re morgage?

julieanne13

we own our home out right. we have been offered a bungalow very cheap its not a wreck we looked after a guy for years and now his dad said we could have his property cheap. we have three off spring so we would like to keep our home and re morgage to buy the bungelow - rent out our home to pay the morgage. worried to death over this - it seems like a wonderful oppertunity but worried. our property it about 170k and the bungerlow is 130k
can i please ask for advice :-)

Let_Us_See

The obvious question to ask is does the father have the legal right to transer/sell the property at reduced value?

kingstreet

If he does have the right to sell the property and at the price mentioned, you would be looking for a buy to let (or let to buy) mortgage on your current home.

Such products are normally limited to 75% of the value of the property and will require a rental income of 125% of the monthly mortgage interest, based on a rate of 6%.

£170k value means a maximum mortgage of £127,500. This would require a rent of £800 per month.

The rental income, after essential expenses, is taxable, so you'll need to register with HMRC.

In addition to the purchase price, you'll need to cover the remortgage and buying costs, which will add up to about £3k, plus the shortfall, leaving you needing to put in about £6k of your own.

You need to carefully study the legal implications and requirements of becoming a landlord before proceeding further.

julieanne13

his dad is his only relative he is doing probate - i guess he can sell it for what ever he likes? as for the renting this is the really scary bit. i have been in touch with the council and they are willing to rent it for 650 a month. we could afford the shortfall. the tax man is more scary than renting. just dont know what to do

kingstreet

If the property will not justify that rent level the lender will not allow that size mortgage. The lender's surveyor will set the appropriate level when he inspects the property for valuation purposes. It's not a question of you making up the difference.

Why the council? Why not a letting agent? See what they think it might attract, rent-wise.

If its rental value is £650 per month, the maximum mortgage will be £104,000.

julieanne13

private rental is 750 -800 we just thought if we went with the council it would be safer. i think this might just be far to scary for me

kingstreet

You're going to have to commit to an application and spend money on fees to find out for definite.

Why not sell your home and pay cash. You have a few quid left over then, too.

julieanne13

my kids all work on agency the chance of them owning a home is next too 0 we thought if we couple buy 2 houses it would give them a very large deposit. also 10 years or so down the line they might be one of the rare lucky ones with w perminent job. i guess a working class person is dream to big for her shoes lol