Second home & BTL mortgage - family sale

ABBF08291

Dear Forum,

Please can you kindly advise on the below scenario with your comments and point out any stumbling blocks?

Scenario
- I currently own one property with my wife (residential mortgage) and it is our main residence.
- My parents live in a different property (residential mortgage) and it is their main residence.
- Parents now wish to sell the property and move out to live elsewhere/abroad.
- Parents wish to sell me & my wife this property via inter-family sale.
- Me & wife therefore wish to purchase from them the property on a BTL mortgage and then rent out the property to new tennants (i have checked and average rent would be 2.1x mortgage on interest only and 1.3x capital repayment)
- Property value is £750k but sale price will be £450k via inter-family sale, with the £300k difference serving as the deposit (gifted equity) from my parents to me & wife (LTV would be 60%)

Please can you kindly advise if the above is allowed / is possible?
Can an inter-family sale be completed as above, ie with the purpose of being my second home on BTL deal with purpose to be rented?
My main home is worth 600k where I shall remain. Is it a big problem that my parents home is worth more (aprox 750k).

Many thanks for your help.
All thoughts welcome.

kingstreet

It can be done, yes.

Some lenders will see the new property being £100k more valuable than yours and suspect you are going to live in it.

Could you demonstrate affordability as a residential if you are asked?

ABBF08291

Thanks kingstreet, agreed - ive heard of this problem before when a lender questioned a friend who wanted to buy a 600k BTL flat when his own house was worth 450k.

Currently I live in a 2 bed flat with my wife in London zone 2 ( where we both work) and parents property is a much larger 4-bed house and is outside london, hence the higher value.

is there no way of demonstrating or proving to the lender that I intend to remain in my main residence? because if i wanted to live in my parents house i could convert my current resi to BTL which would put me in a position to apply for a resi on my parents.

or, will some lenders be more relaxed than others when it comes to house value. in terms of the market, I believe that over the long term my parents house price will rise at a slower pace than my current flat in zone 2 london

re: affordability, we could not afford both mortgages as residential, unless one was interest only. we could borrow up to 500k (assuming eg 4x earnings) and our current resi mortgage amount outstanding is about 400k

kingstreet

Appointing an independent broker to establish the right lender options for you would be the next logical step for this.

You wouldn't be expected to prove affordability for both properties on a residential basis, only the one you plan to buy. If you can demonstrate that, the lender will feel you would buy it as a residential and get a better rate if you can, so you must be planning to let and accepting the worse terms as a result.

Bluebirdman_of_Alcathays

Don't forget the additional SDLT will apply to you - £26k will be required up front.