Can I get a mortgage secured on the property I am letting out?

Posted on 5 November 2007

I own a property (Let at £650 per month) worth approx £190,000 with outstanding interest only mortgage of £48,000. I would like to purchase another property worth approximately £140,000 which I would let to my son with his rent covering the mortgage repayments. Is it likely I can get a mortgage secured on this property as I have approx £140,000 equity, also what type of mortgage, realistically I would need to borrow 90-95%. I also have family home mortgage free worth approx £250,000 but do not want to use as security.

Robert

Dear Robert,
 
£650 rent can support around £115,000 of loan, which means that you have scope to increase your current mortgage and raise up to £75,000 more out if you like, either by approaching your current lender, or by remortgaging away to do it. This would certainly be one method of improving the amount of deposit you are taking to the new property. The new property would require a 15% - 25% deposit, depending on the lender. There are plenty of Buy-to-let mortgages available for this sort of thing but you should be aware that the lender choice will be restricted as you are proposing what is known as a "regulated mortgage contract".  This means that it is more than 40% occupied by a family member, and is not available from all lenders as it has different legal implications. A mortgage broker will be able to tell you which ones can do it for you, or you can try Clydesdale bank, Standard Life, Principality, Irish permanent, The Mortgage Works, Cheltenham and Gloucester, Landsman Heritable and Saffron Bank.
 
Alternatives would be to use the deposit raised from the current place, and just guarantee your son, if he has his own income.  Alternatively, if you both have income, you could just do a normal purchase with him.
 
Katie

Category: Buy-to-let, Second properties

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