BTL remortgage to help pay for parent's new accommodation, due to Stroke

icebergx

Hi all,

My mother recently had a stroke and will probably need some care for the rest of her life. She and my father jointly own our family home, worth around £500,000 and it is mortgage free.

My Brother an I both live in Denmark, so are not around often to assist, but I have a trusted family member who also manages a property I own, who would manage the remortgaged property too.

Rather than sell the house, we're thinking of remortgaging it, renting it out, and using the funds from the remortgage to purchase (outright) a smaller, more suitable place for my parents. The estimated monthly rental for the house is at least £2500per month, so that should be enough to cover the mortgage and supplement my fathers pension a little too, and pay for any additional help he will require.

What amount of equity needs to remain in the property, to obtain the best BTL remortgage rate?
We were thinking of withdrawing upto £350,000 (70% of the equity.) What kind of (ballpark) rate would we be looking at?

Regarding inheritance tax, as my father would own two properties, would IHT take into account the loan amount on the BTL property, as the value of both properties combined will certainly take my parents over the £650,000 limit.

Thanks for your help.

Annisele

I think your parents' real problem is going to be getting the mortgage at all. They'll almost certainly need a broker - many BTL lenders don't deal directly with the public. Also, many lenders have a maximum age, or minimum income requirements (often £25k or so), or don't lend to first time landlords, or don't lend to people who won't have another property. (You're also not strictly talking about a BTL; it sounds more like a let-to-buy to me.)

I know your friend will manage it, but ultimately your parents will be landlords with all the responsibilities that entails - and I think they should read G_M's introductory post or something similar before they go ahead.

As to IHT, the taxable estate is essentially all assets less all liabilities. So, two properties worth £500k each, with £400k of mortgage/credits cards/other debts, would make a total of £600k.

Thrugelmir

icebergx wrote: »

The estimated monthly rental for the house is at least £2500per month, so that should be enough to cover the mortgage and supplement my fathers pension a little too, and pay for any additional help he will require.

And if the property is empty. Who covers the costs? There's tax to pay on the letting profit as well.

Letting property is far from being a one way street. There are considerable downsides and risks.

icebergx

Annisele wrote: »

I think your parents' real problem is going to be getting the mortgage at all. They'll almost certainly need a broker - many BTL lenders don't deal directly with the public. Also, many lenders have a maximum age, or minimum income requirements (often £25k or so), or don't lend to first time landlords, or don't lend to people who won't have another property. (You're also not strictly talking about a BTL; it sounds more like a let-to-buy to me.)

Interesting information. Didn't know this. I'll check with a broker as to their options. Is let to buy an actual mortgage type of isit just a combination of one buy to let mortgage and one residential mortgage?

Thrugelmir wrote: »

And if the property is empty. Who covers the costs? There's tax to pay on the letting profit as well.

Letting property is far from being a one way street. There are considerable downsides and risks.

If there's ever a problem with paying the mortgage, I'll pay it, but the property is located in a popular part of London and I have considerable experience in letting properties in the area, so I don't anticipate any major long term problems. Still, thanks for the advice. It's better to be safe than sorry.

amnblog

Don't worry about the 'let to buy' / 'buy to let' semantics.


Just be aware that your parents options for this mortgage are very limited and you need a mortgage broker, and a good one to get any progress.


On the subject of management, it is not difficult and most areas in the UK have little problem finding tenants. A local agent will do it for about 10% of rental income if you do not want to leave it in the hands of your family friend.