Advice on mortgaging a BTL house - slight twist.

[RWA441]

After some advice on the best plan of action to do the following legally and cheaply!!

My uncle died a couple of months back and as he had no family the house is left to my Mum. Unfortunately he had dementure and we believe he was some how conned into an equity release type scheme on it.

The house value is £120k and there is £35k owed to this company. My Mum doesn't want anything to do with the house and doesn't want anything out of it money wise either so I've decided that my wife and I will buy it and make her end up with something from it.

We've agreed on she gets £60k from us for it to pay off the debt on it then the rest is hers, however.....
It will need about £10k of work to get it to a decent standard and ready to LET.
What I want to know is the best way to go about this as we want it to be mortgaged at 75% i.e £90k, pay my Mum her £60k leaving us with £30k to cover renovation costs and some extra money too.
So can we -
a) Change the deeds to our names, renovate it, re-mortgage, clear the debt and give my Mum her share.
b) Renovate it, then 'buy' it off my Mum for £120k then she gives us the money back over and above the £60k she wants?
c) Another far simpler method!!

Problem I forsee is telling the mortgage company / solicitor we're paying £60k for it but it's value is double that. Any advice would be much appreciated (I am seeing an IFA on Friday but wanted some ideas to go with first)

[Sarnie]

RWA441 said:

After some advice on the best plan of action to do the following legally and cheaply!!

My uncle died a couple of months back and as he had no family the house is left to my Mum. Unfortunately he had dementure and we believe he was some how conned into an equity release type scheme on it.

The house value is £120k and there is £35k owed to this company. My Mum doesn't want anything to do with the house and doesn't want anything out of it money wise either so I've decided that my wife and I will buy it and make her end up with something from it.

We've agreed on she gets £60k from us for it to pay off the debt on it then the rest is hers, however.....
It will need about £10k of work to get it to a decent standard and ready to LET.
What I want to know is the best way to go about this as we want it to be mortgaged at 75% i.e £90k, pay my Mum her £60k leaving us with £30k to cover renovation costs and some extra money too.
So can we -
a) Change the deeds to our names, renovate it, re-mortgage, clear the debt and give my Mum her share.
b) Renovate it, then 'buy' it off my Mum for £120k then she gives us the money back over and above the £60k she wants?
c) Another far simpler method!!

Problem I forsee is telling the mortgage company / solicitor we're paying £60k for it but it's value is double that. Any advice would be much appreciated (I am seeing an IFA on Friday but wanted some ideas to go with first)

I'm a Mortgage Broker.

You wouldn't tell the solicitor you are buying it for £60k. You're buying it for £120k.

Your mother would need to gift you the £30k equity in the property and you mortgage the other £90k.

The solicitor clears anything secured on the property (the equity loan) and passes on remaining funds to your mother, who then passes on to you the £30k.

Potential problems;

-You will need to fund the renovations yourself initially as when you apply for the mortgage it will need to be in a condition to let at that point, not after.
-Do you own a residential property or BTL property? If no to both then you are a FTB and a FTL (First Time Landlord) which will make it harder for you.
-Is your salary over £25k? A lot of lenders have minimum salaries now, but not all
-You will need a lender who will accept the 'Gifted Equity' as your source of deposit.
-You will need to check that the rent will be enough to cover the mortgage by 125%

[RWA441]

Thanks for the response.
To answer a few of your points-
We have a house all ready with a small mortgage (about £270k equity in it)
Salary wise both of us earn comfortably over £25k. Rental income will be £525 pcm. We also have the funds up front to cover all renovation costs so no problem there. Should be relatively simple then......

[Sarnie]

RWA441 said:

Thanks for the response.
To answer a few of your points-
We have a house all ready with a small mortgage (about £270k equity in it)
Salary wise both of us earn comfortably over £25k. Rental income will be £525 pcm. We also have the funds up front to cover all renovation costs so no problem there. Should be relatively simple then......

Those points will help but I wouldn't say it's going to be simple by any means...I would say it's 'potentially possible', there will be plenty of other hoops to jump through...

[RWA441]

Can you give me the names of any lenders who are happy to do the deposit via'gift' method at all?

[Sarnie]

RWA441 said:

Can you give me the names of any lenders who are happy to do the deposit via'gift' method at all?

I could, but without knowing the full details it's pretty pointless, I'd need to know a lot more information to be able to provide details of a lender that would actually carry out what you are looking for.

There's not much point me saying X,Y and Z will do it if then you later disclose something that would mean they wouldn't lend to you.

Feel free to PM me if you want some help with this