2nd home mortgage for property parent will live in (deposit coming from same parent)

neorich2002

Dear All,

I have a mortgage on a property I live in, and I would like to take out a second home mortgage for a second property for my parent to live in. The parent will also provide the deposit for this property.

The property would be in Scotland, and I am aware of the stamp duty implications etc. I have also been approved by several lenders.

The issue I have is as follows:

The lenders require a "gift" letter. Googling this, results in templates which say that the gifter will not live in the property.

My question is whether this sentence is necessary, whether I have to tell the bank that the person gifting the deposit would live there, and get their approval for this?

If it's not possible for the gifter to reside at the address that their gift was used to purchase, what are the alternatives to this approach? Note that it is not possible for the gifter to be on the mortgage due to low income and the fact that the mortgage term available would be around 10 years, which makes the repayments too high.

I see one option is to have the gift transferred to me, leave it in my account for 6 months, and they it no longer is a "gift", but becomes "savings". Is this a legitimate approach?

Finally, if I purchased with a deposit from savings, and a mortgage in my name, is my parent allowed to reside there on their own.

In all of the above no rent will be charged, no agreement in place. This is very much a "buy a second home for my parent to live in for free" issue.

Thanks

csgohan4

the second mortgage will be a buy to let as you are not living in it. Some lenders are not keen on having family members staying.

You really need a good broker on this. As a gift from someone who is living at the property means they have a vested interest in the property however you package it up to the lender.

Unless you can buy the whole property up in cash then that won't be problem as you bypass a lender

neorich2002

Thanks for your reply, but I don't understand what makes this buy to let? I shall not be letting it.

I also am not trying to be assessed for affordability on the basis of potential rental income.

Rather I am being assessed on my income, in the same way I was for my current residential mortgage.

Are you saying this could not be done under a "second residential mortgage"?

If I was simply buying a holiday home, I'd not be "living" there either.

Could you clarify?

Thanks

Neutrinno

I'm fairly sure this would be treated as a regulated buy to let, which would limit lenders available. In terms of the deposit being gifted from people living there, which could create a conflict of interest; then you are best speaking to a good broker who can clarify this from any available lenders.