Mortage Advice Request

Lozza12_2

My partner and I have bought a house together for £235k.

He also owns in his own name another house worth £140k with a £44k interest only mortgage. He wants to keep this house in his name and let his Mother live in the old property. He has an endowment to pay part of this in 2015.
We are planning pay for the new house with a 10 % deposit by extending the other mortgage by £23500, so that the old mortgage will be increased to £67500. This will be interest only.

The remainder of the new house's mortage (£211,500) will be paid by an interest / repayment mortgage.

His Mother may pay us a lump sum of around £25k at a later date for staying in the property- which I think we should use to pay off the larger new mortgage.

Our questions are :-
By extending the £44k mortgage by £23.5k - will lenders insist that either all of this mortgage or just the £23.5k must be a buy to let mortgage at a higher interest rate ? even though we will not be receiving rent from his mother, but a lump sum payment ?

Is this method the cheapest way - or would it be better to have a bigger deposit on the new house by extending the £44k mortgage even further.

Any advice would be really appreciated .

Thank you.

Menna

Your partner can only have one principle mortgage at a time, and he has a duty of care to inform his existing lender in writing that he will not be living in the property, and they will insist a formal tenancy agreement is in place. They may force him to move his mortgage on a buy to let term.

Thats your first decision to consider, then you'll need to sit down with your Whole of mortgage advisor, get some rates and products in front of you and work out, on cost comparison which is the best way forward.