Tax return on a 2nd mortgage. How long will it take?

Dandy_Dan_Dan

Hi all

My fiance and I have just had an offer excepted on a flat. We've got two Agreements in principle for a mortgage.

For various different reasons, we haven't got lots of options when is comes to mortgages at the moment. HSBC have offered us one at 4.99 % which is nearly 1% less than the offer from Virgin.

The only problem is HSBC require to see tax returns on my fiance's other property (Virgin don't). She bought her parents house 3 years ago and rents it back to them. The amount of extra income she receives is minimal (£60 per month?) so she's never really thought about filling out a tax return until now.

Whilst she will go down this route, I'm worried that this might take quite a long time to sort out.

Has anyone had a similar experience and could give me some sort of possible time frame?

Thanks in advance

Dan

CLAPTON

what does 'extra income' mean?

does she have other income?

John_Pierpoint

HSBC is only interested in the cover available to their mortgage advance, should your ability to pay the interest and capital fail.

On the face of the simple figures, the home occupied by the parents dos not offer much security.

Are these figures anywhere market reality?

Please explain.

bartnwood

Dandy_Dan_Dan wrote: »

The only problem is HSBC require to see tax returns on my fiance's other property (Virgin don't). She bought her parents house 3 years ago and rents it back to them. The amount of extra income she receives is minimal (£60 per month?) so she's never really thought about filling out a tax return until now.

Whilst she will go down this route, I'm worried that this might take quite a long time to sort out.

Has anyone had a similar experience and could give me some sort of possible time frame?

Hi Dan,

If your Fiance is already registered for self assessment with HMRC and you have all necessary paperwork ready to complete the returns it could take 2-3 days but if she is not registered then I would estimate that it would take 7-10 days.

happycamel_2

Don't forget that the tax calc is rent received less mortgage interest (so not the capital repayment part if on a repayment mortgage) less allowable expenses less professional fees less insurance costs. This gives profit, which is taxable. If she is making a loss it should be reported and rolled up against profit in future years.

Self assessment can be done very quickly online, the biggest delay is the week or so it takes them to generate and send a Government Gateway (login) ID.

holly_hobby

A big issue I see apart from the non-delaration of income for tax purposes, is the fact (if the property is mortgaged) that your partner has purchased a property and rented it straight back to the Vendor (albeit its her parents) - this is a no-non for lenders, so I can only presume the lender involved wasn't aware, and remains unaware, that this is the case (this is the case even for BTL mges, although rental to a family member, not resident pre pch, is permitted on a regulated BTL arrangement) - as this affects the possessionary rights of the lender.

Moving onto the declaration of rental income, this has to be done, even if there is no profit generated or even a loss. Depending upon how long she has been in receipt of rent, HMRC may not be v happy bunny's at all, and she may well find herself fined as part of the excercise

HSBC want to see HMRC tax returns, to ensure that the rental income is being declared (which is why they haven't just asked for a copy of an AST), and also for examination if they use the existing mge and income as part of their affordability matrix, required to verify both the amount and frequency of payment.

Are HSBC aware that she has never been, nor is currently registered and declaring income on the property ? As if they find out that she is only just registering for SA with HMRC, which is apparently and solely in connection with their criteria for production of tax rtns, they may still choose to decline due to their (justified or not ) perception of previous tax evasion in the matter. And whilst she will of course still have to register for annual SA, it may save you time by getting the handle on their likely approach on the situation, and if necessary going with the alternative AIP at this point to save time, as it is well known that HSBC are notoriously straight laced and v picky when it comes to their mge book ....)

Hope this helps

Holly