Mortgages With No Income ?

Oct 1, 2013
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We have a house for sale in the UK and it's going slowly. We have one potential buyer who really wants it, but the buyer for her house still has a small property to sell. We won't accept an offer if there's an uncertain chain.

But, they've offered us theirs as a part ex. Initially we said no, but now the idea may be OK. Ours is £585k and theirs is £375k. It would give is a big dollop of cash and still have a house to rent out.

But we have no real income, so can't transfer the small mortgage on ours. The only way would be a Buy To Let mortgage.

I've seen many adverts on the on the internet offering BTL mortgages with no income, but they seem a bit iffy.

I'm asking on here as the general age group is the retired folk with no earned income.

Any advice ?

Thanks in advance :)
 

Theonlysue

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Not long enough!
But to let mortgges are based on value of property and rental income. Nothing to do with your own income.
The property is collateral against the loan.
 
OP
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Oct 1, 2013
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But to let mortgges are based on value of property and rental income. Nothing to do with your own income.
The property is collateral against the loan.
Our financial advisor today told us that we'd need to show at least 'some' income.

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Theonlysue

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Not long enough!
I've got a feeling that if you swap with cash adjustment that stamp duty is only payable on the difference.
Best check this out.
 
OP
Yorick
Oct 1, 2013
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Can you not pay the small mortgage off with some of the proceeds of the sale?
If we sell the house outright we clear £300,000.

If we part ex and get a new mortgage we only clear £200,000. But we'll have a mortgaged house bringing in rent.

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Silver-Fox

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im a not so newbie
Can you not pay the small mortgage off with some of the proceeds of the sale?

That was my thought
If only a small mortgage on your property why the need for a B T L mortgage as I assume you will have a surplus?

Confused of Cheltenham o_O

Too slow a typer
 
OP
Yorick
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That was my thought
If only a small mortgage on your property why the need for a B T L mortgage as I assume you will have a surplus?

Confused of Cheltenham o_O

Too slow a typer
The mortgage is £265,000 which would eat into our capital a bit too much.

BUT, it has got me thinking a bit :)
 

Mr B

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What rent would a house of £375,000 fetch in.
I’d rather have an income from that, than money in bank as the interest is poor.

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OP
Yorick
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What rent would a house of £375,000 fetch in.
I’d rather have an income from that, than money in bank as the interest is poor.
It would bring in around £1,300 a month. That's why I'm considering BTL mortgages.
 
May 7, 2015
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I don’t know how much your mortgage is but if you pay it off the rental income will be yours in full and not paying the mortgage off.
 
OP
Yorick
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I've had a couple of very helpful PMs :)

Any more ideas on helpful BTL mortgage advisors ?

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Mr B

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My understanding is that BTL mortgages are only over 10 yrs.
 
OP
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I don’t know how much your mortgage is but if you pay it off the rental income will be yours in full and not paying the mortgage off.
We had several properties over last 15 years. Never bothered about the rental income as long as it covered the morgage.

We made our money on the property appreciation.
 

Mr B

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Is it possible to ( with not much work/cost ) to split house into 2.....
And get £1000pm x 2
Just a thought;)
 

Mr Chrysalis

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If we sell the house outright we clear £300,000.

If we part ex and get a new mortgage we only clear £200,000. But we'll have a mortgaged house bringing in rent.
So if I understand this right, you sell for £585k, and get £300k clear, so mortgage is £285k.
If you then buy the other property, you use £100k of that and get a mortgage for the other £275k, so you’re left with £200k cash and a house worth £375k, which you plan to let to get an income to pay the £275k mortgage.
Would it not be easier to let the £585k house for more rent than you would get for the £375k house and use the additional income to fund whatever you want the dollop of cash for?
 

wingman

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Martin Lewis always advises to ‘Pay the mortgage down’ and I presume he’s also in favour of paying it off. Interest rates are set to rise too!!

Rental income is a good idea. You will earn circa £15,600 p.a. (gross) In 5 years, that becomes £78,000 ( gross). Not to be sniffed at eh? AND, you would still have the asset to sell.

Look into tax allowances though because the current arrangements are being scaled back on a sliding scale over the next few years.

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Xabia

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At one stage I had 3 private rental flats and one commercial building rented out as offices. I now have the offices only, why is that - because it’s fine whilst the rents are coming in and you have good tenants.

