Advice on being Named Landlord/Mortgagor

AskAsk

konn1ch1ha said:

AskAsk said:

so your stepdad will give you money to pay your deposit.  he will then move into it along with his mate.  his mate will pay you rent, what about your stepdad, is he also going to pay you rent?

i assume you won't be living there yourself.

1. Yes
2. Yes
3. Yes
4. He won't be paying rent
5. I won't be living there

if he is in his 70s, then there is a high likelihood that he will pass away within the 7 years rule for inheritance tax on gifting.  if he lives there rent free then the tax man will consider that you have been fraudulent and not declared his rent, as effectively you could argue, he paid you the rent in advance as the lump sum to pay the deposit 

Grumpy_chap

Complicated - you are going to need professional legal advice.
The deposit is likely to be PET.
Are you in a position to pay the mortgage if the income from the Stepdad and / or Carer fails for any reason?
Are you ready to be a Landlord?
Have you received any advice on whether Stepdad and Carer would make the tenanted property HMO?  I can see the argument that it could be, and also argument against (Stepdad and Carer effectively one household?)
Do you own any other property?  If so, 2nd property SDLT will apply - it will anyway if the Stepdad buys as he will continue to own the current top floor flat.
Do you have your own property, or plan to get?  Your affordability will be impacted if you already have a mortgage.

I did initially read that you would by a three- or-more- bed property so there would be OP, Stepdad plus Carer, but I think on reading again that it will only be Stepdad and Carer in the property.

Thrugelmir

Being a regulated BTL will be a higher rate of interest also lenders will have far tighter criteria. Far more focus on your ability to pay the mortgage.

Annisele

I'm not sure it would be a regulated mortgage. An "unofficial stepdad" might not be family for the purposes of deciding whether this was a regulated mortgage contract, depending on exactly what OP means by the term.

But, regulated or not, I share other posters' concerns that this scheme will fall over the instant a potential lender realises that the deposit has been lent by somebody who then intends to live in the house rent free. Any lender would worry that that situation might give "unofficial stepdad" rights to stay in the property even if OP doesn't pay the mortgage - and if there's any chance of that, the lender will simply decline to lend in the first place.

I'd also be worried about the relationships part of this. OP says they've been "offered a position", which makes it sound as though unofficial stepdad thinks he's doing OP a favour. Depending on the size of the deposit, it might be a favour - but it also might be a very expensive millstone if nobody pays any rent to the OP. Any situation where both parties feel they've done a favour to the other has the potential to blow up.

lr1277

I will raise one more situation to consider. Say Fred needs to go into care. How to pay for this?

One possibility is that Fred has sufficient funds to pay for private care for the rest of his life. Then it is fine and dandy.

Another possibility is that Fred doesn't have quite enough be he would have enough if he got back the money he gifted you. Would you be able to pay him back yourself or would you need to sell the property?

HampshireH

theartfullodger said:

HampshireH said:

Why in his 70s does he want to own / maintain 2 properties?

I'm 72 and have more than 2 properties.  Do you advise against this please?

Really you decided to focus on that bit out of context?

My comment was purely a question as to why now he may want to own 2 properties, when already wanting to move to a ground floor property, has parkinsons and wants someone else to do the landlord work for them (based on what OP has said)

Turns out he wants OP to own the 2nd property (seemingly on a mortgage) for him and his friend to live in.

My understanding from your posts it that you have been for some time and have a number of properties as well as know what you are doing. 

These circumstances seem very different to yours.

Thrugelmir

Annisele said:

I'm not sure it would be a regulated mortgage. 

The source of the deposit creates a financial interest in the property. Making repossession extemely problematic for the lender in the event that the mortgage is defaulted upon.  

wilfred30

Another scenario - what happens if the friend/carer dies first.  Who will pay the mortgage then?

konn1ch1ha

AskAsk said:

konn1ch1ha said:

AskAsk said:

so your stepdad will give you money to pay your deposit.  he will then move into it along with his mate.  his mate will pay you rent, what about your stepdad, is he also going to pay you rent?

i assume you won't be living there yourself.

1. Yes
2. Yes
3. Yes
4. He won't be paying rent
5. I won't be living there

if he is in his 70s, then there is a high likelihood that he will pass away within the 7 years rule for inheritance tax on gifting.  if he lives there rent free then the tax man will consider that you have been fraudulent and not declared his rent, as effectively you could argue, he paid you the rent in advance as the lump sum to pay the deposit 

How can I not declare his rent when he won't be paying rent? Surely the declaration should be made on a tax return when he gifts the deposit?

konn1ch1ha

Grumpy_chap said:

Complicated - you are going to need professional legal advice.
The deposit is likely to be PET.
Are you in a position to pay the mortgage if the income from the Stepdad and / or Carer fails for any reason?
Are you ready to be a Landlord?
Have you received any advice on whether Stepdad and Carer would make the tenanted property HMO?  I can see the argument that it could be, and also argument against (Stepdad and Carer effectively one household?)
Do you own any other property?  If so, 2nd property SDLT will apply - it will anyway if the Stepdad buys as he will continue to own the current top floor flat.
Do you have your own property, or plan to get?  Your affordability will be impacted if you already have a mortgage.

I did initially read that you would by a three- or-more- bed property so there would be OP, Stepdad plus Carer, but I think on reading again that it will only be Stepdad and Carer in the property.

What does PET mean? 
I'm confident the carer/tenant will be paying rent efficiently as he'll be DSS. I can't see the property being HMO and will be solely for "unofficial stepdad" Fred and carer.
I do own my own flat which I rent out. What does SDLT mean?

It will only be Fred and carer. I plan to buy somewhere with my wife separately and completely unrelated to this question.