Thursday, July 29, 2010

Who will give me a mortgage with a sitting tenant?

I have a property with no mortgage, but I have a sitting tenant who pays me 拢266 per month. I have been told the property is worth 拢110k with the sitting tenant and 拢175k without. I would like to raise 拢50k to use as deposits on further buy to lets - but I am not sure which lenders will lend. Anybody have any clues?Who will give me a mortgage with a sitting tenant?
Hi, sorry to say that banks and building societies do not grant mortgages where there is a protected tenant in situ. If you were to default on your mortgage or loan, they could not get vacant possession because of the protected status of the tenant. Even finance companies will not lend. If you don't declare the type of tenancy or suggest to the lender that it is an ordinary Assured Shorthold Tenancy (AST), your solicitors will have to and must be truthful before the funds can be released. If you have not been accurate, your offer will be withdrawn and you will be out of pocket for any valuation and arrangement fees as well as any abortive legal costs. If you did find a lender, the rates of interest would likely be prohibitive.





Protected tenancies have recently become rather difficult to sell even to some specialist companies as they rely on getting vacant possession in the future. When these companies do get vacant possession, they need to sell and at the moment, because of the state of the market, they are reluctant to buy at anything other then sensible percentages.





In regards to market value, recent auction results are suggesting that protected tenancies are now only achieving 50% to 55% of vacant possession value. The price paid is dictated by various factors including the age and life expectancy of the tenants and whether or not they have dependants who will be able to succeed the current tenant on his or her death.





You would be in a much stronger position if you sold the sitting tenancy and had a substantial amount to buy a few bargains as the property market declines further.





Buy to let is not dead, but if you purchased property in the last few years with little money down, you probably have no equity left. Mortgage rates have increased which will have eaten in to rental income and with no capital growth, investers are few and far between. However, as the market declines further and repossessions increase, there will be a market for investors.





A simple rule to use is this: aim to acheive between 8% - 8.5% gross per annum. To do this take the annual rent (research actual rents acheived for similar properties) and divide this in to the percentages as above which will give you the price to pay for your property. The initial first year return will be slightly lower as you will have costs like stamp duty, solicitors fees etc. Don't forget that if you are buying flats, you should take in to account annual ground rent and service charges. For all properties, letting agents costs, buildings and contents insurance, gas and electrical safety tests and a contingency for general maintenance should also be included along with any ';void'; periods. Allow 20%-25% of your annual rent to cover such costs. Don't forget that interest rates can go up as well as down and be sure that you can withstand any possible increases.





At present, your income from the property is very low because the rent is regulated. In fact, you are acheiving a return of 3.6% gross per annum. This is calculated based on the capital you could release if you sold at 拢87,500 or 50% of the market value. Not a great return and you would be better off in a quality savings account. If you where to add in to the equation that inflation is running at 3,2% per annum and house prices are forecast to decline by at least 10% this year and next, it probablty feels like standing in a shower and tearing up fifty pound notes. Remember, anyone can make money in a rising market. What sorts the amateurs from the professionals is making money in a falling market which is all about timing and opportunity





There are one or two companies that are buying....if you need any further help or advice, please email me.





Best wishesWho will give me a mortgage with a sitting tenant?
Hi,





Check this site you will get tenant loan http://www.ukremortgagerate.co.uk/100per鈥?/a>
Might be worth looking into the options for a homebuyer company I know they can be quite helpful particularly for people with tennants
Anyone who does buy-to-let will look at the proposition. Money is short at the moment, so you'll need to make it look attractive.
Are you crazy? Buy-to-let has passed its sell by date as a get rich quick scheme.
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