My wife and I have £10,000 left to pay on our mortgage and the value of our home is £250,000. Our son is going away to university. We were thinking of buying a second home for him to stay in. Should we get a buy-to-let property or should we get a residential mortgage in his name? He’ll rent it out to other students and work part-time. Would we have to act as guarantors?
That’s quite a lot of equity. The easiest solution, although not necessarily the cheapest, might be to remortgage your home and buy the second one with cash – if funds allow. In this case you would be free to rent out rooms to whoever you wanted, although you would be liable for the 3% stamp duty surcharge on the purchase.
Alternatively, you could raise the deposit for your son by remortgaging your home and act as a guarantor for his residential mortgage. This means you would become responsible for either a part or the whole of the debt if your child were to default on the mortgage payments. The upside is, that you will not be liable for the extra stamp duty because the property would be in your son’s name. Guarantor mortgages require careful negotiation as lenders have a variety of differing criteria which must be met, and you’ll need to find one that will allow student lodgers too. Do get in touch to talk through the options.
1st January 0001