Buying 2nd home and renting 1st?

Loo5y

I am just wondering what my options are, I bought my first home by myself at the end of 2018. It is a 2 bed, with just a living room and kitchen, no room for dining etc. 

I met my partner January 2019...one month after completing on my house (typical) we are nearly 2 years down the line, he has moved in and we have a dog and the house all of a sudden feels extremely small. My partner was already saving, he has a LISA (I used a help to buy ISA with my house). 

We want a bigger home, to have space for children (or more dogs) we currently have 16k between us 10 in the LISA and 6 in a normal account. My mum rents and has said if we moved and decided not to sell my house she would happily rent it from us, which could be very beneficial in future and also save the stress of trying to sell, allowing us to move chain free.

Would we then become subject to needing a bigger deposit (25% or more) ? Can my partner use his LISA? And would changing my current mortgage to a buy to let mortgage affect the monthly payments?

I did contact Halifax and asked these questions but I’m not convinced I was given the right information...I was told no it wouldn’t affect the mortgage payments as I have a 5 year fixed rate, which he then followed with, I don’t think anyway...he also said I would need a 15% deposit (because that is the current minimum due to covid) which would be okay, we would need more time to save but it is doable, but 25% plus would not be.

Sorry it’s long winded, any advice appreciated!

MaryNB

A lot of lenders don't like borrowers renting to family members. It won't be allowed under the terms of a BTL. You should talk to a broker. 

greatcrested

As Mary says, you'll struggle to fine a neder willing to grant a BTL mortgage where the tenant is to be family. Try a mortgage broker.

Are you up to speed on a landlord's obligations?

Post 7: New landlords (1):advice & information :see links in next post

Post 8: New landlords (2): Essential links for further information

Post 9: Letting agents: how should a landlord select or sack?

SDLT_Geek

Also you would need to budget for the extra 3% SDLT on your new home if you are not selling the old one.

Loo5y

MaryNB said:

A lot of lenders don't like borrowers renting to family members. It won't be allowed under the terms of a BTL. You should talk to a broker. 

Thanks, I didn’t know this! I’ve had a quick research and it does seem to be very few and far between that would accept family and a broker would be the way to go if I chose to do this.

Aranyani

If your mum ever needed to claim help with housing costs in future it would be more complicated, you would still have all the responsibilities of any other landlord and would need to declare the income for tax purposes.

powerspowers

Similar situation, we thought about this and decided against due to 
•paying stamp duty on new house
•not quite enough equity for deposit on both houses- could have managed it but would wipe out savings and then something would go wrong!
•partner had previous bad experience of renting to family, he needed the property back and it was a drama

also can’t see a way round to use the LISA if one of you has had property before- it’s doable but I wouldn’t want the new property in one name

good luck with whatever you decide! 

powerspowers

Aranyani said:

If your mum ever needed to claim help with housing costs in future it would be more complicated, you would still have all the responsibilities of any other landlord and would need to declare the income for tax purposes.

This. It isn’t impossible but can cause delays- especially if it’s soon after family member moves in or they are first tenant in the property 

Thrugelmir

Don't forget that rental income is taxable either.