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Buy to Let/Let to Buy Mortgage Help!(10 Posts)
Okay, so long story coming up. Brace yourselves!
OH, DD and I live in a two bedroom terraced house. OH is named on the mortgage along with his ex, who he has had no contact with for several years. OH pays the rent , his ex has no input whatsoever.
Last year we had the property valued and it came in at £50,000. There is still 59,000 left on the mortgage.
Neither of us have any love for the house. I don't view it as my home and OH is increasingly apathetic towards its up keep.
So I devised a plan, but I'm not sure if it's workable so I need some advice.
Step 1: Put OH's DF on the mortgage in place of his ex and continue to pay the mortgage as normal. The reason for this is that I am not comfortable tying myself into a mortgage on a house I never had any love for in the first place and effectively taking on Ex's debt.
Step 2: Put new kitchen and bathroom in new house. Get new carpets for upstairs. That is about the extent of the work that needs doing on the house bar emptying it out and giving it a good clean.
Step 3 (and this is where I totally lose my mind because I don't understand it): change the mortgage to buy to let (or would it be let to buy), rent the property out.
Step 4: Get mortgage on a new house with our combined income which is 55k plus.
I cannot for love nor money get my head around the let to buy mortgage and how it works. Can anyone help and explain it to me like I'm 5, please?
And if anyone can spot any pitfalls in my plan that would be a welcome contribution too as I feel in way over my head.
Hi I would advise you speak to a mortgage advisor for some advice on the different kinds. I am no expert but a friend of mine is a mortgage advisor and I know he gives loads of advice to people free of charge. Once you have all the facts then you can decide what is best to do x
I'm a little confused as to which house is which, but you are thinking of becoming a landlord. That involves risk and responsibility - being apathetic is not the way to do it. You also need to do some serious sums to see if it is worth it. Insurances are hefty, you need buildings/contents, legal and rent guarantee as if you get a wrong 'un you could be looking at up to a year without income.
MN will hate you but that is the least of your worries.
Let to buy involves taking a residential home, (sometimes) extracting money from it to fund another residential purchase, and then buying a second home which becomes residential, with the first property now rented out.
In your case, there is no equity to extract from the current home - you're in negative equity.
So all you're looking at doing is turning a resi mortgage into a BTL. I have no idea how DH's ex/dad enter into this - you need a broker for that - but generally you'll approach a broker / BTL lender and ask to convert your current mortgage to a BTL. They will ask about affordability as well as potential rental income. Most want rent to cover 125% of the mortgage - so if the mortgage is £100 a month, the lender will want to see that the rent is at least £125 a month.
BTL mortgages are typically available up to 80% loan to value (how much you borrow v how much house is worth). If the house is worth £50,000, no BTL lender will lend more than £40,000 (80%) to you. So if you owe £59,000, you'll need to find the difference somewhere. (There are 90% BTL mortgages, but they are rare and expensive ime.)
The new home - pretty straightforward. You're not releasing equity from the first home, so you'll need to save a deposit/access a government scheme and buy as usual.
I hope I've understood your situation correctly, someone else can advise if I have gotten the wrong end of the stick.
Agree with others - get thee to a broker!
You can't just put someone else on an existing mortgage that your boyfriend's ex is a part to!
Your first step, is to understand exactly what her legal rights are, with regards to the property.
Suggesting you talk to a broker too.
Re the current mortgage - your DH will need to speak to a solicitor to establish ex's legal position. As the current mortgage is in negative equity, he'd need to approach the lender and ask for consent to let, as no new lender will take on a debt that's greater than the value of the property (most BTL lenders cap the LTV at 75%, a few at 80% but you'll pay a higher interest rate). Bear in mind that there'll be a cost to remove ex from the deeds (even if she doesn't want any money to come off, there'll be legal costs).
Also worth thinking about is that if your DH is looking to purchase another property, there'll be an additional 3% of the new property's value payable in stamp duty as he already owns property worth in excess of £40k in the background.
Another vote for broker here- go to a local company ask for recommendations from local people. First step has to be sorting out the legal position WRT the ex IMO. Not as easy as just "putting" someone else on the mortgage.
Why can't OH just he on the mortgage on his own? Why take his father on?? Will ex be amenable to coming off the mortgage? Do you need to buy her out? ie will she be owed money for it?
Can you afford the cash to do the work?
Will you have a deposit for the next house?
What are rental values like for properties similar to yours? And how much is that compared to the mortgage?
You can't just remove his ex and put someone else on that easily.
This would require a transfer of title application where the house seeds are changed and the mortgage which she needs to agree to as well through a solicitor (approx £300) and the mortgage company would need to make sure it's affordable in your oh and any other new parties name.
As the mortgage is now your oh and ex can apply for consent to let (approx £100) which would be the lender agreeing for him to rent it out but still keep the mortgage as is.
Under new regulations BTL mortgages need to be affordable based on expected rental income (confirmed via a surveyor) but also income from the parties on the mortgage. Age will also come into it too.
Firstly your oh needs to speak to his lender to see what they can suggest.
None of your suggestions are viable options unless you have the £9k to make up the negative equity plus another minimum £2.5k (5% residential deposit).
If you do have that money then have s chat with a broker. As others have said, you can't just change names on a mortgage.
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