Posted on 15 March 2010 by K Brendon
My Grandmother currently has her house on the market for £150k, which is a realistic price, but the market is really slow and she is not getting any viewings. She has fallen in love with a bungalow, which I is worth between £120k & £130k. Can you suggest anyway that she could buy the bungalow before her house sells? She is 76.
I do have a property myself, owned outright valued at approx. £80k but I am in the process of moving myself and do not want to affect how much I can borrow in my own right, I personally need between £50-£75k to move 'up'. Although I have complete faith that she would be able to keep up with any payments I am concerned that if I help her out I won't be able to get what I want when I need it. Could she do a buy to let on her own house? Or could I do a buy to let on the bungalow with no effect on my mortgage options?
Dear K Brendon
You don't mention whether or not your mother has any savings and so I presume she needs to raise all of the purchase price for the bungalow until she sells her existing property.
A Buy to Let mortgage on her own home would typically raise up to 75% of it's value, £112,500 leaving a shortfall of up to £17,500 on the figures you have supplied. You could raise this against your own property in the short term and it would not effect your borrowing capability because it would be repaid on the sale of your own home. It would however, reduce the amount of capital you have available to put into your own purchase.
One other issue you will find is the number of lenders that will consider you mother for a mortgage is very limited and depending on the suitability of her property for letting purposes you may have to consider a smaller mortgage and raise more against your own. Raising the mortgage in your name would give you more choice and so long as the rental achieved covers the amount borrowed it should not adversely effect your borrowing capability.
I recommend that you speak to a good independent mortgage broker who can give you the advise you and your mother require.
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.