the grandmother conundrum - any ideas?

fido24 · 30 September 2013 at 3:01PM

some years ago i bought a flat with a large deposit. I then moved to the US so decided to rent the flat out to my grandmother. I have now moved back to the uk and am in the rather ludicrous position of owning a property that i rent to my grandmother, while i rent ten miles down the road.

I would like to buy a property for me to live in but have all my capital tied up in my "grandmothers flat". short of evicting my 78 yr old relative i am a bit short of ideas, so any are welcome.

adouglasmhor · 30 September 2013 at 3:03PM

Buy a property - use your "grandmother's flat" as part security you should get a good rate use what you can of the rent to pay the mortgage.

holly_hobby · 30 September 2013 at 3:21PM

You don't say it the property is mortgaged or not.

You can't put up the property so to speak as security, but you could release equity (via an equity release remortgage), to provide your deposit.

As it is rented to your Granny (and if she is to remain), it would need to be a regulated Buy To Let arrangement (with affordability typically assessed on the applicants earned income, not rental receipt, as a with a traditional unregulated BTL mortgage), and with a typical max ltv of circa 75%.

Is granny paying you rental income ? If so, and I assume you are delcaring this to HMRC, the mortgage interest in relation to the equity release exercise, is also a permitted deduction*, as it is classed as capital withdrawal. *The only caveat is that deductable mge interest is limited to a sum equal to the market value of the property when it entered commerical let (ie you moved out and let it to granny). You can of course release equity in excess of this sum (subject to max ltv's and mge assessment), but you won't be able to offset any excess against rental income for tax purposes.

Not all BTL lenders offer regulated BTLs, although there are a number that are happy to consider - with a whole of market broker being your quickest and best route to source such. Your broker will also source a mortgage for your own home, taking account of the fact that some lenders will include any other mortgage, with it affecting affordability and/or max LTV, whilst others will set aside if self sufficient (ie rent covering mge payments) .... so a broker really is your best route to speedy success here.

With regards to your own status affecting any mge application ... I would leave it until you have at least 6 mths residential and employment history here, including getting myself on the voters roll asap.

Wish you well

Holly