2nd home mortgage

6feet

We would like to buy a second home to live in for a few years because of secondary schools for our children. We would like to have a mortgage that covers us living in it or letting it out, as we may swap back and forth between houses depending on which child is where.

What kind of mortgage would this be? Our current mortgage provider will give us a 2nd mortgage with current equity but would not allow us to let out one of the properties, so we won't be doing that. We have just enough savings for 25% deposit on the 2nd house...

Fire_Fox

This sounds like a terrible plan. It's unfair to evict tenants from their home on a whim of swapping back and forth, nor is it even possible, you may need to evict through the courts which can take months.

Letting a property you are emotionally invested in is rarely a good idea, amateur landlords tend to be completely unreasonable about wear and tear and damage and about their tenants right to quiet enjoyment. Can't you just rent a second property?

See an independent mortgage broker if you are determined to go ahead.

kingstreet

You would need to ask your current lender for consent to let on property one. If granted, you then need to change your buildings insurance to landlord cover.

For the second property, use a residential mortgage if you plan to live in it immediately. Many lenders will ignore the let property/mortgage in the background, as long as it is self-financing.

If you intend to let it immediately, simply purchase it using a BTL product. Lenders use a formula where the rental income must be 125% of the monthly mortgage interest payment, assuming a rate of perhaps 6%pa. The upper limit is normally 75%, if the rental income will support that level of borrowing.