Home News Can we release some money tied up in our current home to use as a deposit on a new one? | Mortgages

Can we release some money tied up in our current home to use as a deposit on a new one? | Mortgages

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Q. My wife and I would like to purchase a second home to live in while renting out our current property. My sister is in a dire situation and desperately needs a safe and secure place to live with her son. Is it possible to use it as a deposit? We currently have around £60,000 in shares and my partner and I have a stable job. We also want to switch the mortgage on the first property to a buy-to-rent mortgage. I understand that I have to charge the market rent to her sister. Is this possible? We want to help her sister.

a Yes, it is possible, but in this case the mortgage cannot be converted into a standard rental mortgage. Instead, you should take out a “regulated” buy-to-rent mortgage. This is also known as a family mortgage. According to mortgage adviser Pete McGreston, onlinemortgageadvisor.co.uk: “This is a specialized mortgage that allows the borrower to lend out all or 40% or more of their property to their next of kin.” Close of kin means children, siblings, parents or grandparents but does not mean cousins, second cousins, or aunts and uncles.

Only a handful of lenders offer regulated buy-to-rent mortgages, and Mugleston said the requirements tend to be more stringent. “The lender is aware that families may not charge each other as much rent and that the unpaid may have a tendency to slip off,” so it is necessary to charge her sister the market rate rent. You may be surprised to learn that no , adds Muggleston. Rather, lenders tend to demand a security deposit of 25% or more (as is the case with standard rental mortgages) and are prepared to lend based on personal income, not potential rental income. It tends to be money based.

Before applying for this kind of mortgage, you should keep certain close relatives in mind. This is clearly what you are doing. And that family must agree to the arrangement. If it turns out that your sister does not want to be helped in this way, there is not much you can do. It depends on the rest of your economy.

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