Gifted deposit for mortgage

Sharkboy

I'd be grateful for advice about a gifted deposit mortgage.

My mother is in her 70's and her bank won't extend her mortgage, so I would like to buy her house off her as a buy to let with her as my tenant.

The house has been valued at c.£160k and has a mortgage on it of £117k but I don't really have a deposit.

I would like to buy the house off her for £160k using the equity in the property (which she will give to me) as a 25% deposit so I can get a good mortgage rate.

I understand this may be possible as a gifted deposit mortgage. Is this possible? How does this work?

If this is not possible, is an alternative to get a bridging loan to get the deposit and then once I have bought the house then pay back the loan with a £40k gift from my mum?

I've got a good credit record, but very little spare cash given my own outgoings. If the rent is 125% of the mortgage repayments and I have a 25% deposit, are the mortgage company less likely to worry about this?

Will it make any difference to the application if my mother is to be the tenant?

GMS

Your Mum residing in the property will not be acceptable to lenders as this is a 'sale and rent back' scenario which gives the lender issues in the event of any repossession.

Not as straight forward as you think.

Sharkboy

Instead of a BTL mortgage is another option simply to buy the house as a second home for a dependent relative, as long as I can afford the monthly repayments?

Or, could my mother and I buy the house together so that both our incomes could be taken into account so it is more affordable? Will they refuse to put her on the mortgage as she is 71?

Cornucopia

It is possible to get a mortgage for a second home, but generally lenders want to see affordability across both mortgages.

You may find the BTL route (a lot) easier if you bought a completely different property.

Alternatively, look at products designed for your Mother's age-group like equity-release.

edit: Age limits vary by lender. If you consult a Mortgage Broker, they may be able to find one with a higher limit.

holly_hobby

You can not purchase your parents home from them via a mortgage, and they remain resident post completion - whether they are paying rent or not - no matter what type of mge is sourced, BTL (regulated), dependants mge, straight 2nd property, etc, etc, etc.

This is in respect of vacant possession requirements of every lender (ie the vendor must not remain resident), and the issues it can cause re any future possessionary hearing.

She could sell her house, and you could source a 2nd property on a straight 2nd property or regulated BTL basis, and put her in it - but she can not contribute to the deposit in any form - as that would give her beneficial ownership and again cause possessionary issues.

You should also be aware that regulated BTLs are not assessed on rental income, but due to their regulatd nature, your own income which will also take account of any other commitments.

Hope this helps

Holly

Sharkboy

holly_hobby wrote: »

You can not purchase your parents home from them via a mortgage, and they remain resident post completion - whether they are paying rent or not - no matter what type of mge is sourced, BTL (regulated), dependants mge, straight 2nd property, etc, etc, etc.

This is in respect of vacant possession requirements of every lender (ie the vendor must not remain resident), and the issues it can cause re any future possessionary hearing.

She could sell her house, and you could source a 2nd property on a straight 2nd property or regulated BTL basis, and put her in it - but she can not contribute to the deposit in any form - as that would give her beneficial ownership and again cause possessionary issues.

You should also be aware that regulated BTLs are not assessed on rental income, but due to their regulatd nature, your own income which will also take account of any other commitments.

Hope this helps

Holly

Holly,

Is shared ownership between me and my mother an option, with my mother providing the 25% deposit?

holly_hobby

Assume this is a Housing Assoc shared ownership (with no extra mge reqd), why can't mum just have the SO in her own name with the 25% deposit she has (assuming she can afford the residual rent)

As otherise, there may be issues in you being party to the deeds and SO arrangement, but on a non-residency basis ...

You'll need to do a bit of leg work with the SO providers, to see if Mum going on her own is possible, OR if you being party and non-resident to the arrangement would be an stumbling block.

Hope this helps

Holly