Two Mortgages - not buy to let

Sharleen_2

Hi

I wonder if anyone could offer me a bit of advice.

I have a mortgage just in my name on a property which my father lives in. The mortgage isn't a buy to let, it's essentially a second home mortgage. Obviously the mortgage company know my dad lives there. They also know he pays rent and are fine with that on the understanding that dad has no rights to the property etc. They wouldn't do a buy to let anyway as we're related.

Now my husband and I are saving to buy somewhere which will be our main home, with both names on the mortgage. I have two questions.

1 - Will the equity I have in the other property be of any use to us?

2 - Will the total outstanding mortgage be knocked off the amount a bank is willing to lend us or will they see the monthly repayments as an outgoing? I'm guessing it would only be the latter if it were a buy to let. If that's the case has anyone heard of a buy to let that allows relatives?

Ok that might have been three questions!

Thank you

kingstreet

1. No. Not unless you remortgage that property to raise some capital from the equity to use as a deposit.

2. There are BTLs for relatives. They are regulated by the FSA, which isn't a major issue, just different paperwork.

As far as your new purchase goes, some lenders;-

- ignore a BTL in the background if it's self-financing, while others

- treat the mortgage payments for the BTL like a credit agreement and knock them off your income, then others still

- take the amount of the mortgage off your borrowing power.

Sharleen_2

Thank you for the response.

I think we might be best off to remortgage on a BTL, release some equity and hopefully find a lender for the second mortgage who will either ignore it or treat it like a credit agreement. I doubt anyone would do that if it isn't officially a BTL.

Do you know of any lenders who will actually do a BTL where the tenant is a relative?

kingstreet

You're better off seeking help from an independent or whole market broker. You can get advice on both issues at the same time. You'll have the option of paying a fee, or the broker receiving commission from the lender(s) and should pick the option which suits you best.