Buy to Let for my parents? - novice needs advice!

Vickipip

I am thinking about helping my parents buy a property as they need more appropriate accommodation due to illness and they are getting no where with their local council and social housing.... I have seen a bungalow for £120,000. They have £40,000 for a deposit. I don't want them taking a mortgage - don't even know if they'd get one! But I am prepared to take an £80,000 mortgage to cover the shortfall and for them to rent this part of the property off me. I have heard that you can't get buy to let mortgages for family though. Does anyone have any advice?

I already have my own property with 4 yrs left on the mortgage.

fishpond

I can't imagine why a lender would want to know who your 1st tenants were.

holly_hobby

You will need a regulated buy to let mortgage (assessed under 2nd property criteria ie earnings not rental income).

BUT, the fact that parents are investing 40k into the pch via their deposit, and will also reside there, will rule out all mortgage lenders due to the beneficial interest the 40k gives parents, and the resulting possessionary issues it will cause the lender (on seeking any repossession order).

So, either you all buy together on a residential mge (ie all 3 of you on the mge app) - with you as main applicant and the application made to a lender whom doesn't have the upper age restriction of 75 yrs (of which there are a couple), OR you fund the entire deposit yourself and source a regulated buy to let lender.

If you go BTL route, don't forget you will need to declare net rental income even if there is no resulting exposure to income tax.

You'll be exposed to CGT on sale of the property, less applicable reliefs, allowances and exemptions.

Don't forget to ensure that you have life assurance (and will) in place to at least cover any mge debt on parents home, as upon you pre-deceasing them they may well find themselves homeless if the property needs to be sold to redeem the OS mge on your prior death.

A whole of market broker will help with sourcing appropriate lenders.

Hope this helps

Holly

Vickipip

Thanks Holly,

My parents are 67 and 69 yrs old. Will this help or hinder a mortgage with all of us as applicants?

If my parents 'gift' us the 40k so that the deposit would therefore come from us, would this reduce any problems for a BTL mortgage?

holly_hobby

Your parents can not be party to a buy to let mortgage on a property where they will live themselves- end of.

If you apply together for a residential mge (where their injection of the 40k won't cause issues), the max term (with most resi lenders), will be capped at the eldest parent reaching 75 yrs of age. Although there is a lender whom doesn't have an upper age limit, although of course affordability has to be proven over the requested term (which will based on your income and their retirement income).

Hope this helps

Holly x