0
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