Buying a property in the UK, first time buyer

jay1441

Factors to consider:

1) My name is on a family members mortgage as part of a buy to let. Done so the mortgage would be approved.

2) My income £62k (before tax),Not many bills at all as live with family/ no car. Live in London.

3) Deposit saved £100k

Im looking to buy a house between £500K to £600k in London alone. My plan is to live upstairs with the downstairs on rent.

I realise the maximum I can barrow is 5x my salary £300k which is not enough.

Can anyone please suggest any ideas on how I could go about this with my factors into consideration? Interest only mortgage or a way into first time buyer help scheme?

Advice would be much appreciated.

ElizabethRose

You're not a first time buyer due to the other mortgage and property. Do you mean you plan to split the house into two flats? I think it's highly unlikely you will be able to do your plan. Look for a cheaper property without the stress of being a landlord. 

AdrianC

Odds-on you aren't just "on the mortgage", but a part-owner of that property.

Assuming that is the case...
You may be jointly responsible for all the legal responsibilities of being a landlord.
I hope you get your proportion of the rental income, and declare it on your self-assessment tax return, even if you then gift the taxed income to your family member.

But... the important bits for here...
You aren't a first-time buyer. You already part-own a property.
You'll have to pay the +3% SDLT, as well as not getting the FTB rate.

Forget residential interest-only mortgages.
Assuming this is a single property, the other occupant would be a lodger, not a tenant.

And, no, your income is not sufficient to allow you to buy a £5-600k property. You cannot afford it. You can afford, at most, £400k.

jay1441

Thanks for the replies!

The idea of the downstairs being on rent is to aid with the mortgage repayments. I guess it would be a family or a couple downstairs and would be lodgers.

This is in a certain area in london and houses are unlikely to be under £500k. I guess i will need to save another £100k or more as I'm definitely not interested in a flat.

elsien

The definition of lodger includes shared living space and them not having exclusive areas that you don’t go into. Otherwise you may inadvertently create a tenancy.

How are you envisaging the you upstairs/them downstairs is going to work in that respect? 

You might also find that the BTL mortgage will impact on the affordability on what you are able to borrow - if your family member defaults for any reason you will be liable to pay. 

Justonemorecupoftea

You generally need a 25% deposit on a BTL property, so doesn't look like a viable option.
Any reason why you don't look for a flat for £400k, which would be effectively the same as only living upstairs in a house, just without the landlord responsibilities.
I'm not sure of the impact of being in another mortgage in terms of how banks assess you, but that is a debt you are liable for and would make one of the properties a second home and (I think) liable for CGT.

grumiofoundation

jay1441 said:

Factors to consider:

1) My name is on a family members mortgage as part of a buy to let. Done so the mortgage would be approved.

2) My income £62k (before tax),Not many bills at all as live with family/ no car. Live in London.

3) Deposit saved £100k

Im looking to buy a house between £500K to £600k in London alone. My plan is to live upstairs with the downstairs on rent.

I realise the maximum I can barrow is 5x my salary £300k which is not enough.

Can anyone please suggest any ideas on how I could go about this with my factors into consideration? Interest only mortgage or a way into first time buyer help scheme?

Advice would be much appreciated.

1) do you get any income from the BTL?
If you don't you will be paying 15,000-18,000 in extra SDLT for nothing.... 

2) If you are happy with your current living situation then why the rush to move?
You are presumably saving >30,000 per year (>2,500 per month).
House prices may rise but your savings and (presumed?) salary increases are surely offsetting this?

Since is doesn't seem that you are a FTB then you aren't eligible for first time buyer specific schemes such as HTB equity loan.

steampowered

Right now, I am not sure you can afford any property at all.

You are the legal owner of another property, so if you buy a house to live in that will be a second property, so you will have to pay the second property SDLT surcharge (3% of the value of the property on top of regular stamp duty).

In addition, you are liable for the mortgage on another property. That means that a lender might not be willing to give you a second mortgage.

It is a shame that you have screwed up your financial situation by agreeing to own the BTL. You should sell the BTL.

Even after you have sold the BTL, you still will not be able to afford a £500k-600k property. The absolute maximum that a bank will lend is 5x your salary (and that is at a push), which gives you £310k. You have a deposit of £100k.

Realistically you should be looking at properties worth around £350-390k max. 

First time buyer schemes won't help - those schemes don't get around the 5x salary cap. A lodger won't help - that won't let you borrow more money.

AdrianC

jay1441 said:

This is in a certain area in london and houses are unlikely to be under £500k. I guess i will need to save another £100k or more as I'm definitely not interested in a flat.

Or look in a different area.

Yes, you have to compromise when you can't afford what you want, where you want.

jay1441

Thanks for all the input all!

I only wish to stay in this area due to convenience and distance to work, etc.

I guess only option is to save another 100K and hopefully house prices dont change too much for the worse.

theartfullodger

jay1441 said:

Factors to consider:

1) My name is on a family members mortgage as part of a buy to let. Done so the mortgage would be approved.

2...................

So "done so mortgage would be approved" eh?  All entirely above board and no fiddling going on no doubt.  

So you are NOT a first time buyer, are you?

Best wishes to all.