Buy to Let Mortgage & Letting to Family

jaybeead

Please could anyone tell me if I can get a Buy to Let mortgage on a house I own and am letting out to my son. I am a pensioner.
We want to do an extention.

ACG

Its called regulated buy to let.

There are only 2-3 lenders I know of who will do it. Its based on your income rather than the rental income.

Your options are going to be very limited, the only lenders I know of are small building societies where I think you will need a broker to access them.

jaybeead

Thanks for your reply. I will look into this and hope I can get what were looking for.

Bonza

Hi, wise people!

By way of background, I am a pensioner who was made redundant a year or so ago. As I'm sure many of you will appreciate, trying to get another job when you're in your 60s is nothing if not impossible. As a result, I am having to sell my house as I can no longer afford the mortgage.

Right, now on to my actual question!

I was considering remortgaging my house as a buy-to-let, and renting it to my offspring. However, I do not pretend to understand anything about tax or legal jargon, but I believe that I would be taxed on any profit I make (which would be zero anyway) and that I would have to pay capital gains tax if I sell the property.

Can anyone please advise whether I should continue with this idea or whether it would be better just to sell up and buy a caravan, which was my original plan? I'm completely confused as to what the best way forward is as I really don't want to start involving accountants and lawyers on a regular basis (though I realise they would initially be involved with obvious set-up procedures).

Many thanks in advance for all your help and (sensible!) suggestions.

All the best.

B. xx

Pixie5740

Bonza wrote: »

Hi, wise people!

By way of background, I am a pensioner who was made redundant a year or so ago. As I'm sure many of you will appreciate, trying to get another job when you're in your 60s is nothing if not impossible. As a result, I am having to sell my house as I can no longer afford the mortgage.

Right, now on to my actual question!

I was considering remortgaging my house as a buy-to-let, and renting it to my offspring. However, I do not pretend to understand anything about tax or legal jargon, but I believe that I would be taxed on any profit I make (which would be zero anyway) and that I would have to pay capital gains tax if I sell the property.

Can anyone please advise whether I should continue with this idea or whether it would be better just to sell up and buy a caravan, which was my original plan? I'm completely confused as to what the best way forward is as I really don't want to start involving accountants and lawyers on a regular basis (though I realise they would initially be involved with obvious set-up procedures).

Many thanks in advance for all your help and (sensible!) suggestions.

All the best.

B. xx

It might be worth starting your own thread so that people don't confuse your question and the original poster's.

You would need a regulated BTL mortgage in order to let your property to your offspring and there are only a couple of lenders who offer that type of mortgage.

If you're letting what is your current home to your offspring, where will you be living?

What is the point of letting out a property if you're not going to make any profit? How do you know that you'll definitely not be making a profit?

As for the idea of living in a caravan. Have you researched the costs into doing this? There have been a couple of posters previously who have considered buying a boat or caravan to live in instead of a house of flat and, after some research, have been quite shocked at the site fees and other costs that weren't initially obvious when considering this route.

kingstreet

A regulated BTL sees affordability based on personal income, rather than rental income, so that would appear to be a non-starter unless there's a source of income we haven't been told about.

Bonza

Many thanks for your replies - much appreciated.

I was trying to start a new thread but couldn't work out how to do it. I confess computers aren't my strong point!

The reason I've looked into BTL is purely for a stop-gap to assist the moving process as I have no deposit for my caravan. Remortgaging would free up enough cash to enable me to buy a 'van and the mortgage would be self-funding inasmuch as the rent charged would cover the repayments. Renting to my son would ensure peace of mind that a stranger isn't having wild parties and wrecking the place as I don't want to have to pay some agent extortionate amounts for background checks. My son is buying his own place in a few months' time so BTL isn't a permanent arrangement, though I realise there is an early redemption penalty. There are other issues involved which I won't bore you with but, essentially, it's all about convenience and peace of mind.

I've checked with an adviser about getting a BTL mortgage and was told it wouldn't be a problem.

My concern is that I'm going to be hit with some nasty tax bill if I go down this route. Any thoughts on the tax implications please?

All the best.

B. xx

harrys_dad

Not sure why you can't just sell the house to buy somewhere cheaper, or a caravan. This is what everybody does when they sell one house and buy another, especially a cheaper one. Where are your offspring living now? If it is just a cash flow problem maybe move in with them for a short time if necessary. On a separate note, are you getting all the benefits you are entitled to, such as pension credit?

Pixie5740

I'm not a mortgage advisor and I'm not privy to all your financial arrangements so if the broker says you can get a BTL mortgage and rent to your son go with the broker's advice. I think the rental income has to be at least 125% of the mortgage repayments as that's usually a condition of the BTL mortgage but I'm not sure about regulated BTL mortgages, that might be something to check with your broker.

Your rental income will be subject to income tax. There are expenses you can deduct to lower the amount of tax payable though such as mortgage interest.

Also when you sell, as the property would no longer be your main residence, you might need to consider Capital Gains Tax. If you're planning on selling the property fairly soon after turning it into a BTL then CGT probably won't be an issue.

It could be worth exploring some of the options suggested by harrys dad if you haven't already as what your proposing does seem like a complicated way of releasing equity from the property.