Transfer of equity

scuttlemonkey

Hi all,

Please help if you can.

I currently have 4 BTL interest only mortgages, which are being rented out. My wife and I want to buy a house in a different city to where the BTL properties are, but we don't want to take on a residential mortgage whilst having the liability of owing the banks so many hundreds of thousands of pounds. They are not worth selling at the moment.

We wondered if there was some way to transfer the liability to any family members, and saw equity transfer. However, only one person in the family has a credit record which we think would pass, but she has only just graduated, and is currently working on a salary of 18k.

Would this be likely to be enough for a lender to put her onto the mortgages?

Would I then be able to remove myself?

Does it matter, what with the properties being BTL and rented out?

What would the risks be if we got a residential mortgage and continued to be liable for the other properties? ie are we overreacting by not being comfortable taking on another mortgage?

Are there any other solutions?

Please help as we cannot find instances of similar cases anywhere!

Many thanks

holly_hobby

scuttlemonkey wrote: »

I currently have 4 BTL interest only mortgages, which are being rented out. My wife and I want to buy a house in a different city to where the BTL properties are, but we don't want to take on a residential mortgage whilst having the liability of owing the banks so many hundreds of thousands of pounds. They are not worth selling at the moment.

Sensible

scuttlemonkey wrote: »

We wondered if there was some way to transfer the liability to any family members, and saw equity transfer. However, only one person in the family has a credit record which we think would pass, but she has only just graduated, and is currently working on a salary of 18k.

So you want to transfer legal ownership (ie sell) a property and its rental benefits to this family member ? which means they can sell it themselves, have it used to secured finance, whilst it being exposed to their creditors.

Or you just want to remove the liability from your name, leave them legally responsible for servicing the mge etc, but you continue to remain beneficial owners (ie recieve rent etc) ?

Either solution aren't sensible IMHO.

scuttlemonkey wrote: »

Would this be likely to be enough for a lender to put her onto the mortgages?

Not with some lenders, where her age may also be afactor, .

scuttlemonkey wrote: »

Would I then be able to remove myself?

Only if the lender agrees, and the property has sufficient rental income & she meets any min income requriements. Although this route may circumvent the BTL FTB issues she would normally be exposed to

Partial/full transfer of a 2nd property will trigger a chargeable event for CGT - which as this is between family will be based on market value. Any net gain will incur a tax bill for beneficial owners (you and/or wife) of 18% basic rate taxpayers, 28% higher rate.

Also stamp duty for her if the tsf exceeds 125k

scuttlemonkey wrote: »

What would the risks be if we got a residential mortgage and continued to be liable for the other properties? ie are we overreacting by not being comfortable taking on another mortgage?

Your borrowing will be restricted with regards max exposure/overall borrowing criteria, including exposure ceilings within the same group.

scuttlemonkey wrote: »

Are there any other solutions?

Remortgage your BTLs to release equity (if there is sufficient free equity and supporting rent to meet lender criteria of 125% of mge interest), and pch your resi property for straight cash ?

The associated BTL mge interest will remain fully deductable, at a total mge equal to the pch price or value of each applicable property when it entered the business (ie first became available for commercial letting) - anything in excess of this, can still be withdrawn upto max LTVs/supporting rent, but the associated mge interest in respect to the surplus won't be tax deductable.

Discuss CGT/IT issues with your tax practioner, BTL further advances with your lenders, and if you wish to remortage to an alternative BTL provider your mortgage broker.

You also need consider on how your lets will be managed if you move out of the immediate area.

Hope this helps get things rolling ...

Holly x

getmore4less

what are you trying to achieve?

This is a business run it as one, if it's not profitable fix it

If it is profitable and likely to remain so then what's the problem?

scuttlemonkey

Thanks for your replies. We have bought a residential property now but still have the btl ones. We still want to get rid of the btl as we are concerned about interest rates going up and mortgage payments going up beyond rental market affordability. Also the term on them is closing in and I don't want the risk of them not being worth the amount payable on the loan. My father is happy to take them on for me, but putting him on the mortgage too and then removing me seems too easy...

Thrugelmir

scuttlemonkey wrote: »

My father is happy to take them on for me, but putting him on the mortgage too and then removing me seems too easy...

Surely a straight sale of the properties to him is the most appropriate course of action.

scuttlemonkey

If he could afford it we would. He has recently been made redundant hence the rental income would help him

Thrugelmir

scuttlemonkey wrote: »

If he could afford it we would. He has recently been made redundant hence the rental income would help him

Perhaps BTL isn't a wise choice of route at the current time in any event.