Non status borrowing

CVID

Can anyone advise on this one?

My brother would like to raise about £120k in connection with buying a small property. To date he has always rented.

Through legacy he already owns a number of properties of which the combined current value is about £400k - but they all have long established tenants with ongoing tenancy rights. The rental income does not come to him but to my sister.

He is a self-employed artist and his income is small - not enough to meet lenders' usual terms. On the other hand, he lives frugally and has been easily able to afford a rent of c.£500/month over the last several years.

I've promised him I'd ask on this forum whether there would be any way of borrowing against the sheer security value of the property he owns, as his status would normally rule him out.

financial_solution

CVID,

All lenders are duty-bound to lend responsibly. Whilst the lender in this sort of market will treat the level of security as paramount they will need some form of confirmation/re-assurance from your brother that the repayments can be maintained.

The terms of the legacy would also need to be taken into account-I am not a solicitor so could not guarantee that there may not be some form of condition that may prohibit him borrowing against the properties. This may not be a problem I am just thinking aloud and think this should be checked early-doors.

Also, why, if you brother does own the properties, do the rental income go to your sister? is this a condition of the legacy? Is she managing the money on his behalf? or is it perhaps a condition of the legacy? This may be integral to the possibilities, if he is entitled to the rental he could use thi money to support his application.

Some lenders will treat the application (should he make one) by assessing his level of "affordability" rather than using income multiples. This is where his frugal existance may help, also dont forget that apparently he has been able to maintain his rental payments so that is a supporting feature. All non-confirming lenders exercise a level of "equity-lending" but must show that they have been responsible in lending the money.

I would point out that he may pay higher rate of interest, but, a reasonable deal should be available due to the low loan to value and clean rent history. By having such good equity in the properties he clears the first hurdle but must be realistic with the other issues/

Good luck, hope this helps,

Regards,

Mark.

CVID

Thanks for all that.

I have checked with my brother that there is indeed nothing in the conditions of our parents will against using the properties as security.

It was a condition of the will that he should own the properties whereas my sisiter would receive the rental income. This was what was agreed by us all while my parents were alive.

mightymouse

Hi

Just to play devils advocate what happens if payment of interest ceases on any money borrowed against the existing property.

The property cannot be sold without dealing with 1) tenants 2) income ceases for sister?

Would sister be prepared to forego future rents and can property can be sold tenanted?

CVID

mightymouse wrote: »

Hi

Just to play devils advocate what happens if payment of interest ceases on any money borrowed against the existing property.

The property cannot be sold without dealing with 1) tenants 2) income ceases for sister?

Would sister be prepared to forego future rents and can property can be sold tenanted?

As regards 2, this is a risk which is implicit within the terms of our parents' wills and my sister is alive to it.

As regards 1, I have no idea what the legal ramifications of this are but I imagine that any lender would be.

financial_solution

CVID,

From the basic, preliminary details given it "seems" that it may be possible for your brother to re-mortgage the properties to raise funds for the purchase of a new home.

Would need to establish the following:

1) Are properties registered in your brothers name at land registry?.
2) Are there any tenancy agreements? if so are they assured shorthold tenancy agreements/ what length are the tenancy agreements?
3) Please advise approx value and rental income for each property?

Regarding previous post, the implications regarding the tenants will depend upon the tenancy agreements (if any). If they are on a short-term (six or twelve month) assured shorthold tenancy agreement you just have to wait until the end of each agreement to review the position (subject to giving notice etc).

Hope this helps.

Regards,

Mark.

CVID

1. Yes
2. Yes... standard 6 months assured shorthold tenancies
3. There are 4 properties, each bringing in an average of £5k - 5.5k gross and each worth c.£100k currently.

I'm not sure what you're implying about 'RE'-mortgaging. There are no mortgages to replace here.

financial_solution

CVID,

I know he already owns the properties without mortgage(s) and was not intending to imply anything. As he is considering doing a mortgage on a property he already owns I called it a re-mortgage as opposed to on a new property which I would have classed as a mortgage to purchase.

I shall consider the contents of your latest post.

Regards,

Mark.

kimbatty

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