A mortgage without an income?

rocket_girl

Hi everyone,

I'm looking for any advice or suggestions that you can make. My situation is this: I'm a student and have recently inherited £100k. I'd like to use this as the deposit on a mortgage. The idea is that I would live in one room of the property and rent the remainder out to cover the mortgage repayments. Alternatively, if the situation demanded, I could buy the property on a buy-to-let mortgage and continue to rent elsewhere.

I called London & Country mortgages to ask for their advice and they were very pessimistic about the possibility of me getting a mortgage without an income. This was regardless of whether it was residential or BTL. (On the buy to let side, the broker did seem to suggest there were some that I could technically apply for, but he didn't seem to think it was worth a try. He said my age (23) and experience as a landlord (none) would also count against me. On the residential side, I discussed the possibility of a guarantor mortgage with the broker, with my parents as guarantors, but he said these are few and far between).

Here are a few options that I can think of...
1. Guarantor mortgage My parents are potentially willing to be guarantors on the mortgage. They have their own mortgage but say there is not much left to pay off. Would getting one of these mortgages be a possibility? On googling, it looks like those mortgages tend to be aimed at children whose earnings are too low to fully afford their mortgage, rather than those without any income at all. (E.g. the cooperative's guarantor mortgage - I can't post the link but it's on google)

The broker was quite negative about a guarantor mortgage due to my parents' ages (oldest one is 55) - he said this will hike up repayments as it will mean a shorter term on the mortgage.

Do guarantor mortgages have generally worse rates than standard mortgages?

Another possibility my parents suggested is for them to remortgage their house (as they have what they think is a very good deal on their mortgage) and use the equity (& my cash) to buy a new place outright, and I would then rent out and use that money to pay their mortgage. Is that a potential option?

2. Just go ahead I could call the broker up and ask to apply for a mortgage (either residential or BTL), despite their misgivings - do you think this is worth it or am I, as they say, just going to be rejected?

3. Wait a bit The brokers I spoke to advised me to wait until I was earning. I'm reluctant to do that because I'm under the impression that you can't earn as much through savings as through property at the moment and so my cash would be losing its buying potential. Is that right, or should I be considering this option more thoroughly? I've got at least 3 years - and possibly 6 - of studying left, which means that there is quite a long period for the money to depreciate in (although it also means I could lock the money away over this period).

One more thing... The whole situation is further complicated by the fact that my brother also inherited the same amount of money, and any potential solution needs to work for him as well. (He is 17). Presumably my parents could only guarantee one mortgage, so, if we went down this route we would need to combine our money to buy a place together. I guess this has the advantage of making the mortgage more affordable/increasing spending power, but may also create potential problems in the future e.g. if one person wants to release the equity and the other wants to wait for the market to improve.

Sorry this has been such a complicated post; it's a complicated situation! Any help gratefully received.

ACG

There is the potential for a btl mortgage but thats about it. Literally 2-3 companies at most may consider you.

Residential relying on lodger income wont get you very far.

Putting money is savings is unlikely to be as beneficial as putting it into property, but at the same time i would suggest getting a mortgage no matter what is the right course of action. Put the money into an investment product which is invested in property? Buy a cheaper property for cash?

Buy with your brother?

There are other options.

amnblog

A lot of text considering you already seem to have been advised you need to have an income.

rocket_girl

Thank you, ACG. Buying in cash seems like a very good option. The problem is that I study in London so there isn't a lot at that price point, but buying with my brother/buying elsewhere should be an option. What is an example of an investment product invested in property, so I can search for & read about these?

What are the other options?

ACG

Theres nothing wrong with getting a second opinion.

Im sure we have all seen people who have been told by other brokers they have no chance, to then manage to get them a mortgage with just a bit of ringing around.

Simon_gloster

Pretty sure you can't get a BTL with the intention of living there.

You cannot use this scheme to skirt around residential rules as you gave no income.

The solicitor would do all the checks fir the lender anyhow.

rocket_girl

Yes, I wouldn't live in the property in the BTL scenario.

Yorkie1

Your brother is 17.

He cannot own property until he is 18.

TBH I think the L&C person has been realistic.

Even if your age and non-homeowner status were not against you, have you fully researched what being a LL involves? For example:

- There are a lot of laws which you must be aware of and comply with.
- You'll either need to pay an amount to an agency for them to manage, or do it yourself.
- How will you manage if you get the tenant from hell who trashes the house and you need to spend £000s putting stuff to rights?
http://forums.moneysavingexpert.com/showpost.php?p=41160642&postcount=12

And have you planned ahead to what happens when you leave Uni? Will you want to sell up if you need to move away to another part of the country for a job?

Even once your brother is 18, being tied together to a mortgage may well be a recipe for difficulties. What happens if one of you wants to move elsewhere? Or wants to sell but the other one doesn't? Or has financial difficulties which put the other's credit rating at risk?

I applaud your forward thinking but I don't think this is the right plan for either of you at the moment.

mr_cool

You could buy a property thats 100k or under, depending where you live there are plenty

Thrugelmir

rocket_girl wrote: »

I'm reluctant to do that because I'm under the impression that you can't earn as much through savings as through property at the moment and so my cash would be losing its buying potential. Is that right, or should I be considering this option more thoroughly?

Running a property business or leaving in the cash in a savings accounts. Is akin comparing to apples to pears.

What's your appetite for risk ?

Have you fully calculated the potential returns from owning a BTL property? After allowing for all costs, potential increases in interest rates and taxation.