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Our property investment expert is Jeni Browne, Sales Director at
Mortgages for Business
www.mortgagesforbusiness.co.uk
Tel: 0345 345 6788
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Question
Buying a student property for my son
My son is in his first year at university and I am looking into purchasing a property which he could live in and we could then rent out to his friends too. I have heard there are some tax breaks available to those of student age and wondered if this could present an opportunity.
I imagine my son would need to take out some kind of guarantor mortgage which I would provide the security for. But how would the buy-to-let aspect be structured? Thanks for any thoughts you may have on this.
Answer
So there are two options here: you buy this as a buy-to-let, and your son lives there, or your son buys it and you guarantor the mortgage.
These are two very different approaches, and each will have pros and cons in terms of tax, mortgage rates and your own risk.
The best option at this point would be to speak to a mortgage broker and a tax professional to get some advice, so you don’t have any issues down the line.
What I would add is that I am not sure about the tax breaks you mention so it would be worth asking the tax adviser about this when you talk to them.
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Question
Buying a flat in a new build high rise
A newbie to buy-to-let here, so be kind to me I am looking at buying a flat in a lovely new development but it is a high rise – definitely more than six storeys – and I am worried it might be tricky to get a mortgage what with the Grenfell enquiry etc.
Should I look at getting something a little more conventional for my first foray or is it just a case of looking for a specialist lender?
Answer
This is a really good question. Generally, flats with anything under 10 stories don’t cause issues, and there are plenty of lenders who can go higher than 10.
The key here is that if the building has any cladding, the lender will want to see an EWS1 form which is essentially a fire safety certificate to confirm the cladding present is not combustible.
The rules changed recently to say that any properties without cladding no longer need an EWS1 form. I wish you all the best with your first foray into the world of buy-to-let!
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Question
Tenant in arrears – how will this impact our mortgage?
We have made the very silly mistake of allowing a close friend to rent out our buy-to-let property. He has run up some hefty debts and has now stopped paying his rent. I know, due to Covid, we cannot evict him but, even without this restriction, it’s a friend and we would feel uncomfortable about kicking him out.
We are keen to sell the flat so it won’t be a burden any more but, equally, will the lack of payments appear on our credit file? Also will the fact our tenant has run up arrears reflect badly on any future mortgages we take out and also the property itself.
For your information we have made our mortgage repayments on the property but obviously we don’t want to keep bailing him out as we are effectively, by doing this, allowing him to live rent free.
Apologies for sounding so inexperienced – we purchased the property on a whim and have deeply regretted how we managed it.
Answer
I am sorry this has happened, you have clearly been incredibly kind to a friend who has not, to my mind, acted in an appropriately thankful way.
The good news is that as long as your mortgage has been paid on time, there will be no impact on your ability to obtain a mortgage in the future.
Lenders do not ask questions about whether tenants have paid on time, and this will not impact your credit score.
The fact that you have paid your mortgage despite not receiving rent is an absolute credit to you and should be viewed positively.
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Question
What’s the best way to take out a buy-to-let?
I have heard the rental market is booming and with world affairs looking so uncertain I have decided to invest a recent inheritance in property instead of the markets.
How do I start looking for the best buy-to-let mortgage? Should I visit an online comparison site or are there any specialist brokers in this area? Also what kind of financial information might a lender need from me?
I am feeling very overwhelmed and inexperienced but hoped you might provide a good starting point for my journey.
Answer
What a fabulous decision you have made! I would absolutely recommend that you speak to a mortgage broker who will be able to talk you through how the mortgages work.
The majority of brokers can offer buy to let mortgages, but I would encourage you to search out a specialist broker whose area of expertise is buy to let, to ensure you are really speaking to an expert in their field.
In terms of the financial information required by the lender, you will need:
• Proof of ID and address
• Proof of income (three months’ payslips and p60 or two years’ tax returns and tax overviews if you’re self-employed)
• Evidence of good bank account conduct (three months’ bank statements)
• You’ll probably also need to show your solicitor that the money came to you via probate
Good luck!
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