Second Mortgage

MikeyG1976

Hi, new to this so apologies if this subject is elsewhere (I just couldn't find it). I have a mortgage on a home, recently purchased, so very little equity (however we did get a good deal in terms of other properties in the area but that's not what the valuation came back with - my mother previously rented the house and the landlord loves her so we got it for a steal!).

I live there with my mother and grandmother. I want to buy another property and move into that myself. My mother currently pays me the mortgage amount (it's essentially her home in theory) and I pay her rent back. The mortgage is fixed for 2 years......this may mean I don't do anything till then.

I want to buy another property. She would continue to cover the mortgage payments but I know there are rules and regs around buy to let to family. So whilst I'm living there it's ok, but once I move, does anyone know if I have to rebadge the mortgage as buy to let? Can I do this with my mother inhabiting the property?

Also, I've searched everywhere online and cannot find a calculator that will tell me what I can borrow for the second property. I don't want a holiday home it's a normal residence. But I need a LTV to know how much I have to save to make this happen.

Can anyone offer any advice? I'm sure there are loads of details you need to be comprehensive in your reply, but ask and I will answer.

Thanks in advance.

hazyjo

Speak to a broker, but it is highly unlikely a lender would let you have your mum as a tenant. Would you be willing to evict her if she couldn't pay? Presuming no, that's why. While there's a mortgage on it, it's more the bank's risk than yours. It's their money that wouldn't get paid back.

If by some remote chance you managed it, yes you would be her landlord with full LL responsibilities. No escaping that. Would be on a BTL mortgage, or possibly 'Consent to let' - although it sounds long term so they'd prob want BTL.

Do you earn enough to get another mortgage? With additional stamp duty for a second home?

Is your mum on the deeds (or did she pay towards the house) or do you own it all? Not sure about the 'in theory' bit.

Presume this is England.

00ec25

depending on the stance of your existing lender, they may (or may not) require you to convert your existing mortgage to what is called a Regulated Buy to Let mortgage. That is one where the occupant paying rent is family/related to the LL and therefore offers much less likelihood that the owner/landlord would evict in the event of rent arrears and so is much higher risk to the lender

as such a regulated BTL mortgage is not based on the usual rental income cover, ie the rental property is viewed by the lender as self financing paid for by the rent it produces. Instead, it is treated exactly the same as a residential mortgage for a property you would live in, ie it is based on assessment of your affordability and income multiple. Any rent you receive would be totally ignored in calculating your income.

so, if your lender goes down that route, you won't be buying a second property unless your income can cover both mortgages in full without contributions from mother.

as you are in a fixed interest period, any change to your existing mortgage may (or may not) result in your existing lender invoking an early repayment charge - you won't know until you ask them.

go see a broker

MikeyG1976

Thanks guys, I think that gives me what I need for now, and as I suspected this won't be on the cards for a few more years

take care.

Thrugelmir

MikeyG1976 wrote: »

My mother currently pays me the mortgage amount (it's essentially her home in theory) and I pay her rent back.

Sounds as if it's going to be your home for a lot longer. Unfortunately circumnavigating the rules isn't that straightforward. Always worth working through all the scenarios before trying to be too clever. There's nothing that hasn't been attempted before.