When applying for a personal mortage, do BTL mortgages affect the decision?

simon20_08

Hi there,

I will try to explain my situation for you in the most succinct way possible!
My younger sister inherited 3 properties, about 10 years ago from the passing of her father. She has been living & working in Australia for the last few years & set up a nice life over there. One of her properties had a long term tenant in but they have now moved out into a care home. This property is a large Victorian terrace & is crying out for renovation - standing empty is costing my sister money & if she can re-develop it, she has the option to let out multiple rooms. In order to do this, she wants to release equity in the property by getting a buy to let mortgage for approximately 60k.
My mum has been speaking with the bank over the last couple of weeks about this, and they told her that my sister's income from her geologists job in Australia cannot to be used in the application as she is working overseas & the property is in England. My mum is practically retired now, so she has no income to use in an application & her dad is no longer around.
Therefore, I am the only person who can realistically help her out. Let me just add here, that when my sister's dad died over 10 years ago - my mum & I became co-executers of my sisters estate, and as trustees we had our names on the deeds for the properties she inherited. That therefore makes it possible for me to obtain a mortgage on this property.
The mortgage advisor at the bank has said with my annual wage of £32,000 it shouldn't be a problem to get a 60k buy to let mortgage.

But here lies my concern.... My personal circumstances. Following a marriage breakdown a few years ago, I managed to rack up a fair amount of personal debt (approx 15k) & although I have never defaulted on a payment I've warned my mum & sister that I could be turned down on my application based on a poor credit score. But anyway, that is out of my hands.

My main concern however, is how this Buy To Let could affect my future financial life. A couple of years ago I met a wonderful girl & am in a very happy place now, and would like in the not too distant future to hopefully buy a house together.
So my question is this - If I decided to help my sister out & I was successful in the BTL mtg application - would this affect my already shaky credit score, and affect a potential mortgage lender's decision in a few years time when I'm applying for a personal mortgage with my girlfriend? I wonder whether the fact I'd have a mortgage on another property, would make me be seen as a risk.

Or do lenders disregard any Buy To Let mortgages an applicant has?

I really want to help my sister - but I also have to be conscious of my own future too.

Your feedback would be greatly appreciated!

Halle71

As long as all went smoothly with the agreement between you and you sister (and I'm sure that other people will be able to advise on the pros and cons of this arrangement), and you are prepared for the responsibility of becoming a landlord (G_M has a good link), I would have thought that a BTL mortgage would help your credit rating as long as you keep up with payments.

Annisele

simon20_08 wrote: »

Let me just add here, that when my sister's dad died over 10 years ago - my mum & I became co-executers of my sisters estate, and as trustees we had our names on the deeds for the properties she inherited.

I'm a bit confused by that bit. Were you and your mum executors of your sister's father's estate (rather than your sister's)?

I'm assuming you were both executors, and that your sister was under 18 at the time and so couldn't hold property in her own name. If that's the case, then I'm a bit confused as to why you haven't put the houses into your sister's name yet?

So far as the mortgage is concerned, it sounds as though you have legal ownership of the property (you're named on the deeds) but no beneficial ownership (it's really your sister's house, and you hold it on trust for her). I suspect that there are significant wrinkles with arranging a mortgage in those situations, so if you do apply you should ensure that you fully disclose that situation at the outset.

simon20_08

Annisele wrote: »

I'm a bit confused by that bit. Were you and your mum executors of your sister's father's estate (rather than your sister's)?

Hi there, sorry that was a bit confusing! You're correct, my mum & I were executors of my sister's fathers estate. (My sister and I have different fathers). My sisters dad died when she was under the age of 18 & he died without making a will - so as his sole next of kin, my sister inherited. (my mum & him never married)

When my sister was still under the age of 18 I believe a prudent decision was taken to keep property in trust until my sister reached 21. That has recently passed, but things just kept ticking over. My sister is very much involved with decisions about her properties - and as she graduated from Uni & immediately went to Australia & found work, it's just been easy for things to stay as they are and keep ticking over. Luckily, as a small family we don't fall out & I'd never envisage big arguments between us - ultimately, my sister has my Mum & I doing her bidding for her, while she's sunning herself overseas! lol

Over the last couple of years I have been expressing an interest to get my name taken off everything - but now this situation has cropped up....

Of course, a full disclosure of the situation would be made when an application is made. I just wanted to be sure that for my sake, in the future if I apply for my own residential mortgage - the fact my name is potentially on this BTL mortgage, it won't affect my residential application.
Some reading online I've just done suggests that some (most?) lenders will disregard BTL mortgages & treat them as 'self funded'

All advice is welcomed - thank you to those who've read or responded so far

kingstreet

Some lenders ignore self-financing BTLs in the background, while others assume you may have a void and two mortgages to pay for a time and "tax" your income/affordability with the BTL mortgage payments.

You may also be required to put down a higher deposit when you purchase a "second" property.