Slightly Complicated Mortgage Query

Daps

Hi there all,

My family home is currently owned by my brother, with my father as a tenant. My brother wants the house out of his name, and my father is unable to get a mortgage. We do not want to sell the house, so I am looking to buy the property myself - however I have had a couple of mortgage applications declined now and am seeking advice on how to best proceed.

The value of the house is approx £140,000, and approx £90,000 is still owing on the mortgage. We want to release £12,000 in equity from the house, but use the other £38,000 or so as a gifted deposit.

I am a contractor and therefore not able to prove my salary in a way that satisfies most lenders. I am set up as my own limited company, and only have been for a few months so do not have 3 years worth of accounts.

I have tried doing my own research on this but am finding it really difficult and complicated so any help would be much appreciated!


Can anyone advise on the best way to proceed with this in a way that I will be able to get the mortgage.

If the best way to proceed is with a standard mortgage with the gifted deposit, can anyone recommend a broker/lender that will not reject my application due to me being a contractor?

If there's no way I could get a standard mortgage as a new contractor, would it be possible to get a buy-to-let mortgage, if we had a tenancy agreement where my father signed to pay 125% of whatever the mortgage repayment amount is?


I'm not sure if I'm asking the right questions or providing all the necessary information - so basically if anyone can help with the above it would be much appreciated, and if I can clarify any details which will make things clearer please let me know. Thanks!

Annisele

Do you live in the house / will you live there after you've bought it? (I'm wondering about whether you'll need a regulated buy-to-let mortgage).

Did the house originally belong to your father? If so, how come your brother now owns it? (If you do take a mortgage, your lender will want to make sure it can repossess the property if you don't pay. That gets more difficult if your father has rights over the house).

If this is possible at all, I think you'll need an experienced broker.

Daps

The house did originally belong to my father - he needed to release equity from the house and was unable to get a re-mortgage so it was sold to my brother.

I will not be living in the house in the short term - my father will continue to live there as a tenant.

I don't think my father has any rights over the house so the lender should be able to repossess the property if the repayments are not made (though there isn't really much of a risk of this since my father has no issue paying the rent, and even if he did, I would then be able to make the mortgage repayments.)

holly_hobby

You could look at regulated Buy To Let - regulated because more than 40% of the property will be tenanted by family.

However, the fly inthe ointment is that regulated BTLs are based on the applicants income and not rental reciepts (as traditional unregulated BTLS are).

If you are only newly contracting, you won't yet have 12 mths submitted figs, and therein lies the issue, as this is really the min any lender would consider.

A family discounted pch/gifted deposit, under a regulated BTL application should also be ok - but I do think you may struggle with the current paramaters you're trying to work within, and you may have to wait a little while before you're in a position to proceed with this enquiry.

Bottom it out with your mortgage broker to see if or when you'll be in a position to take this forward, but please no more random applications, mulitple credit searches for failed applications will do nothing but hinder your quest !

Hope this helps ... good luck

Holly

Annisele

I think your thread title is correct - you do have quite a few issues here. I agree with holly; you'll do much more harm than good with random applications. This is one for a broker. (It won't hurt to discuss with a broker - if a broker tells you a lender will decline, that doesn't hurt your credit record at all. If a lender actually declines/does credit searches, it might).

Daps wrote: »

I will not be living in the house in the short term - my father will continue to live there as a tenant.

I think this takes it into broker territory by itself. You can't have a standard residential mortgage because you won't be living in the property. You can't have an unregulated buy-to-let mortgage because your father is a family member. So as holly says, you're looking at regulated buy-to-lets.

I don't think my father has any rights over the house.

I think that if you do decide to go ahead, you should take legal advice on that point. It's a complicated area, but I'm not a lawyer and I'm not sure of the position.

If your brother bought from your father for less than the market value (or with a gifted deposit), then your father might be able to claim the sale was conditional on him being able to live there for the rest of his life. Also, between parents and children there's the possibility of claims for undue influence.

Quite possibly none of that applies - but if it doesn't, you'll likely want a broker's help to make sure the lender doesn't get spooked by it.