Help please - is there a solution?

Iamafreeman

Hi everyone, can anyone give me a ray of hope with what I'm trying to acheive, please. I'll try to keep it brief.

I am trying to get a buy to let mortgage for a house which I will then rent to my mother. The price of the house is £190k. I can put down whatever deposit is required. Rentable value £750/mnth.

I have an interest only mortgage on my house with my wife for £173k. There is no equity in this property. We are selling this house, but letting it out (if allowed) is an option.

I have a half share on a house with my mother (this share can be adjusted if necessary). There is no mortgage on this house, which will be my new family home. It's value is £210k.

Now here's the rub. I have no income. I've been on incapacity benifit for 4 years (currently apealing WCA, thanks:( ). My wife (a teacher) is on a years sabbatical to look after our young family, and so not earning. My mother is retired.

The rent from the new property would cover the mortgage, but how can I get a mortgage? Does anyone have any suggestions, please? I'm desperate to make this happen.
Many thanks

kingstreet

A regulated buy to let with no personal income. Blimey - that's one you are going to have to put in front of a broker.

hamster2013

house price = £190k
you say rent of the house will cover mortgage - that is not enough for lenders giving buy to let - they require in most cases 150% if not more of the mortgage to be covered by rent, in addition of a minimum 30% deposit.

so lets work on a 150% assumption - with a rent of £750 - a mortgage should be MAXIMUM monthly payment of around £500
so that means, if you get a 20y mortgage BTL - at an interest rate of 5.5% - you can borrow a maximum of about £73k.
if you manage to find a lender (depending on your age) who would lend over 25years.... that can go up to around £81,5k.

a property worth £190k will incur a 1% stamp duty - around £2k various legal and bank fee's and lets say about £3k before you can get it into a livable state for your mother to move in.... and would include the moving and stuff.
so basically, when you say you can put any deposit required.... that is meaning that you have about
deposit 190-81.5 = £108.5k / 190-73 = £117k
+ stamp duty = £1900
+ other various = £5000
between £115.4k and £123.9k cash in hand.
this can not be borrowed monies or remortgaged of your main residence - as that will have a big hit on your affordability considering your current situation.... furthermore, considering your current sitaution - it would be virtually impssible to get a remortgage anyways.

so if you have that sort of cash - I would think that going through a broker will make life easier as you will not have to run around - or just walk into a bank branch and discuss.

if you do not have that kind of monies.... i would reconsider to something else.

Furthermore - remember, if you want to let your current residence, you will need consent from your bank - who are not obliged to give you that - even less likely at the same interst rate... so expect those payments to go up too.

kingstreet

How is your mother going to pay the rent?

Local Housing Allowance?

Read up on "contrived tenancy."

ACG

There might be 1 or 2 lenders who will look at this but you definitely need to see a broker as the options for this are so narrow even a broker will earn there money on this.

Dave_Ham

Ok, typically I look at tricky cases on this forum and can see a solution almost immediately.

Not so much here, but given the information I would suggest there may be a solution

When you say open-ended deposit, how much were you anticipating putting down as the deposit on the new place?

Assume everyone involved has acceptable credit files, definitely find yourself a good broker and expect to pay a fee accordingly.

Good luck

maninthestreet

You already own a property with your wife, which you are going to sell or rent out, and you also own another property with your mother, and now want to buy another property (on your own?) to rent to your mother? Why are you going to sell / rent out the property you currently live in? Surely it wouild make more sense to sell the property you own jointly with your mother, releasing the equity in that property?

Iamafreeman

Many thanks for the replies. Just to settle curious minds - the house I co-own with my mother is a recent purchase which coincided with the sale of her own house that was done to allow her to relocate to my part of the world. The co-owned house was ideal for me and we didn't want to miss it. Also, it allowed my mother time to get to know the area and choose her new home freely.

What has made this more difficult is the price of £190k. I was originally thinking of something around £150-160k. Mothers eh?! Also, in the time this has taken, the one lender who would give me a BTL mortgage based on rentable income no longer provides this.

Thanks kingstreet, I will read up on contrived tenancy, but I think I'm ok with it.
Talking of contriving solutions....what if (if it's allowed) a trust fund was set up to give me a regular income?

Creative thinking is the only weapon I've got
Many thanks again.

Thrugelmir

Iamafreeman wrote: »

Creative thinking is the only weapon I've got

Creative thinking is best done prior to taking any course of action rather than afterwards.

Iamafreeman

Ok, getting (more) desperate, or creative now. What if I were able to have a trust fund equal to a salary paid to me? Would the mortgage companies go for that?
Ta

holly_hobby

Iamafreeman wrote: »

I have a half share on a house with my mother (this share can be adjusted if necessary). There is no mortgage on this house, which will be my new family home. It's value is £210k.

If your mother owns a half share in a property other than that she is renting and residing in (eg - the house you will be moving into), this will be assessed and affect any MT benefits (including housing benefit) she is considering applying for as part of the exercise. She'll also have to declare any transfer of equity - which will be examined by DWP/LA under deprivation of assets.

Regulated buy to let (reqd as more than 40% is occupied by family) - is a small pool of lenders, and is typically assessed under 2nd property regs, which as regulated means affordability is based on earned, not rental income.

I am afraid that my opinion, based on the above and the details of your case, is that in its current format, this idea is a dead duck ... what is the actual purpose of the exercise to see if there is another route ?

Sorry this won't be what you want to hear.

Holly