Inherited share of property and buying my 1st property

Guinnessdrinker

Hi there,
I would greatly appreciate some advice/guidance. Me and my six siblings inherited my fathers house worth £200,000 which I am emotionally attached to. Four of my siblings want out so they can set their children up. One of my sisters wants to also keep the house and so we have agreed to keep it and rent it out. The rental income will be £700 per month. I will be buying out the others with an amicably agreed payment plan however I have a few questions/thoughts I would appreciate your help with. 

1. Until the money is paid in full to the siblings do they still have some right of ownership? If yes I would rather find a way to pay them immediately, e.g. through a mortgage. 
2. Is it realistic that I can get a mortgage on the rental property to help me pay an outstanding £20,000 to my siblings and to buy my own home. Or not. What is the best course of action? The places I am looking at are around £260,000, My salary is £34,000 per annum and I will probably have about £10,000 by the time I want to move. 

3. As a ‘first time buyer’ is it realistic that I could get a mortgage on the BTL. I am blessed to have no debts, good credit and a secure job.

Please let me know if you need more details. This is all quite hard to get my head round as I haven’t bought anywhere before and I am still grieving. But life goes on and I need to plan for my future. 
Thank you in advance.

[Deleted User]

Guinnessdrinker said:

Hi there,
I would greatly appreciate some advice/guidance. Me and my six siblings inherited my fathers house worth £200,000 which I am emotionally attached to. Four of my siblings want out so they can set their children up. One of my sisters wants to also keep the house and so we have agreed to keep it and rent it out. The rental income will be £700 per month. I will be buying out the others with an amicably agreed payment plan however I have a few questions/thoughts I would appreciate your help with. 

1. Until the money is paid in full to the siblings do they still have some right of ownership? If yes I would rather find a way to pay them immediately, e.g. through a mortgage. 
2. Is it realistic that I can get a mortgage on the rental property to help me pay an outstanding £20,000 to my siblings and to buy my own home. Or not. What is the best course of action? The places I am looking at are around £260,000, My salary is £34,000 per annum and I will probably have about £10,000 by the time I want to move. 

3. As a ‘first time buyer’ is it realistic that I could get a mortgage on the BTL. I am blessed to have no debts, good credit and a secure job.

Please let me know if you need more details. This is all quite hard to get my head round as I haven’t bought anywhere before and I am still grieving. But life goes on and I need to plan for my future. 
Thank you in advance.

I'll start by saying that letting a property you have an emotional attachment to is a bad idea and a 4.2% gross rental yield isn't exactly great.  Selling is the more sensible option.

1) It depends on how you set things up.  You can have a private mortgage arrangement between you and the siblings who want to sell where instead of being owners your siblings place a charge(s) against the property until they are repaid.
2) If you and your sister want to remain owners and be joint landlord of the property you will need a joint BTL mortgage with her. You and your sister will need at least 25% equity in the property to get a BTL mortgage.  When you come to buy your own home you will have to pay the higher rate of SDLT which on a 260k property will be 10,800 so that's more than the savings you have meaning you have no deposit for buying your home.  Even without the higher rate of SDLT you still wouldn't be able to afford a 260k property with a 10k deposit and an income of 34k because you'd be looking to borrow over 7 times your income which just isn't realistic.

In short you cannot afford the BTL and to buy your own place.

Guinnessdrinker

Hi Lover_of_Lycra, thank you for your detailed response. I take on board your salient points and you’ve given me things to think about. I will look into what having a charge against the property would look like for everyone.

Guinnessdrinker

hi Lover_of_Lycra
Your summary is a bit disappointing to accept but maybe a reality I have to accept until I can pay everyone off and save a decent deposit again. Thank you for taking the time to read and share your knowledge on my situation.

Doozergirl

I'd seriously reconsider the whole
BTL thing.  Being emotionally attached to something isn't the basis of a business plan.  If you aren't living in the house, it's going to be someone else's *home* and you are simply responsible for maintaining the building.  There's no emotional pay off for you, the financial return isn't good, it's pure admin and it's going to cost you all that additional stamp duty down the line when you want your own place.  That's nearly two years of rent (and tax and costs) before you've even started to see a return on paper.  

There's also the issue of joint ownership with someone who may well want to sell up in the future, or you may.  It gets complicated.  

Your first priority is to buy yourself a home, where you can create a new memories.  At the moment, you could potentially just about scrape to buying dad's house for yourself.  If the emotional attachment is genuinely that
strong, then live in it and enjoy it.  It is, however, only an object and the memories are inside you, not inside the house.  

Otherwise, dad has left you a wonderful gift of a deposit to springboard you into the next chapter of your life.  It doesn't replace him, but it helps to set you up and I can imagine that he'd be really proud to see you taking that practical step to build your future.  

hazyjo

Agree with the others. Emotional attachment is a disaster waiting to happen when it comes to BTL.

I've lived in many homes during my lifetime. I look back on some really fondly. I have lovely memories of my dad in one, and mum still lives in the other but is contemplating moving. We won't be hanging onto that house for sentimental reasons. The memories are in our heads, and if I did believe they were in the fabric of the actual building, the absolute last thing I would want is to be forced to see other people in it. I'd rather sell and let someone else make it their home and make their own memories within it.

Retired_Mortgage_Adviser

Guinnessdrinker said:

2. Is it realistic that I can get a mortgage on the rental property to help me pay an outstanding £20,000 to my siblings and to buy my own home. Or not. What is the best course of action? The places I am looking at are around £260,000, My salary is £34,000 per annum and I will probably have about £10,000 by the time I want to move. 

3. As a ‘first time buyer’ is it realistic that I could get a mortgage on the BTL. I am blessed to have no debts, good credit and a secure job.
Please let me know if you need more details. This is all quite hard to get my head round as I haven’t bought anywhere before and I am still grieving. But life goes on and I need to plan for my future. 
Thank you in advance.

Sorry for your loss.

Regarding the mortgage bit of your post -

It's not impossible to get a BTL mortgage as an FTL who isn't an owner-occupier but it will mean that you are limited to a handful of lenders. Mainstream-ish rates should be available. You may be able to extract between 60-75% of the equity through a remortgage depending on how the calculations stack up, what lender you use, lender val and what term you fix for. Fairly straightforward job for a half-decent broker.

Guinnessdrinker

Thank you Doozergirl
I hadn’t even thought about stamp duty so that’s something else for me to seriously consider. The joint ownership isn’t (shouldn’t be) a problem as we have made legal arrangements to give each other first refusal and/or leave to the other sibling in our will. We were advised this was sufficient to minimise/eliminate the potential desire to sell.
You are right my first priority is to buy myself a home and to create new memories.  I was trying to see if I could use my dad’s home to do that whilst putting in plans with an investment towards my pensionable years. Unfortunately I am unable to live in it as it is in an area where there is little to no work in my profession and the salary below par. 

“It is, however, only an object and the memories are inside you, not inside the house”.  This is Very very true x.

It is a ‘wonderful gift’ that I am trying to fully utilise with the knowledge and experiences that good people like yourself who take the time to share and help strangers like me to become more informed. 

Thank you for your advice and time. 

Guinnessdrinker

Hi hazyjo
thank you. You are of course right. The memories are lived inside and outside of the home and are with me wherever I am. I do want others to benefit from the house so your comments are helpful. 

Thank you kindly. 

Guinnessdrinker

Thank you for your condolences Retired_Mortgage_Adviser. Your advice regarding the mortgage is helpful, for me to look at all my options before eliminating what is not feasible. Having a few lenders to explore will be insightful (and better than none!) before I decide how to proceed. 

Thank you for sharing your knowledge with me.