Should I help a friend with BTL mortgage?

by Readers Question

11:45 AM, 21st May 2015
About 4 years ago

Should I help a friend with BTL mortgage?

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Should I help a friend with BTL mortgage?

My very close friend has asked if they could put me down on their BTL mortgage application for better interest rates apparently. I have no financial interest in the project at all and won’t be contributing anything towards the deposit. It’s literally just my name on the mortgage.

I have no doubt about my friend’s ability to meet the payments. However, I would like your opinion on if I should be agreeing to do this.

What are the potential risks?

And how can I protect myself if I do agree to go ahead with it?

Thank you for your responses.

Jamiehelp



Comments

Neil Patterson

11:59 AM, 21st May 2015
About 4 years ago

Hi Jamie,

A Buy to Let mortgage will be "Joint and Several"

This means in the event of non payment you are not only responsible for half the mortgage but also all of it if the other party does not pay.

One missed or late payment on your credit file will make it extremely difficult for you to get a mortgage for 3 years.

This is a very big risk for no reward!

Also the property title deeds with land registry will need to be in joint names if the mortgage is in joint names. Your friend may not want this.

Also I have been in and around the mortgage industry 20 years and I know from vast experience that circumstances nearly always.change and that this is highly likely to be a source of stress in the future.

My advice is don't do it unless it really is a 50/50 joint investment.

money manager

12:17 PM, 21st May 2015
About 4 years ago

No.

money manager

12:27 PM, 21st May 2015
About 4 years ago

To elaborate, but from a different perspective from Neil, suppose everthing goes swimmingly with regard to the mortgage but unfortunately you were to die. Your executors would be bound to call in the assets of your estate of which half of this asset would form part if arranged on a tenants in common basis. So, a joint tenancy is the solution? Not really, if your friend died the whole property would become yours; not perhaps the intended result.
Numerous risks for no intended benefit; the answers is still no.

JohnCaversham

12:46 PM, 21st May 2015
About 4 years ago

You said-"literally just your name on the mortgage" there is no 'JUST' in a mortgage application, the responsibility to honour the debt is very real and comes with huge consequences if it goes wrong.............
I have to ask as to why you're of the opinion that you would get a better interest rate than your friends?? BTL's are based solely on the property rental income, and application/rate problems usually only occur if there is a low income/poor credit score on application??
I've done this sort of thing for close family but the only reason was they (my sister) didn't show enough self employed income..
Don't do it...

Jan Martin

12:51 PM, 21st May 2015
About 4 years ago

I sense that you know its not the sensible thing to do or you wouldn't be asking ..
Take the advice and don't do it .

Ian Narbeth

14:51 PM, 21st May 2015
About 4 years ago

Reply to the comment left by "money manager" at "21/05/2015 - 12:27":

Jamie should be wary of doing this (see Neil's comments) but not for the reasons you mention. It is quite simple for the friend and Jamie to hold the legal estate as joint tenants on trust for the friend absolutely, i.e. 100:0, not 50:50. Death will not affect entitlement and there is no need to sell the property.

money manager

15:04 PM, 21st May 2015
About 4 years ago

Reply to the comment left by "Ian Narbeth" at "21/05/2015 - 14:51":

Agreed Ian, up to a point. "It is quite simple". Except it isn't. My point was, essentially, that there are many different facets and levels to consider (Neil's, mine, yours for starters) and that the depth, breadth, and robustness of advice required was unlikely to be properly obtained and for what in return?

Colin Dartnell

0:09 AM, 22nd May 2015
About 4 years ago

Reply to the comment left by "Ian Narbeth" at "21/05/2015 - 14:51":

I believe that should be Tenants in common not joint tenants, then you can chose the percentage share that each holds in the property.

All the same I would not touch it, and as John Maynard has already pointed out BTL mortgages are based on rental income mostly, and no employment income in some cases.

money manager

5:18 AM, 22nd May 2015
About 4 years ago

Reply to the comment left by "Colin Dartnell" at "22/05/2015 - 00:09":

Thank you Colin. As per "Reply to the comment left by “Ian Narbeth” at “21/05/2015 – 14.51“: ""Jamie should be wary of doing this (see Neil’s, my, and Colin's point comments) but not for the reasons you mention. I'm not being sarchastic but simply pointing out that my comment had sought to address one issue, Ian introduced a perfectly reasonable solution but the wrong way round, I missed the error in my reply but thanks to Colin again, all of which again demonstrates that “It isn't quite simple” and none of this "advice" carries responsibility

I used to conduct highly complex income and CGT work but for paying clients where I had the time and purpose to check, check, and check again detailed analyses and fully comprehensive reports before going anywhere near the client with a solution and which advice most certainly DID carry responsibility. And a bill.

Ian Narbeth

8:53 AM, 22nd May 2015
About 4 years ago

Reply to the comment left by "Colin Dartnell" at "22/05/2015 - 00:09":

Hi Colin
I should perhaps have expanded my remarks. As a matter of law the legal estate in the property must be held as joint tenants. The beneficial interest should in Jamie's case be held as tenants in common. See e.g. https://www.lawsociety.org.uk/support-services/advice/practice-notes/joint-ownership at 2.1

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