Is this possible?

inkie

Myself and hubby paid our mortgage off 5 years ago. We are in our 40s. Daughter is at uni, and is married (they are both students). Is it possible for us to take out an ordinary residential mortgage for a property for them to live in (ie not a buy to let mortgage). We would pay the mortgage, and they would give us a contribution towards that.
They rent at the moment, but the house has terrible damp problems.
Just thinking that this may be a mutually beneficially situation (investment for us, sound house for them).

Bluebirdman_of_Alcathays

I very much doubt there is a mortgage product available for you, although I'm far from expert in that area. BTL mortgage is more expensive as it reflects different (higher) risks to the lender than a normal residential mortgage.


What I do know (and apologies if you know this already!!) is you would be a landlord, and have to pay tax on the income (only the interest portion of the mortgage is tax deductible so there will likely still be a profit, even if the total mortgage is more than the rental income). You would also have to pay the extra 3% SDLT, and CGT on any profit when you sell the property. You'd also have all the legal responsibilities of a LL, so this is not a venture to take likely.

lee111s

Nothing to stop you taking out a mortgage on your own property to release equity.

You'll likely get a much better rate of interest due to LTV. You'd also potentially be a cash buyer for the second property if it were cheap enough/you had enough equity in your own home.

Pixie5740

Yes it's possible. You could either mortgage your home and use the money to buy a property to let to your daughter, or you could get a regulated BTL mortgage to purchase the BTL property.

The contribution your daughter makes towards the mortgage will be taxable income and you'll also need to pay an additional 3% SDLT.

Seanymph

But presumably if you raised it on YOUR home, and 'lent' your daughter the money to buy her home - and she repaid you at exactly the rate of interest your mortgage was then you would have no income, and no tax laibility.

You also, of course, would have no security of tenure should she stop paying you.

Cakeguts

If it is an investment for you then any money they pay to you will technically be rent so you will need a buy to let mortgage and you will need to pay tax on the rent.

It is important to remember not to impose your ideals onto your daughter. You might think that the most desirable way to live is to own a house but many young people prefer the flexibility that renting allows them especially if they don't know how long they will be living in a particular area. They may be renting this damp house in order to keep the costs down.

ScorpiondeRooftrouser

Seeing as the house they are living in has terrible damp problems, isn't it lucky they are renting it and can just move to another.

If they'd bought a house with terrible damp problems they'd be in far more trouble.

Pixie5740

If this really is an investment you are looking for then you'll break the golden rule which is never let to family of friends. Furthermore, if your daughter only pays enough rent to cover your mortgage payment then you'll be operating at a loss. You'll have to use your own money to pay for insurance, gas safety certificates, energy performance certificates, maintenance and repairs. Not much of an investment really unless you are completely banking on capital gains which is risky.

If you want an investment property then buy a property, let it to a tenant who isn't a friend or family and charge market rent. Then with your additional income you could help your daughter move into a nicer rental property.

inkie

Would I need a BTL mortgage though. Can I not just get an ordinary residential mortgage and let them live in it, with or without making a contribution?

FBaby

It's in the name, residential, ie. for the residents. You won't be a resident, you'll be a landlord.

inkie

wouldn't it be a second property for a family member to live in, though - regardless of whether they made any contribution or not?