First time buyer

moneysmart_2

Hi,

My wife and I are looking to buy a house next to my mothers and in a couple of months help her to buy her house using the "Right To Buy Scheme".

Both houses could do with some modernisation and our plan was to use some of the equity in my mothers house to borrow against that house to complete the work on both houses.

We were initially advised that in order to do this we would need to apply for this at the time of the first re-mortgage (2-3 years).

Does this sound viable?

The motives for buying both houses are as follows:

The house next door will become out family home and be our permanent residence and my mothers house will be her house for as long as she needs it with the security that she will be able to live there until she is no longer around (bit morbid...).

On a separate note, our salaries cover more than double the mortgage we need but because of our relatively low deposit
we will need to take out a 90% mortgage.

Regarding mortgage lengths would we be best to take a longer term so the repayment is lower as long as we can over pay the mortgage or take a shorter term to the maximum that we can afford?

Kind regards
Nick

kingstreet

Remortgaging a RTB within the pre-emption period is fraught with problems. Councils do not like providing the necessary deed of postponement which allow owners to borrow into their discount during the five years.

To borrow for home improvements, you need to have detailed estimates prepared and you can expect the work to be surpervised, to ensure it is done. How you would get to improve two properties that way, I don't know.

How will your mother purchase her property? Will she be able to raise a mortgage in her own right? You will not be able to be part of her purchase if you do not reside in the property with her.

moneysmart_2

Hi,

Thanks for the reply...


Our intention was to get a joint mortgage with her if this is feasible, realistically she can afford to take it out on her own however she is happier for us to be involved in case her circumstances change at a later date.


So the likelihood of remortgaging against the equity is unlikely within the first 5 years.


Regarding the overpayment element presumably the more we over pay initially the quicker we can make a dent in the capital so when we come to remortgage after the fixed period we can hopefully drop the LTV ratio. Does this sound like a good idea?


Thanks in advance
Nick