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I'm hoping someone may be able to offer some advice on this please.... We've seen a house in a particular area we'd like to buy as a long term investment where (unusually) we are not bothered about making a return as our intention would be to rent it to a family member at a slightly less than market rent so they can rent it for as long as they want and have complete surety of tenure. House is a 3 bed for around £260k and we'd be looking for a 75% LTV mortgage of £195k, although a LTV of 80% would be preferable..
My usual broker has come up with a TMW product which is a no fee five yr fix at 3.09% which would be easily affordable at £502pcm. As we have quite a few BTL mortgages TMW is possibly the only lender we can consider unless someone knows differently?
But, according to TMW criteria the minimum rent would have to be £195k x 5% x 1.45 = £14,137/yr or £1178pcm and the true market rent would probably be around £950pcm max. Therefore, assuming they do their due diligence and check on the rent returns for that area it seems likely that the maximum loan we would be able to borrow on that property would be around £160k which would mean us putting down £100k which is more than we either want to or can afford. Annoyingly, apparently if we were newbie LL's the factor TMW would apply would be £195k x 5% x 1.25 = £12187/yr or £1015pcm - this seems to me to be to be the wrong way round as we are therefore being penalised for being more experienced?
Can anybody think of another way we might be able to finance this or another lender who may be prepared to lend to us without such a high rent required?
Your input, as always will be appreciated - thanks.
I didn't think TMW allowed tenants to be family members.
I arrange a similar mortgage a few months ago where a family member was going to be the tenant of the property and went through a number of lenders until I found one who would do it (then I came across quite a few!)
If the rent doesn't add up, then there are lenders out there that offer 'top-slicing'. This is where your personal income is used to cover the rental shortfall.
With you being a portfolio landlord as well, it's probably going to need a specialist BTL broker.
More than happy to assist, but would need a property portfolio spreadsheet as well as income details to begin some research.
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I assume that if you take out one of these family mortgages, the rental income received will fall into the s24 bracket?
It's my understanding that the rental income is treated the same as a non-family tenant.
Lenders shy away from family related tenants because they believe they is more chance of the tenant not paying, so some lenders look to use 'affordability' (same as residential mortgage) to estabilish how much your can borrow. In essence you prove you can run 2 homes (although the running costs are slightly different for the second property). Some lenders will allow the rent to be taken into consideration, some won't.
PRA lending will have more effect than folk think
and most lenders will not allow a family member and they do check ??
They check the Voters roll and council tax
Learn Change and Adapt ?????
All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.
Lenders aren't allowed to access council tax details.
CT payers don't appear on credit files.
In selective licence they inform the lenders who is liveing there
voters Register is public document
So LL are required to give details of any lender they may have?
If the LL doesn't give any lender details then there is no way the council can find out.
Councils are not allowed to access credit file details.
It is none of the council's business what loans etc a person has.
So LL just have to indicate they own the property outright.
The only way the council could find out if there is a lender was if they accessed LR details.
Do councils have free access to LR records?
If not they will not pay for each property LR details.
There is simply no way I would advise any council of any mortgages etc I may have.