BTL with low income

LateStarter

Hello all,

My girlfriend moved in with me a little while ago - the house we live in now is mortgaged in my name only.

After selling her house and getting a small inheritance, she can afford to buy a flat which she wants to rent out to top up her income, and be her retirement fund. Because she has a very low income (<10k) she has been advised it would be extremely difficult to get a mortgage.

Would it make a difference if she put up all her cash and bought the flat outright, and then approached lenders for a BTL mortgage?

Thanks
LS

ACG

Earnign under £10k and being a non home owner will both be issues.
I think buying the property owning it for 6 months and then remortgaging would open her up to more deals, but im not entirely sure they would be market leading deals in either case.

Do the sums, also be aware of the tax changes due in the next 12-24 months with BTLs.

HappyMJ

LateStarter wrote: »

Hello all,

My girlfriend moved in with me a little while ago - the house we live in now is mortgaged in my name only.

After selling her house and getting a small inheritance, she can afford to buy a flat which she wants to rent out to top up her income, and be her retirement fund. Because she has a very low income (<10k) she has been advised it would be extremely difficult to get a mortgage.

Would it make a difference if she put up all her cash and bought the flat outright, and then approached lenders for a BTL mortgage?

Thanks
LS

If you sold her half your house and put her on the mortgage she would then become a home owner and eligible for a BTL mortgage without needing an income of her own.

amnblog

Her income is not a barrier in itself. The fact she is not a property owner is not a barrier in itself. The two factors combined are a problem.

Speak to a good broker about this.

There are a couple of potential solutions depending on the circumstances.

ViolaLass

If she can afford the flat outright, why does she want a BTL mortgage (which will be more expensive than a residential one and likely cost more than savings would make)?

ACG

At the moment there can be tax benefits.
It would also allow her to free up some money to put down on a second property if she wishes or have readily available cash for emergencies.

amnblog

If the focus is on long term return rather than immediate income, a more expensive property with a mortgage is probably a good idea.

Investor A buys at £100,000 producing £333 pm rental with no mortgage.

Investor B buys at £200,000 producing £666 rental with £100,000 mortgage paying £333 per month.

In 10 years prices and rents have risen 25%

Investor A has a property worth £125,000 producing £416 rent

Investor B has a property worth £250,000 producing £832 rent

Net income before tax for Investor B is 20% higher and capital value after debt is also 20% higher

That is why investors like mortgages.

Investor C who split their £100,000 two ways and buys two £200,000 properties with £150,000 mortgages may find the maths are even better as they are sitting on £200,000 of equity. Rent after debt servicing is now £1,000.

Of course there is risk in both buying and borrowing and the investor has to be comfortable with that.

Thrugelmir

amnblog wrote: »

In 10 years prices and rents have risen 25%

Optimistic assumptions should never be the basis for business decisions.

_CC_

amnblog wrote: »

That is why investors like mortgages.

That is why [STRIKE]investors[/STRIKE] speculators like [STRIKE]mortgages[/STRIKE] leverage.

amnblog

Thrugelmir wrote: »

Optimistic assumptions should never be the basis for business decisions.

UK Average according to Nationwide was 28% 2005 to 2015

Either way as long as there is growth the point holds.

LateStarter

HappyMJ wrote: »

If you sold her half your house and put her on the mortgage she would then become a home owner and eligible for a BTL mortgage without needing an income of her own.

I'm very willing to put her on the mortgage for my house - but as usual nothing is straightforward. We've been in this house less than a year, and I'm on a 2 year fixed mortgage. Can you add another person to a mortgage? Or is it a case of having to essestially remortgage?