The problems arise when the good tenants move on and new ones, who appear to be fine initially, suddenly change for whatever reason, rent not paid, aggro to get them out, my son is going through the same experience with two tenants at the moment and it’s costing in legal fees with very slow movement if they ‘know how to,play the system’. He is selling his as soon as they are vacant.

When they leave you sometimes get a nasty surprise about the renovations necessary before you can rent again. Rates have to be paid when property is vacant.

Compare that with commercial premises, 15 year repairing lease so the landlord has no costs, property is properly maintained and all managed by professional agents for a reasonable fee.

I wouldn’t go into private rentals again, commercial only for me now.
 
OP
Yorick
Oct 1, 2013
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So if I understand this right, you sell for £585k, and get £300k clear, so mortgage is £285k.
If you then buy the other property, you use £100k of that and get a mortgage for the other £275k, so you’re left with £200k cash and a house worth £375k, which you plan to let to get an income to pay the £275k mortgage.
Would it not be easier to let the £585k house for more rent than you would get for the £375k house and use the additional income to fund whatever you want the dollop of cash for?
No, coz we need some dosh now. We bought our lovely villa here for cash. Then loads of improvements. And a 4WD and motorbikes. Our ready capital reduced, coz we though the house would sell faster than it did.

We'd like £50k in the bank in case of medical or financial emergencies
 

Mr Chrysalis

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Another thought, what if you bought the smallest house in the chain as a rental property, allowing them to buy the £375k house and them to buy yours. That would leave you with more cash and less invested in the rental market, which as @Xabia points out, does have its risks. You would get lower rental income but need a smaller mortgage ( or personal loan)

Or invest £10 in the Funsters Lottery syndicate tonight, and lose all your money worries when we share the £120m tomorrow!:D

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May 7, 2015
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Is it possible to ( with not much work/cost ) to split house into 2.....
And get £1000pm x 2
Just a thought;)

It would be nice to think so but it doesn’t work like that... the property would then be half the size, so each half would only bring in roughly half the rental, the ground floor binging in most because they would probably have the garden.

There’s a lot of work involved too as soundproofing will have to be installed under the floor upstairs and it will have to pass strict noise transfer level tests. It will also have to pass fire regulations

As well as the above you’d also need to install a kitchen upstairs and a bathroom downstairs, have adequate access to both properties and a whole host of other hurdles to jump including having two sets of tenants to deal with.

I don’t think it would be cost effective.
 

gerry mcg

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does your pension qualify as a regular guaranteed form of "income"? as it is essentially a deferred salary and is taxed as such?

for example, i know my father, a retired surgeon, has a monthly pension income that far outweighs my salary :(
 
Mar 23, 2012
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I would look at the property you are thinking of p/x ing and think would I buy it if I had the cash. You will still have to pay stamp dutyt etc on it you won't be able to offset the mortgage against the rental income and its an asset that takes time and more expense to realise. That being said the interest anywhere else is low at present and provided that house prices go up at inflation you are getting a return plus inflation proofing on the capital. My calculation would be on a base rate of 6% would the figures still add up everyone knows rates are likely to go up soon and history tells us they usually go higher than the predictions.
 
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............... It would give is a big dollop of cash and still have a house to rent out.

But we have no real income, so can't transfer the small mortgage on ours. The only way would be a Buy To Let mortgage.

I've seen many adverts on the on the internet offering BTL mortgages with no income, but they seem a bit iffy.

The best advice is for you to contact an Independent Financial Advisor to see what options are available to you. He won't be able to give you any exact figures but he will be able to advise you on a set of operating parameters by which you can apply to your own circumstances. Don't forget that the Bank of Engalnd is likely to apply a further 2 x 0.25% points to base rates in the next few months and this will undoubtedly effect the mortgage products being offered. Some of the best products will only stay 'live' for a few days so it would be in your interests to have an IFA that scans the mortgage products on a regular basis to help you secure the best deal.

A few points though:

1. As a rule of thumb a BTL Lender will require the monthly rental income for your rented property to be a minimum of 1.5 times that of the monthly mortgage repayment.

2. The Lender will most likely require a proof of income to show: a). Your financial Independence; b). proof of income for those periods when the house is not rented.

3. If you exchange houses for the cheaper home then you will still succumb to a Stamp Duty Bill of £8,750 on a £375K home. This is a big extra financial loss which you wouldn't have if you were to sell your main property outright.

