How can I get a mortgage for second home as I need to keep a buy to let property

m1keyblue

Hello, this is my first post so please be kind.

The issue is obtaining a mortgage with my fianc!.
We have no property in mind but will consider anything affordable.

Key Facts

We currently have saved approx £8000 but live in an area where property prices are rising quickly, so may consider the help to buy scheme to get on the ladder before property becomes unaffordable.

We have no debts and no dependants and are both in full time employment.

We can afford a decent monthly mortgage repayment.

I earn approx £35k and fianc! £30k.

The main sticking point is that I own and let out a property in my home town (up North where prices are still flat/falling), I purchased it at the height of the property boom for 120k. It is now worth approx £100k, my remaining mortgage is 84k.

Before I get a raft of comments to sell... A few years ago my mother who is elderly needed somewhere to live after the property she rented was sold, I helped find my tenant a new property and now let my home out to my mother at a below market rent of £400 per month, my monthly mortgage payment is about £350.

I cannot sell the property, although I would like to very much, as my mother has made it her own and could not afford anything else in the area, and given her age it is just an impossibility.

So how can my fianc! and I get a mortgage while I have this property?

Yes save, save, save, I hear you saying .. Ok thanks we are, but not quick enough it seems!

Help to buy is limited to people that do not own a home already as far as I am aware, could my girlfriend buy on her own and then add me to the mortgage etc later? This would probably mean we couldn't afford (qualify for a large enough mortgage) to buy in the areas we need to live.

Could I set up a company and sell my property to my company maybe selling shares to my brother? How would that work and would it make me eligible for a first time buyer mortgage?

Where can I get specialist advice about this? It is a major issue I feel guilty that I am stuck with this property and this is stopping us from getting a house together but equally I have a responsibility to my mother.

Any constructive advice would be greatly appreciated.

Thanks

pinkshoes

You have £16k equity in your northern rented property.

is this on a buy-to-let mortgage?

If you only have £8k savings, then your budget is around £100k, as don't forget to factor in buying costs.

m1keyblue

Yes it is on buy to let, I lived in it for a few years but had to move away for work and have not returned. As it was in negative equity initially I had to let it out so contacted the lender I pay a yearly fee to the mortgage company to have it as a buy to let.

The equity in the house is less than 25% required to remortgage on a new buy to let so that is out of the question. If that is what you are suggesting?

£8k is less than 10% of 100k so still couldn't borrow that on a regular mortgage and property in the area we live starts at about 140k for a small flat - which we would consider if we can raise the finance.

Thanks so far..any more questions please ask.

pinkshoes

Other than keep saving...! It really would be your best option.

Could you get your mum to pay more rent? Could you rent in a cheaper area so you can save more money? Or be lodgers in someone else's home for a couple of years? There used to be a scheme where you moved in with an old person in exchange for doing some chores and helping them out, and got really cheap rent!

Once have paid stamp duty and solicitors fees and moving costs, that will eat into your £8k.

Pixie5740

m1keyblue wrote: »

Yes it is on buy to let, I lived in it for a few years but had to move away for work and have not returned. As it was in negative equity initially I had to let it out so contacted the lender I pay a yearly fee to the mortgage company to have it as a buy to let.

Is it an actual buy to let mortgage that you have or do you have consent to let on a residential mortgage?

m1keyblue

Pixie5740 wrote: »

Is it an actual buy to let mortgage that you have or do you have consent to let on a residential mortgage?

Yes you are correct it will be consent to let I have never remortgaged since original purchase.

Pixie5740

m1keyblue wrote: »

Yes you are correct it will be consent to let I have never remortgaged since original purchase.

That might have more of an impact on your affordability then compared with having an actual BTL mortgage. You'd probably find it difficult to switch to a BTL too since you let to your mum and for below market rate.

I'm no expert though so you should talk this through with a whole of market mortgage broker to find out what your options are regarding the property your mum lives in and buying a property with your partner.

m1keyblue

Has anyone got any actual advice based on the points I listed rather than the usual MSE forum advice of changing your life around.

1) Part of my income depends in living in proximity to work if I moved I would loose income and thus not save anything - but incur removal costs, storage costs and end up in a much worse property.

2) As much as we would like to get on the property ladder, which is not a pipe dream give our financial standing and future earning potential, renting for longer in a nice property when we are about to be married is much preferable to moving in with an elderly stranger and doing odd jobs around their house.

To clarify the question, please respond based on not being able to save more than 15k in the next two years and not moving anywhere else to save money and with an outright purchase price of 140k min.

We will also look at shared ownership schemes but again (due to qualifying criteria i.e. Can't own a home already) this relies on either my girlfriend acquiring on her own and me being added later or disposing of my property in a way that allows my mother to still live there.

Based on the points in my original post - not least because I have thought about all these issues already and can't resolve them any bright ideas would be most welcome.

Thanks again

Annisele

You talk about selling shares to your brother. I don't think that would work, but clearly you have a brother - is he in a position to help? Specifically, is he in a position to buy the property your mum lives in from you?

Any other siblings?

Tixy

If your brother is in a position and willing to buy your existing property from you (and presumably continue to rent it to mother) then can you not just do that - rather than considering putting it through a company purchase and selling him the shares in it?

I would have thought the best place to get advice on this would be a mortgage broker. They will likely best placed to know what is and isn't possible with the help to buy schemes etc and how likely it is your partner could buy a property just in her name on her income.

Sorry x post with Annisele, I must have been typing very slowly!

m1keyblue

Annisele wrote: »

You talk about selling shares to your brother. I don't think that would work, but clearly you have a brother - is he in a position to help? Specifically, is he in a position to buy the property your mum lives in from you?

Any other siblings?

I have one brother, I am not sure of his financial standing as he has just extended his property but I could certainly ask the question.

Thanks