BTL Affordability

danielanthony

Hi,

The wife's grandmothers house has been left to my MiL but with a £160,000 charge on it for care home fee's. Its been in the family for generations, unfortunately this generation didn't do effective tax planning due to dementia.

The house is worth c.£350,000 in its current state according to local estate agents.

Fixing it up, costing £80,000 would make it worth c.£500,000.

So, would it be possible to get a BTL mortgage on the property for £240,000 with a view to renting it out at £1,800pm with an interest only mortgage costing £780pm? I checked the figures online.

Would MiL need to put any money in, as there is still £110,000 equity in the property? Would MiL be assessed in the same way as a residential mortgage for affordability?

Thanks!

danielanthony

Anyone got any advice?

amnblog

The figures you state meet criteria for most lenders.

BTL mortgages are based on rental income although many lenders like the Borrower to have a personal income of £25,000.

danielanthony

Would there be a problem with borrowing the additional £80k to do the house up? This activity could take three months, MiL would have the funds to cover the repayments in the meantime as she owns her own house.

dimbo61

Would it make a good BTL property?
£80,000 to do sounds like a lot of work and any BTL lender will want a survey done on the property.
If it is in the right area IE close to a tube station in London then NO problem

danielanthony

dimbo61 wrote: »

Would it make a good BTL property?
£80,000 to do sounds like a lot of work and any BTL lender will want a survey done on the property.
If it is in the right area IE close to a tube station in London then NO problem

The valuations have been done by local estate agents and the train station nearby has a direct line to Paddington.

This exercise is really to try and keep the property in the family and bring it back to a livable standard.

amnblog

Are you thinking £160,000 to cover the charge and £80,000 on improvements?


BTL Lenders generally do not like extensive renovation when they are lending. The prospect of the property empty and without rental income makes them nervous.


There are some products specifically designed for BTL renovation before letting.


OFAB.

dimbo61

You need a broker who deals in BTL lenders and even then you may struggle.
In 2010 we bought a house to DO UP and rent out and the Lender at the time was happy to lend BUT they put a second charge on our home!

danielanthony

Yes, but that would only be for the initial term. Once re-mortaged after 2-3 years then it would be a normal BTL mortgage of £240,000* on a £500,000 house.

*£160,000 for care home fee's + £80,000 for the renovation.