4. Renting any property can be hard work and you do need to have the relevant tradesmen on your speed-dial to ensure that you maintain your obligations to your tennent. This can include boiler repairs, servicing, CP12 checks and replacement; electrical work; plumbing repairs; insurance costs; structural or physical maintenance of the exterior/interior and decorating etc. You will also need to look at the replacement cost of carpets and boilers once you've been renting for a few years as these things won't last forever and the money to replace them needs to come from somewhere, i.e. your profits or your cash flow.

5. If you plan to receive a monthly rent income of £1,300 then don't automatically assume that you'll get £15,600 for each year rented. If your property goes unrented for say 2-months in any one calender year then that becomes a great deal of financial loss to your expected income. This includes the need for you to consume the council tax, service costs and all of the other little bits which soon mount up.

The whole renting-thing can sometimes become a bloody big headache and if I was in your position then I would be leaning towards the idea of selling my main house without the burden of renting and part exchanging etc.

All the best,

Andrew
 
Last edited:
Mar 23, 2012
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The best advice is for you to contact an Independent Financial Advisor to see what options are available to you. He won't be able to give you any exact figures but he will be able to advise you on a set of operating parameters by which you can apply to your own circumstances. Don't forget that the Bank of Engalnd is likely to apply a further 2 x 0.25% points to base rates in the next few months and this will undoubtedly effect the mortgage products being offered. Some of the best products will only stay 'live' for a few days so it would be in your interests to have an IFA that scans the mortgage products on a regular basis to help you secure the best deal.

A few points though:

1. As a rule of thumb a BTL Lender will require the monthly rental income for your rented property to be a minimum of 1.5 times that of the monthly mortgage repayment.

2. The Lender will most likely require a proof of income to show: a). Your financial Independence; b). proof of income for those periods when the house is not rented.

3. If you exchange houses for the cheaper home then you will still succumb to a Stamp Duty Bill of £8,750 on a £375K home. This is a big extra financial loss which you wouldn't have if you were to sell your main property outright.

4. Renting any property can be hard work and you do need to have the relevant tradesmen on your speed-dial to ensure that you maintain your obligations to your tennent. This can include boiler repairs, servicing, CP12 checks and replacement; electrical work; plumbing repairs; insurance costs; structural or physical maintenance of the exterior/interior and decorating etc. You will also need to look at the replacement cost of carpets and boilers once you've been renting for a few years as these things won't last forever and the money to replace them needs to come from somewhere, i.e. your profits or your cash flow.

5. If you plan to receive a monthly rent income of £1,300 then don't automatically assume that you'll get £15,600 for each year rented. If your property goes unrented for say 2-months in any one calender year then that becomes a great deal of financial loss to your expected income. This includes the need for you to consume the council tax, service costs and all of the other little bits which soon mount up.

The whole renting-thing can sometimes become a bloody big headache and if I was in your position then I would be leaning towards the idea of selling my main house without the burden of renting and part exchanging etc.

All the best,

Andrew
I think there are ptfalls in renting but the advice to see a financial adviser might be a good way to look at your overall investments if you have a load in shares/pensions already it could be a good way to balance things out a bit. Also if you have bought ouitside the UK it leaves you with a foothold in the UK property market if you want to return and prices rise a lot (unlikely!!)

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Aug 7, 2017
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I think there are ptfalls in renting but the advice to see a financial adviser might be a good way to look at your overall investments if you have a load in shares/pensions already it could be a good way to balance things out a bit. Also if you have bought ouitside the UK it leaves you with a foothold in the UK property market if you want to return and prices rise a lot (unlikely!!)

Yep, I totally agree.

Our own business plan is based on both capital and PCM gains but you need to be very aware of your market place for both to be successful.

IMO just renting one house to help assist with income streams is fraught with danger.

Also, if you are overseas-based (various circumstances apply) while renting a UK property portfolio then your tax requirements will be different. The OP will need to seek advice from his FA to ensure that his pension, personal tax allowance, overseas residency and rental income streams are all aligned.
 

Vic

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No one has mentioned tax. All of the rent is now taxed. It no longer takes into consideration the mortgage payment. If your rent is £1000, mortgage of £500, your income tax will be £200 leaving you £300. This does not include insurances, boiler repairs and general maintenance. Obviously this will alter with different amounts, but it is not as good as it was.
 
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Seems too complicated, especially 'at arms length'
I'd reduce my asking price and stick with a straight forward sale.

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