Second Property & Mortgage Options

Gandt810

I'm thinking about helping my brother financially by buying a house with him so that he'd have somewhere to live and I'd have the potential for an investment property.

I already have a mortgage but have spare capacity to buy another property, albeit with someone else. My brother would live in the house and pay me a rent on top of his mortgage payments.

I'm unsure how to go about getting a second mortgage for this purpose, do mortgage lenders look at affordability compared with the mortage I'm currently paying based on my current salary.

I just don't know how to get started in terms of getting the right advice. Any ideas or suggestions of where to turn would be much appreciated.

Cheers!!

MarkyMarkD

Welcome to the site, Gandt810.

There are all sorts of issues with what you propose.

As the new property isn't your principal private residence, you will be liable for capital gains tax on your share of any increase in its value when you eventually sell or transfer your interest to your brother.

Given that rentals are no cheaper than mortgage payments in many areas, I'm not sure how it will financially benefit your brother to pay you rent rather than to pay the whole mortgage.

If the issue is that he can afford the mortgage payments on the whole property, but his income doesn't meet affordability guidelines, maybe you could guarantee the mortgage, or give him the deposit, rather than going into this joint venture?

Gandt810

Many thanks, I hadn't thought about CGT.

The issue for him is a one of affordability but also getting a suitable property in the right area, at the moment it looks as though buying on his own will mean living quite a distance from work. We are considering renting out a second room to a lodger, which could cover my requirement for a rental income.

I am also considering helping with the deposit, the only thing is that I can better afford a monthly outlay rather than a lump sum at the outset!

MarkyMarkD

But again, rent-a-room is specifically tax exempt, but this wouldn't apply to you if it was not your PPR that you were renting a room in.

I think it's a LOT more straightforward if you let him buy this property himself, with your support if necessary on the mortgage, but without you seeing it as an income-generating opportunity.

If renting a room will pay you a return on your investment, surely it would also address his affordability issues - in reality, if not in the eyes of a mortgage lender?

Gandt810

Thanks.

It sounds as though the stand-alone assistance (deposit/guarantee) may be the better and more straightforward options to consider first of all.

Cheers,

G&T