Buy to let question

bellathecat_2

Our mortgage is due to end in just over 2 years when I will be 65 however there will still be a shortfall of £160k. The house is valued at 320k and I have been trying to get an extension to the mortgage term but I have had no success. Although I can afford the payments (I am better off than I have ever been) my income figures don't stack up for the Building Society.


One of our sons is willing to buy the house from us with a buy to let mortgage, at a knockdown price so we will keep the collateral. On paper, he would then rent the house to us.


I have heard that this is not so straight forward and we don't want to do anything illegal. Any advice would be really appreciated.

ACG

What you are describing is a regulated buy to let.

This would be based on your sons income - not yours.

Will the mortgage be repayment or interest only? If repayment there are lenders out there who would go to your 75th or even 80th birthday - assuming the figures stack up. But you would not be able to do it on an interest only basis.

bellathecat_2

ACG wrote: »

What you are describing is a regulated buy to let.

This would be based on your sons income - not yours.

Will the mortgage be repayment or interest only? If repayment there are lenders out there who would go to your 75th or even 80th birthday - assuming the figures stack up. But you would not be able to do it on an interest only basis.

The figures would stack up on my sons income. I don't know if would be repayment or interest only. At this stage, I just need to know if it is legal for my son to rent the house to his parents.

Pixie5740

It's legal if he has a regulated BTL mortgage or can by the property outright.

bellathecat_2

Pixie5740 wrote: »

It's legal if he has a regulated BTL mortgage or can by the property outright.

It would definitely be a regulated mortgage company. He would buy the house outright on paper but we would have a legal agreement that the collateral in the property remained ours.

ACG

bellathecat wrote: »

It would definitely be a regulated mortgage company. He would buy the house outright on paper but we would have a legal agreement that the collateral in the property remained ours.

You cant do that.
You either own it or you dont. You cant own half a building (well, you can but not in this situation).

Also regulated buy to lets are underwritten differently.
Lets just assume his income is £50k and any bank will lend 4x his income. That means he can borrow £200k.

If his current residential mortgage is say £150k, that means for a regulated BTL he can only borrow £50k.

Bantex_2

bellathecat wrote: »

It would definitely be a regulated mortgage company. He would buy the house outright on paper but we would have a legal agreement that the collateral in the property remained ours.

surely the lender will want the property as security.

kingstreet

Chances of him being able to purchase the property and you remain living in it are extremely slim. The legal ramifications for a lender looking to repossess in such circumstances mean lenders shy away from such business.

Yorkie1

Would this also fall foul of the 'sale and rent back' rules, or not?

ladeeda

The property is security for the mortgage loan. Harder now to find a lender willing to do a regulated BTL, at least a few of the lender's in this area have pulled out.

If your son is planning to buy in the future this loan will affect his affordability.

bellathecat_2

Thanks for all the replies.
We are looking at other options.