any problems with tenant also being joint landlord?
Discussion
A bit of a complicated one but here goes.
I want to buy my first property soon but with a twist. I am in the Royal Navy and so dont really need accommodation as its provided but i do want to get onto the property ladder as im getting on a bit, lol, so my first thoughts have been a buy to let mortgage.
A good friend also wants to get on the ladder but he cannot afford a deposit on his own and doesnt have a great credit rating and currently earns only £15K a year. I was thinking maybe we could do a joint venture where we would pull together our resources. I have about £20K deposit and he has £10K so we would enter it as a 2:1 split. The property would be valued around 120-140K looking at current house prices in this area. He would be living in the property and so would be both a landlord and tenant. Are there any issues or complications with doing something this way Other than the usual "can you trust this guy" answers. I have known this person for a long time and have provided him with substantial loans etc before and its always gone smoothly.
There are probably a hundred and one things im missing, as im a property virgin i have no idea what im doing tbh and could do with the advice.
I want to buy my first property soon but with a twist. I am in the Royal Navy and so dont really need accommodation as its provided but i do want to get onto the property ladder as im getting on a bit, lol, so my first thoughts have been a buy to let mortgage.
A good friend also wants to get on the ladder but he cannot afford a deposit on his own and doesnt have a great credit rating and currently earns only £15K a year. I was thinking maybe we could do a joint venture where we would pull together our resources. I have about £20K deposit and he has £10K so we would enter it as a 2:1 split. The property would be valued around 120-140K looking at current house prices in this area. He would be living in the property and so would be both a landlord and tenant. Are there any issues or complications with doing something this way Other than the usual "can you trust this guy" answers. I have known this person for a long time and have provided him with substantial loans etc before and its always gone smoothly.
There are probably a hundred and one things im missing, as im a property virgin i have no idea what im doing tbh and could do with the advice.
That's a 2/1 split on the deposit, what about the repayments? He won't be a landlord or a tenant, he'll be a resident joint owner. The tricky bit will be getting a mortgage lender to give you much; if they treat you like a couple, about the best you'll get will be 2 times the biggest income and maybe 1.5 the other. The LTV will have to be low, but you have 30k to play with.
oh i see, my income is £31K so that means combined we would come up short anyway. There is a 2:1 split in the deposit but the mortgage would be covered by the rent. He is currently renting and has flat mates to pay most of his rent. After we discussed this it would seem a good idea to do the same in the mortgaged property too.
The mortgage lender won't treat this as BTL, and won't be interested in whether there are lodgers(that's what they would be with your mate living there too, which is good as lodgers have relatively few rights and are easy to get rid of if troublesome) or not. In order to find out exactly what's what the pair of you need to go and see a mortgage adviser and find out what your options are. 4 years ago you could easily have done this via a 'liar loan' and accounted for predicted lodger rental income that way, but that's not available anymore AFAIK.
If you do go through with this, make sure it is completely clear on paper how much deposit each party has contributed, and how much of the repayments each party contributes, etc. How would you apportion the benefit from the rental income? Would it be split 50/50(because him acting as landlord makes up for his reduced financial contribution), or would you be due 2/3rds because you contribute more(I would say the latter, but you may not)?
If you do go through with this, make sure it is completely clear on paper how much deposit each party has contributed, and how much of the repayments each party contributes, etc. How would you apportion the benefit from the rental income? Would it be split 50/50(because him acting as landlord makes up for his reduced financial contribution), or would you be due 2/3rds because you contribute more(I would say the latter, but you may not)?
Edited by hidetheelephants on Sunday 20th February 21:39
hidetheelephants said:
'liar loan'
I have a huge pet hate about Self Certification mortgages being referred to as such. Self-Cert was a godsend for freelancers like myself where it's hard to "prove" your actual income but sadly they were perhaps abused a little and now everyone who made use of them is tarred with the 'liar loan' brush
I wouldn't have thought this was buy to let, simply a joint mortgage? Substantially cheaper/easier too. No doubt someone will tell me this is wrong/illegal!
Make sure you get the legals sorted - regardless of how well things have gone in the past make sure it is all written in black and white, agreed and signed. Although your deposit is twice as big, is he paying all the mortgage? If push comes to shove he may think he then owns "more" than you do.
Make sure you get the legals sorted - regardless of how well things have gone in the past make sure it is all written in black and white, agreed and signed. Although your deposit is twice as big, is he paying all the mortgage? If push comes to shove he may think he then owns "more" than you do.
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