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Original poster

Can 76yr old MIL get a BTL mortgage on her own home to downsize?

16 replies

deepest · 21/06/2014 13:15

MIL is looking to come to live with us - and we will need to build an annex to accomodate her. Can she raise the capital from her existing property by transferring it to BTL - so that she can live off the rental income and fund the annex build?

OP posts:
specialsubject · 21/06/2014 13:31

sounds tricky at her age.

also has she factored in all the other costs: maintenance, agents fees, tenant referencing, gas certificate, call outs? Plus any renovations needed, insurances (Buildings, contents, legal, malicious damage) ?

HaveToWearHeels · 23/06/2014 20:55

I wouldn't have thought so unless she has a regular income.

Herhonesty · 23/06/2014 21:04

speak to a btl specialist. but there's probably also gift/IHT issues to think about. what is the issue with selling the property?

KatieKaye · 23/06/2014 21:07

Doubtful.

Most lenders have 75 as the upper age limit at the term date of the loan, and she is already over that.

thatstoast · 23/06/2014 21:14

I think it would be very irresponsible to lend money based on the limited info you've given. I would consider selling if you're not able to fund the annexe.

LondonGirl83 · 24/06/2014 11:39

It's a great idea!

Buy to let has no age limit. You can either qualify by personal income or the projected rental income. If the bank is convinced the rent will cover at least 120 percent of the mortgage, they will grant it.

Most banks won't lend more than 80-75 percent of the value but I imagine you won't need anywhere near that much to build an annex. Depending on size, an annex can be as little is 20k so you probably need a very small loan relative to the house value.

Your MIL can therefore keep the majority of the rent as an income for herself to cover costs.

This is much more sensible than selling the house and blowing through all the equity as she can still leave the house to her family if she want eventually.

Original poster
deepest · 24/06/2014 13:56

Thanks London girl that is what we had hoped. House worth 500k - annex we have budgeted approx 30k (but dont have the cash) hope that it will also create an income for her after letting fees/costs and 30k interest only mortgage repayments ... which would be good.

Does the 120% rental figure reflect that 20% of the income is needed for fees etc?

OP posts:
titchy · 24/06/2014 14:09

You'd certainly need to speak to a btl specialist.

Does she have enough income to cover the interest if there are any gaps in tenants (inevitable)?

Marmitelover55 · 24/06/2014 17:31

Could you borrow extra on your mortgage - we have done this and then lent it to my parents who were unable to get a mortgage themselves to do up their BTL property?

PancakesAndMapleSyrup · 24/06/2014 17:34

You will struggle with getting a btl mortgage that is not vastly overpriced. I know this as mil has literally just been through a broker at 64 years old, trying something similar with a v small mortgage 45000! The rates and application fee were plain stupid!

LondonGirl83 · 24/06/2014 17:43

Maybe you could co-sign the btl with her. With you as an extra signatory she should qualify for better rates hopefully.

Original poster
deepest · 24/06/2014 18:40

Pancakes that is interesting - she would probably be happy enough to transfer the whole property into our names, then we could apply for the 30K mortgage as BTL to build the annex at ours - and let our her home so that she has an income...

OP posts:
Marmitelover55 · 24/06/2014 18:53

If the house is transferred to your name I think the rent would be treated as your income and therefore you would be taxed on it and your mil's personal allowance may not bd fully utilised. Also as you would have two houses, one not your main residence, there would be CGT to pay if you were to sell it in the future. There would also be IHT to pay if she were to die within 7 years. I think you should get some advice from a financial adviser as its a very complex area...

KatieKaye · 24/06/2014 19:32

Sadly for you, many BTL mortgages do pose age limits. The reasons for this are pretty obvious... The ones that aren't so bothered about the borrower's age are often the ones that charge higher interest rates.

Why doesn't she sell her house and invest the money to give her an income? Or sell the house, fund the extension and then use the surplus to buy a smaller property to rent out?

8misskitty8 · 24/06/2014 23:38

I would check with some lenders but I would have thought that your mums age will be a factor.
We moved 2 years ago and our mortgage is only a 50% one (So big deposit) but since i'm a few years older than DH our mortgage term took my age at the end of the mortgage term to beyond retirement age. This was highlighted when we took it out and we had to assure the bank we had provison in place to pay mortgage beyond my retirement age (I.e. pension) . Since we had a good deposit, DH is younger and the main wage earner it was fine. That was before the new tighter mortgage rules came in though.
Good luck OP.

PancakesAndMapleSyrup · 25/06/2014 07:52

Op i really would get some financial advice and then go and see a broker as well, its a difficult area at the moment. You may find that you can get a btl if you or dh are willing to commit to being on the mortgage as well because of salaries. But the option of selling up and buying a smaller place outright, building the annex AND having liqiidity in the bank for her to spend sounds a better idea and she can enjoy herself.

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