UK Landlord Forum / Life

Hi,

I have checked the rules, so hopefully I'm not breaking any, but please let me know if I am and I will do as required.

Firstly, a little about me:

Basics

Age – 29
Salary – 31k
Savings – 50k (increasing £500ish a month)
Already a home owner (mortgaged w/partner)

Situation

My Mother has always rented with me and my sister. My sister is currently in the process of moving into her own property and I moved out several years ago.

Now that my mother is living alone, I would like to come up with a situation whereby she won't have to pay rent years into retirement, we have about 15yrs.

We did try and arrange a mortgage for herself, which whilst possible, would be too expensive for her to pay the monthly costs in a reasonable time frame.

My "solution" which actually seems possible is a "Family buy-to-let" Interest Only mortgage.

I have used a comparison site based on today's figures and remortgaging after 5 and 10 years.

Prices below are based on a mortgage of 75k on a 100k home. I have (hopefully wisely) decided to keep 25k in my savings "just in case."

I have taken into account most fees, including Stamp Duty.

          Interest   "pot"     (post tax)
Month 1   £105   £495   £495
Month 2   £210   £990   £990
Month 3   £315   £1,485   £1,485
Month 4   £420   £1,980   £1,980
Month 5   £525   £2,475   £2,475
Month 6   £630   £2,970   £2,970
Month 7   £735   £3,465   £3,465
Month 8   £840   £3,960   £3,960
Month 9   £945   £4,455   £4,455
Month 10   £1,050   £4,950   £4,950
Month 11   £1,155   £5,445   £5,445
Year 1   £1,260   £5,940   £4,922
Year 2   £2,520   £11,880   £9,844
Year 3   £3,780   £17,820   £14,766
Year 4   £5,040   £23,760   £19,688
Year 5   £6,300   £29,700   £24,610

REMORTGAGE
         
Year 6   £7,200   £36,000   £29,892
Year 7   £8,100   £42,300   £35,174
Year 8   £9,000   £48,600   £40,456
Year 9   £9,900   £54,900   £45,738
Year 10   £10,800   £61,200   £51,020
         
REMORTGAGE

Year 11   £11,353   £67,847   £56,649
Year 12   £11,907   £74,493   £62,277
Year 13   £12,460   £81,140   £67,906
Year 14   £13,014   £87,786   £73,534
Year 15   £13,567   £94,433   £79,163

The "pot" detailed above is the difference between the cumulative interest raised, taken away from the agreed rent of £600. (decided to keep it relatively high so it's paid off quicker).

I have calculated the "post tax" yearly based on if there were no issues (yeah, right). I am a basic rate tax payer.

Now for the questions,

1) I am aware that I will need a "Family Buy-to-Let" but I can't find anywhere that explains what the difference is. Can anybody advise?
2) Based on the figures above, am I right in saying that I would be mortgage free and own the house completely by year 15? (assume I use the entire pot to pay off the loan)
3) How necessary is Landlord / Mortgage insurance?
4) When the house is paid, I would want her to live her life rent free. Is there a downside to that?
5) Am I naive and stupid?

I know I'm technically profiting off my mother, but I'm doing it with the best intentions!

Thanks for bearing with me. What do you think? I welcome critique and a slap of realisation.

I have never heard of a Family BTL,is this a recent thing? You don't mention that your mother will be on the deeds along with you,is that correct? The problem of course with plans is that life can take unexpected twists.If your mother was unable to keep on paying the rent,would you be able to cope if she remained living there? If your situation changed workwise,starting a family etc.it could also make a difference.And,God forbid,if a family rift arose it would be an added complication.Then again,you can't base your life on worst case scenarios,so I would say go for it.My son never phones and forgot my birthday recently,so I think your Mum is lucky to have you! You've done well to have saved when so many people are in debt,so I suspect you will make this work.Good Luck!.

P.S.Just Googled-is this the Mansfield BS scheme,aimed mainly at parents wanting to buy a house for student offspring? 

Not everyone has to have, or own, a house. If your mum has been renting for most of her life then it is something she will be used to, and has probably thought about and planned for. Letting property to family is always a big no-no for somewhat obvious reasons. It is amazing how a loving family relationship can turn sour and feelings of resentment grow because one party is providing the other with a roof over their head, even if the other party is paying the going rate. My only advice would be to not go about things this way. Far better to try and make money via what you'd call a normal Buy to Let and increase the speed of your savings so that in 15 years you might be in a position to buy something outright and donate it. I am just being cautious - not letting to family and friends is Landlording 101 for a reason... and it's not because no-one has ever been burnt in this way, it's not an urban myth.

If you are to get a £100,000 property, I would put in £40,000 of my savings to get the best deal possible. I realise you want to save £25,000, but saving £10,000 might be better. I'd at least do the sums, which you seem quite good at.

You simply cannot predict what the remortgage situation would be in 5 or 10 years.

1) never heard of it.
2) I couldn't be bothered to review... but you'll only pay the mortgage off in 15 years if it's a 15 year term from the outset, or you're allowed to overpay (many have 10% limits per year)
3) Landlord insurance is necessary
4) Sure, no rent
5) Not stupid, everyone is naïve - don't worry about it

What's the worst that can happen monetarily? You lose all your savings. The house price plummets... but not to £0. Money can be re-made. Think about the worst that can happen to your relationships.

What you are thinking about is not unique, but not that common either.

A Jewish friend told me a Yiddish saying-"Man plans,God laughs".