Buying Flat For Student

student's_mum_2

Hello helpful people! Would really appreciate advice. The situation is that my husband and I should like to buy a flat for our daughter at uni (in Scotland). We are (fortunately) mortgage free, with our property worth around £135000 At the moment properties are going approximately up to 35% over the asking price! So, if we were to bid for a property of offers over £90K we would be looking at around £120K, but the mortgage loan would be up to the surveyed value of the property. What would be the easiest and most cost effective way of raising the capital? Thank you

herbiesjp

Probably the quickest and easiest way would be to re-mortgage against your unencumbered property - assuming your income was sufficient

HOwever you would then have a large mortgage on your own property as opposed to the second property

You would need to weigh up the pros and cons of this route as opposed to getting a mortgage on the new property on a second property basis

student's_mum_2

Many thanks for your quick reply. What do you think to a 90% mortgage on the new property and the rest raised from a secured loan on the main property?

malko

let her live in halls and stop hiking up the price of scottish property

student's_mum_2

LOL X:rotfl:

dwight-van-man

Make sure that the flats you're looking at are not going for 35% over valuation. Depending on what city you're looking in, offers over 90k could quite realistically mean a value of 120k and your bid needing to be a %age over that.... My sister just sold a flat in Edinburgh - offers over 135K, valued at 170k, sale price was 198k. If you post what town you're buying in, someone will be more specific.....

jennifernil

For tax purposes you should buy the flat in your daughter's name, have the mortgage in her name and you act as guarantors, otherwise you will get hit with CGT. The mortgage will be calculated on your income, and of course the value of the property you are buying.

If you have no cash deposit then you could raise a small mortgage on your own property to cover any shortfall. But be aware some lenders will not give small mortgages. As a FTB your daughter could well qualify for a good deal on a mortgage. Possibly even a 100% deal.

We have financed a flat for our daughter this way (in Glasgow). If you intend to get in other students to help with costs make sure the lender is OK with this. We went with Halifax, they were OK. Also Nationwide, but there are others.

Draw up a proper agreement about the ownership of the flat/repaying your investment, and get your daughter to make a will.

As an owner/occupier your daughter can have 2 "lodgers" without needing HMO, if you were owners you would need HMO for 3 people and also need to declare rental income for tax. Your daughter can receive £440 per month (I think) without paying tax. Make sure she uses proper Short Assured Tenancy agreements for her tenants. And that these include agreements to pay bills too.

You will need to use furnishings which conform with the fire regulations, and get a gas certificate if there are any gas appliances. You should insure the furniture you are providing, Endsleigh are good for student places, the students should insure their own stuff. Your daughter's stuff may well already be covered under your own house contents insurance.

Most Unis have accommodation offices where you can advertise the property, but they do insist on certain minimum standards for furnishings and security.

Make sure they all get Council Tax exemption forms from the Uni.

student's_mum_2

Thank you very much Jennifer, that is really helpful.

student's_mum_2

Thanks DVM! It's Aberdeen that we're looking in.

dwight-van-man

Lol - you arn't going to thank me - I just moved from Edinburgh to Aberdeen and although the market has calmed down here a bit in the last month, you are more likely to be looking at 25% over valuation as opposed to purchase price. We lost out on two flats that went for double the offers over price, and the house we eventually managed to buy, we only got because we offerd on it sight unseen the day it came on the market, even then we still paid 10% over value and this was 33% over offers over price. If you want, I can recommend the solicitor we used who was fantastic - he'll be better placed than me to give you guidelines over prices...