Hypothetical Mortgage Question

crazyhorse88

Hi

Just a quick query regarding mortgages.

If for example you had a house signed over to you that was mortgage free etc, but you were also interested in purchasing another house, what view are the banks likely to take?

Are the banks still going to require a c. £20k deposit if you plan on using the mortgage free house as security?

Sorry if this is confusing!

tara747

AFAIK you can't use one property as collateral against another, you would probably have to sell it to raise a deposit for the second house, or else just provide a deposit yourself. But I am happy to be corercted!

36square

You will have two houses and will presumably only live in one of them. The other will be let which means you can raise a buy-to-let mortgage on it and use some or all of the cash raised to make a deposit on the property which you want to purchase. Does that sound sensible?

crazyhorse88

Thanks for your reply. The possible scenario relates to a colleagues parents house which they have signed over to him. The parents are likely to live for quite a while so I was unsure what the process was if he wanted to try and use his parents house as security. Parents house value somewhere in region of £300k and he was looking at potential mortgage of £100k.

suki1964

The banks will not use property as collateral - as they said houses dont pay the mortgage and they have lots of house on their books so you have to fill the lending criteria

We are in the same situation and have gone through the same process. You can raise a buy to let mortgage on the first property to purchase the second. But then you are not allowed technically to let it to close relatives so you need to find yourself a very understanding mortgage broker who will know how to fill the forms in for you