Trying to buy a second house as main residence

Dim90

Not sure if anyone has faced a situation like this but my partner and I have both come in the situation where we had to use our first time buyers to purchase both of our parents houses; they both were trapped in cycles of paying interest on loans for decades until we were able to take it over. Now we pay a steady mortgage for them. We know that this place is where we want our parents to stay but my partner and I are coming to the age where we are considering finding a place to live together.

We are still paying the mortgages for our parents because we want them to be okay but are worried about the initial costs we will face when looking for a new place as I believe we have lost our first time buyers status so I think the deposit would have to be 25% and then there is stamp duty. This place we will be looking for will be our main residence but I'm not sure if it will be considered as a "second home" as it would be another property in our name. Are there any other substantial costs to consider?

Also, would we be able to remortgage the first properties to have more money to be able to contribute to the deposit/ stamp?

much appreciated

hazyjo

Are you living apart with each of your parents at the moment, or together elsewhere?


If the latter, did the lenders know you'd not be living there?


You may find you each have a BTL (let to family members which is potentially another problem)


Couldn't each set of parents have moved/downsized?

ACG

There are lenders who will consider you with a 5% deposit.
The biggest issue you will probably come across is affordability.

Your incomes will support a certain amount of lending. If you already have 2 mortgages/2 mortgage payments they will get taken in to account for affordability purposes. I suppose if their mortgages are relatively small then it may not be an issue.

I am not sure where you stand on the stamp duty front, I assume it will be normal stamp duty (not the higher rate) but happy to be corrected on that.

Speak to a broker, theoretically it can be done and at normal rates, but the devil is in the detail.

p00hsticks

ACG wrote: »

I am not sure where you stand on the stamp duty front, I assume it will be normal stamp duty (not the higher rate) but happy to be corrected on that.

I'm no expert but I'd take the opposite view - the OP has indicated that they're not just 'paying the mortgage' for their respective sets of parents , but that at least one of the properties is in their name. In that case surely any subsequent purchase will be subject to the higher 'second home' SDLT rate ? I'm not aware of any exemptions when property has been purchased for relatives to live in.

AdrianC

Dim90 wrote: »

Not sure if anyone has faced a situation like this but my partner and I have both come in the situation where we had to use our first time buyers to purchase both of our parents houses; they both were trapped in cycles of paying interest on loans for decades until we were able to take it over. Now we pay a steady mortgage for them.

So you each own your parents' homes?
And you each live elsewhere?

So you are their landlords... With all the legal responsibilities that entails. Your lenders are aware of the circumstances, right?

I believe we have lost our first time buyers status

Of course you have. You already own a home each.

so I think the deposit would have to be 25%

25% is for a BtL mortgage. I presume you have those for the let properties you own.

and then there is stamp duty. This place we will be looking for will be our main residence but I'm not sure if it will be considered as a "second home" as it would be another property in our name.

You own one home each now, you own two properties between you, and you will own three homes between you at the end. Additional property purchase. +3%.

Also, would we be able to remortgage the first properties to have more money to be able to contribute to the deposit/ stamp?

Perhaps - depending on your finances, the amount of equity you currently have in your let properties, etc etc.

Dim90

Much appreciated for the feedback you have given. I will have to speak to a broker, my comments on the below:

AdrianC:
So you each own your parents' homes?
Yes on mortgage

And you each live elsewhere?
No we both live with our parents but were planning to find our own place together.

So you are their landlords... With all the legal responsibilities that entails. Your lenders are aware of the circumstances, right?
We are not landlords as we are not renting the places out, our parents are the only ones living in the properties apart from us and we expect this not to change. We don't think it's right to charge rent as they raised us and they can cover their own bills. Are we obliged to charge rent if we move out of the property?

25% is for a BtL mortgage. I presume you have those for the let properties you own. We do not plan to let the properties, we just want our parents to have somewhere to stay. We are currently living in the properties so it should be under a normal mortgage. If we move out, do we have to change the mortgage to a BtL mortgage?

Perhaps - depending on your finances, the amount of equity you currently have in your let properties, etc etc.
I was thinking of extending the mortgage by several years if it would give us a bit more equity to put for our own place.

hazyjo:
Couldn't each set of parents have moved/downsized?
I am also considering this for my parents, a bit of uncertainty with property value in the current climate. If I do sell my property and have my parents find another place to move to in their own name, would I be able to buy a new property in my name to :
a) pay a smaller % deposit amount on a new house (bear in mind the mortgage will be for both me and my partner so we can have enough)
b) not pay the additional stamp duty as this will be my main residence and no other property in my name.

