Buy the remaining percentage of our help to buy property to rent out

ISC82

Okay, so my wife and I managed to get on the property ladder several years ago through the help to buy scheme. At the time we were approved to purchase 60% of a one-bedroom flat. In the past couple of years, through promotions and a couple of pay rises and a serious amount of effort improving our credit ratings we can definitely now afford to purchase the remaining 40%. However, we do now need something a little bigger, i.e. a two-bedroom flat or small house but we are struggling to find anything that either makes my commute impractical or that we just cannot afford the mortgage for (is that someone playing the worlds smallest violin I can hear? ). 

Now one of closest friends is aware of our situation (as lucky as we are) and has made a suggestion to us, i.e. if we were to buy the remaining 40% of our mortgage out to then rent it out, he would then rent us his property for as long as we would like it and all we need to do is cover his mortgage payments. This would probably be about the same or even less than what we are paying at the moment and help us save towards that bigger flat or house at some point. 

I suppose this leads to several questions:
Is this even allowed and if so how feasible is it?
Would getting a buy to let mortgage without a large deposit be possible?
What other considerations do we need to make? 

Any advice would be greatly appreciated. 

P.S. We have contacted two mortgage advisors but we have not had the best advice from them in the past. 

[Deleted User]

ISC82 said:

Okay, so my wife and I managed to get on the property ladder several years ago through the help to buy scheme. At the time we were approved to purchase 60% of a one-bedroom flat. In the past couple of years, through promotions and a couple of pay rises and a serious amount of effort improving our credit ratings we can definitely now afford to purchase the remaining 40%. However, we do now need something a little bigger, i.e. a two-bedroom flat or small house but we are struggling to find anything that either makes my commute impractical or that we just cannot afford the mortgage for (is that someone playing the worlds smallest violin I can hear? ). 

Now one of closest friends is aware of our situation (as lucky as we are) and has made a suggestion to us, i.e. if we were to buy the remaining 40% of our mortgage out to then rent it out, he would then rent us his property for as long as we would like it and all we need to do is cover his mortgage payments. This would probably be about the same or even less than what we are paying at the moment and help us save towards that bigger flat or house at some point. 

I suppose this leads to several questions:
Is this even allowed and if so how feasible is it?
Would getting a buy to let mortgage without a large deposit be possible?
What other considerations do we need to make? 

Any advice would be greatly appreciated. 

P.S. We have contacted two mortgage advisors but we have not had the best advice from them in the past. 

Which HTB scheme?  Is this HTB Equity Loan London where you have purchased 100% of the property using a deposit, mortgage and equity loan, or is it a shared ownership property where you have purchased 60% of it using a mortgage and/or deposit and a housing association owns the other 40%?

Generally speaking to get a BTL mortgage you will need to put down a deposit of at least 25%.  I think there are some lenders who might go lower.

In terms of letting the property there's is lots to think about.  For starters, does your lease allow you to let the property?  Will you actually make any money from letting the property once you've accounted for all the expenses and tax?  For the rest read the sticky at the top of the board called:  Tenancies in Eng/Wales - A guide for landlords and tenants.

ISC82

Lover_of_Lycra said:

ISC82 said:

Okay, so my wife and I managed to get on the property ladder several years ago through the help to buy scheme. At the time we were approved to purchase 60% of a one-bedroom flat. In the past couple of years, through promotions and a couple of pay rises and a serious amount of effort improving our credit ratings we can definitely now afford to purchase the remaining 40%. However, we do now need something a little bigger, i.e. a two-bedroom flat or small house but we are struggling to find anything that either makes my commute impractical or that we just cannot afford the mortgage for (is that someone playing the worlds smallest violin I can hear? ). 

Now one of closest friends is aware of our situation (as lucky as we are) and has made a suggestion to us, i.e. if we were to buy the remaining 40% of our mortgage out to then rent it out, he would then rent us his property for as long as we would like it and all we need to do is cover his mortgage payments. This would probably be about the same or even less than what we are paying at the moment and help us save towards that bigger flat or house at some point. 

I suppose this leads to several questions:
Is this even allowed and if so how feasible is it?
Would getting a buy to let mortgage without a large deposit be possible?
What other considerations do we need to make? 

Any advice would be greatly appreciated. 

P.S. We have contacted two mortgage advisors but we have not had the best advice from them in the past. 

Which HTB scheme?  Is this HTB Equity Loan London where you have purchased 100% of the property using a deposit, mortgage and equity loan, or is it a shared ownership property where you have purchased 60% of it using a mortgage and/or deposit and a housing association owns the other 40%?

Generally speaking to get a BTL mortgage you will need to put down a deposit of at least 25%.  I think there are some lenders who might go lower.

In terms of letting the property there's is lots to think about.  For starters, does your lease allow you to let the property?  Will you actually make any money from letting the property once you've accounted for all the expenses and tax?  For the rest read the sticky at the top of the board called:  Tenancies in Eng/Wales - A guide for landlords and tenants.

We have bought through shared ownership where a housing association own the other 40%.

Our lease does allow rental of the property and looking at rent for the area and similar properties we should cover our mortgage payments even at a higher rate of a BTL. However, as you mentioned there is a higher deposit required and having a read through various threads and other forums I think the deposit will make getting a BTL impossible for the moment.

It is a bit off catch 22 as the lower rent that we would be able to pay to live in our friend's property would have allowed us to save anywhere between £400-600 a month. Whereas, we would struggle to save a third or even £100 or more with having to pay a full 100% on the current property while living there. 

Thanks for the tips.