Posted on 3 April 2012 by margaret
My husband and I have a joint mortgage with 5000 left to pay and the value of the property is 100000. We want to buy a second home and allow our daughter to stay there while at university should we get a BTL mortgage or can we get a residential mortgage in our daughters name.We are both in employment.
You have 4 options to choose from and each has their own pros and cons.
1) Buy the property with a residential mortgage in your names as a home for a dependent relative. The maximum you will be able to borrow is normally 75% of the purchase price and unless you have the balance in savings you will probably have to raise the funds by extending your current mortgage. However, the bulk of the debt will be secured on the second property and the risk to your own home will be reduced.
2) Buy the property with a residential mortgage in your daughter's name, with you acting as guarantors if necessary. The property will be purchased in your daughter's name and you may or may not want this, depending on whether you have other sons or daughters for who you would have to do the same. As guarantors the covenants you have to give are very similar to as if the mortgage was in your names so you have all the risk but none of the security.
3) Buy the property with a residential mortgage secured on your current home. This would enable you to buy the second property for cash and you may be able to obtain a better price or property as a cash buyer. You would though have all the debt secured on your own home which would be at risk if you did not keep up repayments.
4) Buy the property with a BTL mortgage. The maximum loan you will be able to get will be 85% and many lenders do not like you having students as tenants or your own daughter as a tenant. However, there may be tax advantages to buying with a BTL mortgage and you should seek specialist tax advice on this before proceeding.
How you decide to proceed will depend on your own circumstances and whether or not you want your daughter to be the owner of the property?
I believe we can help you and that you would benefit from speaking to one of our independent mortgage advisers. Please call 0344 346 3672 and tell the consultant the date and title of your question, they will then be able to help you find the right solution for your situation.
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