Strands #290 “You Say You Want A...
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BTL mortgage
15 Answers
I have a BTL property in my sole name but due to adverse credit from 2007 im finding it hard to get a remortgage. I am now thinking to transfer the property to my partner so he can then get a BTL mortgage in his sole name. I have spoke with a solicitor who said he can do the transfer and a deed of assignment. Prop worth £160k mtg £90k so in theory I would be selling it at an undervalue. Would my partner be able to get a BTL on a property bought at an undervalue. He has an excellent credit rating. thanks
Answers
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If conditions are right you could get a BTL mortgage of 75% of equity value providing you could expect 110% of the monthly payments in rental income p.c.m.
17:55 Fri 13th May 2011
Thanks Brightspark, so If I sell it to him for the £90k will he in theory be able to get a mortgage for the £90k that he is buying it for plus say an extra £10k for home improvements. We have checked out that the rent would be in line with the lenders criteria and he earns enough for affordability, as this lender wants a min income of £20k.
If I understand this correctly – you could sell the property and have £70k in your pocket, after paying off the mortgage.
Since you own the property (albeit with a mortgage), what you are proposing to do is sell the property to your partner at less than the market value – but you don’t say by how much.
Let’s assume you propose to sell the property to your partner for £90k (who can get a BTL mortgage for this amount). Should this all go through, what would happen is that the £90k mortgage your partner obtained would pay off your mortgage. You would then have no financial interest in the property – and in theory your partner would have a property worth £70k more than they paid for it.
Therefore my advice would be to make sure your financial interest in the property is recorded/protected; should the worst come to the worst – you get your fair share of the BTL property.
Since you own the property (albeit with a mortgage), what you are proposing to do is sell the property to your partner at less than the market value – but you don’t say by how much.
Let’s assume you propose to sell the property to your partner for £90k (who can get a BTL mortgage for this amount). Should this all go through, what would happen is that the £90k mortgage your partner obtained would pay off your mortgage. You would then have no financial interest in the property – and in theory your partner would have a property worth £70k more than they paid for it.
Therefore my advice would be to make sure your financial interest in the property is recorded/protected; should the worst come to the worst – you get your fair share of the BTL property.
Hi Hymie yes thats the intention but the solicitor said we could draw something up to say I still have a financial interest in the property. I would be selling it him for around £90k whatever the settlement figure is on my outstanding mortgage. We just want to free some money up, so he would then get a BTL for around £105k. We tried to get a joint mtg but because I had a default registered in 2007 I was refused, but he has an excellent credit history. Would we also be able to have something drawn up that if we did ever split up (hope not) that I would also be liable to pay him half of the mortgage payments until it sold. (Just for his piece of mind, even tho he has not mentioned anything) .We want to eventually, and sooner rather than later sell the house but in todays market it's been impossible. Maybe in a couple of years the market would of picked up and it could be sold.
the only other thing was to see if I could borrow more with the lender I am now with which is Platform. I know their Rental calculation is 125% of pay rate or reversionary rate, whichever is higher. And the reversionary rate - 5.00% (BBR*+ 4.50%).
There is a calculator on their website which says to enter your rental amount which is £525 per month and then the rev rate which I presume is the 5% which equals £100,800, so I presume this would be the full amount I could borrow?
There is a calculator on their website which says to enter your rental amount which is £525 per month and then the rev rate which I presume is the 5% which equals £100,800, so I presume this would be the full amount I could borrow?
Well at least you have considered making sure your interest in the property is ‘protected’.
With regards how much of a BTL mortgage your partner could obtain, given that there is around £60k equity in the property I would expect potential lenders to be willing to lend you the amount since there is this financial safe guard for them (not you).
There is another very important consideration of in placing the property in your partner’s name. Let’s assume you have an absolute interest of £60k in the property (after the transfer of the property to your partner). Assuming all goes well and the house is rented out for the remainder of the mortgage period and the value of the house increases to a total value of £200k. Your partner could then justifiably sell the property, giving you £60K, pocketing £140k. Why if the property has been transferred into his name is he under any obligation to give you any of the property value gain (or even the gain from the mortgage being paid off by the tenants)? Just as you are under no obligation to share any of your current or future gains from the property with him (since it is solely in your name).
