Homes for Dependent Relatives Scheme
Answered on 18 July 2017 by Nick Morrey
I want to buy my elderly parents a house nearer to the family. I already have a mortgage for my own place but I have heard there is a scheme titled ' homes for dependent relatives ' which will allow me a second mortgage. If this is OK what terms could I expect on an Interest only mortgage?
It is certainly ok to raise a mortgage to buy a home for a dependent relative and there are several lenders available to you. In all cases they will want to be sure that you have sufficient income to support both the new mortgage and any existing commitments, where they differ is how they assess this. Some will add the two mortgage debts together and apply an income multiple whereas others will take your existing mortgage payment as a monthly commitment and then apply their affordability calculation. Usually you are able to borrow more with lenders who use the second method.
You will need to raise a deposit for the purchase and typically this would be around 20-25% of the purchase price. This also coincides with the typical maximum loan to value available on interest only mortgages unless you are hoping to use the future sale of the property as your repayment vehicle. In this case you may need to "invest" between 40-50%. Unless you have existing savings available this can sometimes mean looking to borrow extra money on your own home.
I believe we can help you and that you would benefit from speaking to one of our independent mortgage advisers. Please call 0330 433 2927 and we will then be able to offer further advice on your situation.
Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.
We recommend you seek professional advice with regard to any of these topics where appropriate.