Mortgage to buy flat for son to rent

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13th January 2021, 15:39
snowman

Mortgage to buy flat for son to rent

My son, currently out of work thanks to the Covid situation, is renting a flat but has been given notice as the owner wants to sell.

We thought we'd buy the flat, putting down around 50% deposit and interest only-ing the rest on a mortgage.

Seemed easy, except it seems it's not.

You can't get a buy to let mortgage if a family member is going to be the tenant.

So, maybe a standard mortgage is the answer, but it seems you have to prove you have a massive income for that, which I can't currently do as I've been working more or less part time over the last few years, since our mortgage is paid off.

It seems strange that we can't just get a mortgage on a property worth twice the loan amount and with a fully paid off property of our own, especically as there would be no issue if we were renting it out to a stranger...

We can't stretch to buying the property outright, so does anyone have any experience of this situation and, if so, what was the answer?

M
13th January 2021, 15:45
Omegamanic

Do you have to advise about the tenant prior to mortgage? Slightly underhand I guess, and I wouldn’t like to rely on family paying if everything went wrong - but if I knew I could cover all mortgage costs regardless and would be happy to do so, then I might consider a buy to let mortgage. Years ago I rented a place off my parents that they had a buy to let mortgage on, in their retirement, but I wasn’t aware of any restriction and I’m sure they weren’t that clued up either.
13th January 2021, 15:46
snowman

Quote:

Originally Posted by Omegamanic

Do you have to advise about the tenant prior to mortgage? Slightly underhand I guess, and I wouldn’t like to rely on family paying if everything went wrong - but if I knew I could cover all mortgage costs regardless and would be happy to do so, then I might consider a buy to let mortgage. Years ago I rented a place off my parents that they had a buy to let mortgage on, in their retirement.

Legally, absolutely!

In your scenario, assuming your parents didn't initially plan for you to rent it, they should have informed their lender and, probably, remortgaged.

M
13th January 2021, 15:47
Boss13

Can you take a mortgage on your own house and buy the flat for cash?
13th January 2021, 15:49
southerner101

you would need to be able to prove you can pay the mortgage regardless of a tenant irc
13th January 2021, 16:05
snowman

Quote:

Originally Posted by southerner101

you would need to be able to prove you can pay the mortgage regardless of a tenant irc

That's fair enough, but you can get interest only mortgages for a pittance (under £100 a month in our case) if you're renting to strangers, but not if you're renting to family! I wonder if we could get a BTL and then just NOT rent it out and let him live there rent free to keep an eye on it?

Quote:

Originally Posted by Boss13

Can you take a mortgage on your own house and buy the flat for cash?

I guess that might be an option, but then it'll possibly come back to income, etc, proving we can cover the mortgage...

M
13th January 2021, 16:21
Dave+63

Quote:

Originally Posted by snowman

Legally, absolutely!

In your scenario, assuming your parents didn't initially plan for you to rent it, they should have informed their lender and, probably, remortgaged.

M

Almost twenty years ago (so not sure how relevant now), I took out a business loan to buy the house my parents are living in.

I had the same issues re BTL so it was an agreed solution with my bank.

In your situation, can you remortgage your home to raise the money?
13th January 2021, 16:47
Coronet king

I think most BTL mortgages require you to have an income of 12.5k. We have a couple we did a remortgage with Santander and as long as there is a margin in the market rental value and you can prove over the earnings limit you should be fine. You wouldn’t need a tenancy agreement in place so should be ok, unless things have changed in the last 6 months.
13th January 2021, 17:09
Captaincook

I would suggest you need to speak to a specialist buy to let mortgage broker they would be able to advise with more accuracy. There may well be suitable options for you.

However, as far as I’m aware, no lender would allow you to rent the property to a family member, they’ll all expect transactions to be at an arm’s-length and with a third-party.

So long as the property/LTV meets the mortgage requirements, they would not expect you to have a rental agreement in place prior to completion.

The other point worth mentioning is that, is the property owner actually looking to sell or are they looking for a change in tenants?
13th January 2021, 17:09
awright101

You will need to find a lender that lends on regulated buy to let’s. Find a local mortgage broker who can hook you up.
13th January 2021, 17:41
snowman

Quote:

Originally Posted by Captaincook

The other point worth mentioning is that, is the property owner actually looking to sell or are they looking for a change in tenants?

Well, they've said they want to sell (it's always been an option), but it is possible!

Needless to say we'll need to determine that before we go too far.

M
13th January 2021, 18:23
MCFastybloke

The existing landlord should provide 6 months notice to terminate.
13th January 2021, 18:30
Stanford

Equity release?
13th January 2021, 18:34
Devonian

An independent mortgage broker could tell you all you need to know in 5 minutes. Home for a dependent relative might be an option subject to income? BTL’s generally don’t officially let to relatives.

Phone one up and run through your situation.
13th January 2021, 19:18
redmonaco

Quote:

Originally Posted by snowman

My son, currently out of work thanks to the Covid situation, is renting a flat but has been given notice as the owner wants to sell.

We thought we'd buy the flat, putting down around 50% deposit and interest only-ing the rest on a mortgage.

Seemed easy, except it seems it's not.

You can't get a buy to let mortgage if a family member is going to be the tenant.

So, maybe a standard mortgage is the answer, but it seems you have to prove you have a massive income for that, which I can't currently do as I've been working more or less part time over the last few years, since our mortgage is paid off.

It seems strange that we can't just get a mortgage on a property worth twice the loan amount and with a fully paid off property of our own, especically as there would be no issue if we were renting it out to a stranger...

We can't stretch to buying the property outright, so does anyone have any experience of this situation and, if so, what was the answer?

M

Raise the total amount of the flat cost from your existing no mortgage property. Then the flat will be yours with no mortgage so you can do what you like with it.
13th January 2021, 22:13
Montello

Quote:

Originally Posted by Boss13

Can you take a mortgage on your own house and buy the flat for cash?

I’d guess this is your best option, or can you use pension funds!
13th January 2021, 23:47
David_D

Quote:

Originally Posted by Montello

I’d guess this is your best option, or can you use pension funds!

You’d have to cash in your pension (and pay tax); you can’t invest in residential property through a personal pension.
14th January 2021, 00:38
Montello

Quote:

Originally Posted by David_D

You’d have to cash in your pension (and pay tax); you can’t invest in residential property through a personal pension.

May not have used the 25% tax free portion.