Regulated buy to let – affordability check for tenants?

Regulated buy to let – affordability check for tenants?

8:26 AM, 18th November 2013, About 11 years ago 13

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I own a property on a residential mortgage. I am in the process of acquiring another property on a residential mortgage and I am looking to convert my existing mortgage into a regulated buy to let so that my parents can live in my old house. Having done a bit of research it looks as if a regulated buy to let is our only option, given the family connection.

The situation is a little more complicated because my parents will be unable to meet the full cost of the open market rent for the property. Therefore, I plan to support them by paying part of each month’s rent myself. Regulated buy to let

Having not been through this process before, is anyone be able to tell me whether the lender will check rental affordability for my parents? I am worried that on paper the rental figure will not look affordable for them, and therefore if a check is carried out the mortgage may be refused.

As stated above, I plan to support them by paying part of each month’s rent myself and I am comfortable that this would be financially sustainable on an ongoing basis.

Any advice would be great.

Thanks in advance.

Jack


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Comments

Bob Nunn

12:56 PM, 18th November 2013, About 11 years ago

Mark as you say
My accountant sorted this for me.
Any transaction, at arms length, i.e. With family members
Needs to be done properly and even then it will always come under
Scrutiny from the Tax department.
I know this first hand, even with independent valuations by 3 professional valuation experts you can still be seen to pull a fast one.
Even with your accountant doing all the legal stuff and without trying to pull a fast one the tax man will always think there's more to it than there is.
I agree totally you should always seek professional advice but it can still back fire on the tax liability side.

Mark Alexander - Founder of Property118

13:13 PM, 18th November 2013, About 11 years ago

Reply to the comment left by "Bob Nunn" at "18/11/2013 - 12:56":

Too true, that's why it's important that we make sure that our professional advisers also have PI insurance. That way, if their advice turns out to be bad we have recourse which is something you can never get from advice from the man at the bar, a cab driver or an internet forum 🙂
.

Howard Reuben Cert CII (MP) CeRER

23:59 PM, 18th November 2013, About 11 years ago

Reply to the comment left by "Mark Alexander" at "18/11/2013 - 08:35":

"the type of loan you are seeking is a regulated Let to Buy mortgage" Yes, you're absolutely right Mark and before Jack enters into any new mortgage arrangement (whether by product switch, remo to a LTB or a BTL) it is definitely the right thing to take full advice first.

Jack you say "Having done a bit of research..." - was this with a Broker?

I assume you are a first time buy to let'er so I also advocate 'face to face' advice so that you can properly consider the options in 'black and white'.

The previous suggestions of speaking to an accountant who can handle the tax side for you and also a legal beagle for the 'formalities', are spot on.

Have you spoken with your existing lender first? Sometimes (depending on the lender) you can get their consent for just this sort of thing - and save a few quid on new valuation, arrangement and mortgage fees too!

One final thought - every mortgage account you have is also an additional debt too. We carried out research with several BTL lenders as to what they would require from the estate in the event of a premature demise and a summary of this report can be found here > http://www.property118.com/life-insurance-landlords-ifa/

Yes, I know, all you wanted to know about was if the lender will 'affordability check' your parents!!

There's so much more to this BTL (LTB?) lark! 🙂

Hope this helps.

Howard

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