Refused a mortgage due to a owning a buy-to-let?

monsterlimo

Hi,

My back story is that my parents never planned to pay their mortgage by the time they retired. I'm not sure if this was due to selfishness, stupidity or laziness but lack of money it definitely was not. When they came to me pleading to help a couple of years ago I could hardly refuse, it was either that or see them sell up with nothing left. They already had the plan to sell their house to me as a buy-to-let, they pay me monthly and I pay the mortgage. Annoyingly their mortgage is slightly more than my own, mine being £114k, there's £116k.

They (my dad and his mortgage advisor mate) assured me that I will have no trouble getting a mortgage but when I applied for my first mortgage after agreeing to help them I was refused.

There were 3 things against us compared to our previous successful mortgage application:
1. the money from my parents only covered the mortgage...no extra. £398 mortgage, £400 from my parents
2. childcare fees (£350+)
3. lastly some marks on my credit history (which i didn't know at the time were there)

The bank said we couldn't afford the mortgage, my guess was that childcare didn't help but they didn't mention anything about a credit check at the time. That only came about when I was refused a credit card. I'm pretty sure it was a combination of the last two but convincing my fianc!e is not working.

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I'm now planning to move house in the new year. The credit score has been rectified by the unnamed company error *cough* nPower *cough* (all negative applications removed, 950+ on Experian) and I'm getting more than 150% of the mortgage value from my parents (£398 mortgage, £600 from parents). We still have childcare to pay for but my salary has gone up which should offset that a little.

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What I'm really after is if anyone has been refused a mortgage due to a owning a buy-to-let, or if there's anything I need to do to help make things run smoother as I have a very very nervous fianc!e who wants me to sell my parents house and kick them into rented...and that's no joke.

Appreciate any tips, advice and cheers for reading.

ACG

I can not think of any high street lenders who would decline you because of the Buy to let - there could be reasons surrounding it (ie they may say the rent needs to be x% about the mortgage repayment based on a nominal rate otherwise they would count it against what you can lend), or alternatively they may not be happy that it is let out to family but specifically because you have a BTL I dont think so.

There are lenders who will disregard the childcare costs in certain circusmtances and providing the property is let with sufficient rent to cover the mortgage they will not mind but it sounds like you are not 100% "vanilla" and it could be worth a chat with a broker.

I am sure there will be enough options available based on what you have said to be able to get a mrotgage at normal rates.

Annisele

Is the mortgage on the house your parents live in a regulated or an unregulated BTL? (There are a few differences, but one of the key ones is that the terms of an unregulated BTL will prevent you from letting to family.)

If you have a regulated BTL - as it sounds like you should - then some lenders will count that as part of your own mortgage commitments. In effect, they'll assume you get nothing from your parents, then see if you can still afford a new mortgage on top.

I think this is likely one for a broker.

monsterlimo

Cheers ACG,

That's a massive help and a lot of relief for future mortgage applications.

I had a feeling the credit score might have been the issue. That's all been rectified now but I guess I still have to declare that I was refused a mortgage even though technically it was due to a mark on my credit history which has been removed.

I did apply for 2 credit cards before founding out what had happened to my credit score but those checks were removed along with the errors.

monsterlimo

Hi Annisele,

I actually don't know if it is unregulated or regulated, this was all handled by my Dad and his mortgage advisor. That's what I will be finding out though.

When I did apply for the mortgage which I was refused, they said it wasn't affordable. I asked if the buy-to-let income was too low and they said it would still be unaffordable if I got 125-150% of the mortgage value.

GMS

What percentage deposit do you have? Which lender declined?

Could be purely down to affordability. A BTL mortgage is driven by the rental income. A residential needs to be supported by your own income.

Does your BTL lender know your parents live there?

monsterlimo

Hi GMS,

The lender was nationwide who we had a mortgage with already. We were looking to release some equity in the house for improvements leaving us with a 15% deposit on our own house. It all looked affordable to us when we tested it on various comparison sites.

The buy-to-let deposit is 35% on an interest only mortgage.

I'm guessing my buy-to-let is an unregulated BTL as I was not refused based on the buy-to-let but other factors.

This sounds very messy and certainly not something I thought my parents would of done to me.

silvercar

I doubt your parents were aware that you getting a mortgage, for which they make a payment to you, could have any impact on your ability to get a mortgage on your own property.