'Buy for Uni' Mortgage

Pixie5740

geckomike wrote: »

I wasn't sure whether students have to be under Short Assured Tenancies, or whether they were referring to non-student tenants. I think the Bath Society mention that you can have non-students for 6 months under Short Assured Tenancy to cope for the situation of, say, buying in March and needing to wait until the start of the academic year for student lets.

We are looking at spending around £250,000. That would give monthly mortgage repayments of around £1460 per month, let each room out as £500 (x2) which would leave my partner and I to cover the remaining £460 per month. This would be opposed to renting a 1 bed flat, which if we are very lucky, could cost £750-800 per month.

The the student/non-student status of the person renting the room has nothing to do with the person being a tenant with an AST or an excluded occupier.

Comms69

geckomike wrote: »

I wasn't sure whether students have to be under Short Assured Tenancies, or whether they were referring to non-student tenants. I think the Bath Society mention that you can have non-students for 6 months under Short Assured Tenancy to cope for the situation of, say, buying in March and needing to wait until the start of the academic year for student lets.

We are looking at spending around £250,000. That would give monthly mortgage repayments of around £1460 per month, let each room out as £500 (x2) which would leave my partner and I to cover the remaining £460 per month. This would be opposed to renting a 1 bed flat, which if we are very lucky, could cost £750-800 per month.

There is no material difference in terms of tenancy law between students and non students. Certainly not in terms of eligibility for ASTs.


If you think it just ends after 6 months you're in for a shock


Stick to letting to lodgers

Plus

Also, what about council tax? If you're all students it's exempt, but if there's one or two non-students they can end up footing the bill for the whole property. This can make it non-economic to rent to non-students, unless everyone agrees they will pay council tax anyway. In which case it can put up the effective rent by a substantial chunk.

Pixie5740

Plus wrote: »

It's maybe worth using one of the tenant check services to check the applicant's credit history, references etc. However IME there's a risk of 'computer says no', which is particularly a problem for overseas students who don't have much/any credit history in the UK. And sometimes the companies running these systems aren't the best at explaining why the computer says no.

There's not much value in a full service agent, because the tenant is supposed to complain about maintenance to the agency, who contact you... when you could just fix it. It's worth having contacts with tradespeople, so if there's a burst pipe while you're on holiday your tenant knows who to call and that you'll pay up to £X without pre-approval from you.

You'll need to use the deposit protection services, but I think a private LL can do that.

It may be that your university has some kind of database of approved landlords, and it might be worth getting on that as a way of generating leads, although TBH you'll probably hear about friends-of-friends wanting housing, etc.

The OP is going to be living in the same property therefore (s)he will be a resident landlord with lodgers aka excluded occupiers. There is no legal requirement to protect the deposit from a lodger and lodgers do not have anywhere near the same legal rights as tenants so are much easier to evict.

I don't know why you think tenants are supposed to "complain" to the letting agent about repairs. Tenants are supposed to contact the address for the serving of notices given in their tenancy agreement which may or may not be c/o a letting agent. That's tenants, the OP will not have tenants because the OP will be a resident landlord. Why would a lodger "complain" to an agent about a repair when living under the same roof as the landlord? It makes no sense.

Pixie5740

geckomike wrote: »

I was thinking about the possibility of staying in Bath after, desirable, but low - in this case I would hope to remortgage as a buy to let, and let that mortgage keep ticking over. Thoughts?

Do you expect to have 25% of equity in the property by then? I know no one has a crystal ball but as a rule of thumb to qualify for a BTL mortgage you're looking at a maximum LTV of 75%, a minimum income of £25k pa, and for the rental income to be at least 125% of the mortgage payments and in some cases 145%. You can always cross that bridge when you come to it.

steampowered

With a 100% mortgage, you would be in negative equity if there was to be even a modest price reduction in the Bath market. It wouldn't have to be a crash.

That sounds like a pretty big risk to me, as you could be locked into the city and the property.

The other part of your post which I struggled with was the reference to remortgaging at a lower rate at the end of your course. Not sure this is realistic?

Over the first 3 years nearly all of your mortgage payments will go to interest. I don't think there are any banks who lend on 100% mortgages. You would presumably need to have a deposit to remortgage.

pinknsparkly

Hi Mike,

My husband and I tried to do what you're proposing - buying the house using the Bath Building Society "Buy for Uni" mortgage (the mortgage holder can be the student OR the parents). We were eventually turned down as they wouldn't take my husbands income into consideration since we weren't married at the time (you need to prove enough income to cover 125% of the mortgage costs, and what we were intending to charge lodgers wouldn't cover this entirely). For what it's worth - BBS knew we were intending to have 4 people in the house, but considered my (at the time) unmarried partner and I to be "related parties" and allowed up to two lodgers to live with us.

In the end, my parents bought the house as a standard BTL, and we have just bought it off them after three years of living here. We had two lodgers for the duration of my studies and have now dropped down to just one lodger without any intention to get another one. It's worked out well for us but I would reiterate previous posters points that we only bought as we intended to stay put long term (beyond the end of my PhD). We wouldn't have bought if we thought we'd be moving again after I finished. Also, keep in mind that you'll have to complete tax returns for having lodgers since £1000 per month lodger income will put you over the annual Rent a Room allowance (though if you're both students and not working alongside your studies then it's unlikely that there will be any tax payable.

I would also only consider the Buy for Uni option if you will put the mortgage in YOUR name rather than your parents. I'm not sure if this is feasible from your posts as I'm unclear whether you already have the deposit saved up yourselves, if your parents intend to gift you the deposit or if they will loan you the deposit. If they want to loan you the deposit, then they may wish the mortgage to be in their names in which case a standard BTL would be cheaper and more straightforward.

dont_use_vistaprint

Pixie5740 wrote: »

Why would you need to use an agent when there's a resident landlord? Other than getting a gas safety certificate and the right to rent checks what else does a resident landlord need to do except working out if the lodger seems like someone else they could live with?

An agent will handle all the acceptance criteria such as deeds for UK based guarantors , contracts and secure deposit scheme, as well as quarterly checks which could be uncomfortable with an onsite landlord. It will let the owner focus on being a student not a landlord. Doing it more informally with lodgers is an option too though.

Pixie5740

dont_use_vistaprint wrote: »

An agent will handle all the acceptance criteria such as deeds for UK based guarantors , contracts and secure deposit scheme, as well as quarterly checks which could be uncomfortable with an onsite landlord. It will let the owner focus on being a student not a landlord. Doing it more informally with lodgers is an option too though.

That's not really the scenario the OP is describing though where (s)he is the mortgager and landlord. In your case you're both the beneficial and legal owner of the property making you the landlord, your daughter just happens to live there.