AdrianC

Dim90 wrote: »

So you each own your parents' homes?
Yes on mortgage

That's a simple yes. Whether you borrowed money against them or not, you own them.

And you each live elsewhere?
No we both live with our parents but were planning to find our own place together.

OK, so you will be living elsewhere at the end of the saga.

So you are their landlords... With all the legal responsibilities that entails. Your lenders are aware of the circumstances, right?
We are not landlords as we are not renting the places out, our parents are the only ones living in the properties apart from us and we expect this not to change. We don't think it's right to charge rent as they raised us and they can cover their own bills. Are we obliged to charge rent if we move out of the property?

No, you can certainly choose not to charge rent - but you will still have all the legal obligations of being their landlords once you're no longer resident.

25% is for a BtL mortgage. I presume you have those for the let properties you own. We do not plan to let the properties, we just want our parents to have somewhere to stay. We are currently living in the properties so it should be under a normal mortgage. If we move out, do we have to change the mortgage to a BtL mortgage?

A normal residential mortgage certainly wouldn't be appropriate, since you won't live there.

Perhaps - depending on your finances, the amount of equity you currently have in your let properties, etc etc.
I was thinking of extending the mortgage by several years if it would give us a bit more equity to put for our own place.

Give us rough numbers.

hazyjo:
Couldn't each set of parents have moved/downsized?
I am also considering this for my parents, a bit of uncertainty with property value in the current climate. If I do sell my property and have my parents find another place to move to in their own name, would I be able to buy a new property in my name to :
a) pay a smaller % deposit amount on a new house (bear in mind the mortgage will be for both me and my partner so we can have enough)
b) not pay the additional stamp duty as this will be my main residence and no other property in my name.

If you sell your current property, and your parents sort their own accommodation, then you'll be in exactly the same boat as any other non-FTB looking to buy as an owner-occupier.

silvercar

A simple phone call to the mortgage lender(s) could solve this one. You bought on a residential mortgage as you were living in the property with family, very standard. Now you are moving out but the parents remain, so you need to ask the lenders how they see that.

They may not be bothered, particularly if your bedroom remains your bedroom with your rights to occupy it.

Plenty of people provide homes for family members without entering landlord/ tenant relationships. A sizable minority of people also run 2 homes, possibly a small place near work and a larger home elsewhere, or a main home and a second home somewhere coastal/ countryside/ abroad. Just because you allow your parents to live in a second home you own, doesn't make you a landlord.

Another option, depending on the figures, would be to clear the mortgage on these second homes and buy your main home with a larger mortgage. That gets around any lender consent issues, if it is an issue!

00ec25

AdrianC wrote: »

That's a simple yes. Whether you borrowed money against them or not, you own them.

on the info provided you cannot be that categoric, quite possible to be party to a mortgage without being a legal owner, rare, but possible

AdrianC wrote: »

No, you can certainly choose not to charge rent - but you will still have all the legal obligations of being their landlords once you're no longer resident.

A normal residential mortgage certainly wouldn't be appropriate, since you won't live there.

agreed
the lender may require that it is a REGULATED buy to let mortgage which is the format often required where the letting is to "family" ie. someone less likely to be evicted without extreme provocation.
However, that may actually work to your advantage anyway since a regulated mortgage is based on normal affordability calculations, ie your income, whereas a (true) BTL mortgage is based on multiples of rental income, and since you won't be charging rent, you won't be getting a normal BTL mortgage

AdrianC wrote: »

If you sell your current property, and your parents sort their own accommodation, then you'll be in exactly the same boat as any other non-FTB looking to buy as an owner-occupier.

agreed, this is the best solution

p00hsticks

Dim90 wrote: »

I am also considering this for my parents, a bit of uncertainty with property value in the current climate. If I do sell my property and have my parents find another place to move to in their own name, would I be able to buy a new property in my name to :
a) pay a smaller % deposit amount on a new house (bear in mind the mortgage will be for both me and my partner so we can have enough)
b) not pay the additional stamp duty as this will be my main residence and no other property in my name.

I'm not sure if the mortgage company will be happy to take your partners income into account if the new house is only in your name? And if it's in both of your names and she still owns her parents house I susect you may be liable for the additional stamp duty.

SDLT_Geek

Yes, I would expect the extra 3% SDLT to apply to your joint purchase of a home if your partner retains her existing property.