Things become more problematic should you have periods of no tenants where you or your partner has to pay the mortgage from your own money – should you later split up, how would this be taken into account?
If I were your partner (and because I love you) – I would be willing to enter an agreement whereby all of the future property gains were in your name (absolutely). After all, all I am doing is using my name to obtain a better mortgage deal for you (no skin off my nose), and this would protect your current/future interest in the house. This would stop any arguments as to who owns what should we split. And why should I profit from this arrangement – should we split?
I would accept that all the equity in the h
With regards how much of a BTL mortgage your partner could obtain, given that there is around £60k equity in the property I would expect potential lenders to be willing to lend you the amount since there is this financial safe guard for them (not you).
There is another very important consideration of in placing the property in your partner’s name. Let’s assume you have an absolute interest of £60k in the property (after the transfer of the property to your partner). Assuming all goes well and the house is rented out for the remainder of the mortgage period and the value of the house increases to a total value of £200k. Your partner could then justifiably sell the property, giving you £60K, pocketing £140k. Why if the property has been transferred into his name is he under any obligation to give you any of the property value gain (or even the gain from the mortgage being paid off by the tenants)? Just as you are under no obligation to share any of your current or future gains from the property with him (since it is solely in your name).
Things become more problematic should you have periods of no tenants where you or your partner has to pay the mortgage from your own money – should you later split up, how would this be taken into account?
If I were your partner (and because I love you) – I would be willing to enter an agreement whereby all of the future property gains were in your name (absolutely). After all, all I am doing is using my name to obtain a better mortgage deal for you (no skin off my nose), and this would protect your current/future interest in the house. This would stop any arguments as to who owns what should we split. And why should I profit from this arrangement – should we split?
I would accept that all the equity in the h
I would accept that all the equity in the house is yours (as it is now), although obviously being together, we would share that money, spending it in later life.
However, in being the named person on the mortgage, there would have to be certain safe guards for me, re not getting a bad credit record should things go pear-shaped and the property have to be sold, to protect me. In time, I would expect you to be able to once again take over the mortgage – once your bad credit rating was history.
However, in being the named person on the mortgage, there would have to be certain safe guards for me, re not getting a bad credit record should things go pear-shaped and the property have to be sold, to protect me. In time, I would expect you to be able to once again take over the mortgage – once your bad credit rating was history.
Hymie thank you for your brill answer, thats what we will do, there is already a tennant in the prop who wants to stay there until the house is sold, she may even be in the position to buy it herself in a year or so. As I said once the market picks up we will sell. The other thing I thought of (if its possible) is to put my partner on the mortgage and deeds with me now with Platform. Then in around 2 months could he then apply for a mortgage in his name only, but we are both on the deeds?
In my agreeing to enter into the agreement whereby I have no financial interest in your BTL property (with the mortgage in my name) – there are a number of assumptions made, making the deal fair to both of us.
The main assumptions are that the BTL operation is self-financing, it would be unfair to me if you were spending a considerable amount of your income on the mortgage and upkeep of the property – expecting me to finance your general living expenses.
If there were a surplus (rent exceeding mortgage + general operational costs), then it might be reasonable that this was paid into a savings fund to be used to cover periods of no tenants.
There would have to be an agreed set of circumstances under which I could exercise the right to end the mortgage being in my name (by forced sale or transfer to another).
Although all property value gains would be yours – any property value falls would also be yours.
You might want to sit down and have a good think about other situations that might need some form of agreement.
Although my name is on the mortgage, I would strongly recommend that you have some form of proof that it is you who is paying the mortgage (don’t give me cash, for me to pay by direct debit).
The main assumptions are that the BTL operation is self-financing, it would be unfair to me if you were spending a considerable amount of your income on the mortgage and upkeep of the property – expecting me to finance your general living expenses.
If there were a surplus (rent exceeding mortgage + general operational costs), then it might be reasonable that this was paid into a savings fund to be used to cover periods of no tenants.
There would have to be an agreed set of circumstances under which I could exercise the right to end the mortgage being in my name (by forced sale or transfer to another).
Although all property value gains would be yours – any property value falls would also be yours.
You might want to sit down and have a good think about other situations that might need some form of agreement.
Although my name is on the mortgage, I would strongly recommend that you have some form of proof that it is you who is paying the mortgage (don’t give me cash, for me to pay by direct debit).
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