The Question
We need advice. We own a buy-to-let property worth £445,000. It’s been let to our daughter’s ex-husband (aged 58). He had a stroke and our daughter moved back in to help him, along with her two daughters.
The interest-only mortgage has now expired, and the repayments have shot up, as you will understand.
We’re looking at a new fixed interest-only buy-to-let mortgage of £275,000 / 62% for around five to 10 years which will clear both the existing mortgage and credit card balances used to refurbish the property in recent years to get the necessary EPC & EIRC Certificates.
The incomes total c£60,000pa (daughter and elder daughter both £18,500, younger daughter £12,000 and ex-husband Universal Credit £11,200pa).
Other than a buy-to-let renewal we’re told there are ways in which our daughter can ‘buy’ the property off us using the £170,000 as a ‘gifted’ deposit.
Can you see a way around all this?
The Answer
First instance, you will need to determine the true rental value of the property if the property is being rented currently to your daughter’s ex-husband below market value. This is to establish if the property can be remortgaged on a buy-to-let basis.
Selling the property to your daughter is an option. As your daughter needs a residential mortgage, her income will be taken into account. Looking at the income provided I would recommend seeking the advice of a mortgage adviser, so accurate affordability checks can be carried out. This will also help determine if all the income disclosed can be used in the affordability calculation.
Age will also be needed to be taken into account with your daughter’s ex-husband currently being 58 years of age.
I would also seek tax advice as selling your buy to let property to your daughter could cause a capital gains charge.
Meet our expert
Introducing Joe Capon of The Mortgage Bubble, who is ready to answer your questions…
Joe Capon has more than 10 years’ experience in the mortgage industry. He set up The Mortgage Bubble in 2021 and it is now a multi-award-winning mortgage firm, which strives to deliver the best mortgage advice to its clients which meets their needs now and also in the future. If you have a question for Joe email our editor and she’ll pass it on to him – kate.saines@emap.com
