Should I help a friend with BTL mortgage?

by Readers Question

11:45 AM, 21st May 2015
About 6 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


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Comments

money manager

9:20 AM, 22nd May 2015
About 6 years ago

Reply to the comment left by "Ian Narbeth" at "22/05/2015 - 08:53":

Interesting and "Joint purchasers of property may need to be advised separately, even if they are married, in a civil partnership or cohabiting. You should be aware of the possibility of a conflict of interest arising in this situation and consider whether the parties should be advised to seek separate representation - for example, where the parties are making uneven contributions to the purchase and you have a suspicion of undue influence. Different factors may need to be taken into account in commercial situations." More cost for no benefit. I can't imagine many solicitors countenancing the original proposition as a "favour".

Jireh Homes

15:58 PM, 22nd May 2015
About 6 years ago

Agree with all the reservations noted above. The better rates may be due to your friend having a low income and thus limited on choice of lenders. Adding another name to the mortgage application allows an assessment on "joint" income and thus opens up the mainstream lenders at better market rates. Allan

Raj Kirpalani

9:03 AM, 23rd May 2015
About 6 years ago

I agree, don't do it

Unless you have a declared interest in the property i.e. it is your investment too
And you have complete visibility of what is going on.

I understand that your friend is probably looking to use your income as a basis to get exposure to lenders who provide lower interest rates. From my recent chats with brokers a minimum income is required for some lenders in the buy to let arena. Maybe this is what your friend is trying to meet.

Colin Dartnell

9:18 AM, 23rd May 2015
About 6 years ago

I think all are agreed that the purpose is probably for a better rate on the mortgage, unless the friend has financial issues which hamper their ability to borrow alone.

Without this meaning to be unfriendly, but if the friend doesn't have the income to negotiate a good rate alone, will they have enough income to maintain the property afterwards (boilers etc) or finance void periods?

Colin Dartnell

9:23 AM, 23rd May 2015
About 6 years ago

Another thought, if you agreed to this will it reduce your own ability to borrow in the future as you will have this mortgage liability over your head, and for no gain!

Puzzler

10:30 AM, 23rd May 2015
About 6 years ago

Who's putting up the deposit?

As you will be buying it jointly (or as t-i-c), after repayment of the deposit (assuming a rising market) and costs, the profit would be divided equally on sale as whether or not you pay anything you are legally considered liable. So that's what's in it for you, but does your friend realise that? You can put an agreement in place varying that but it might not stand up in court (see prenuptials).

Since this seems to be a joint venture why not do it properly as one i.e. 50/50? Or not at all. This is a recipe for falling out with your friend.

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