Q My wife and I would like to buy a second home to live in while renting out our current property. My sister is in dire straits and desperately needs somewhere safe and secure to live with her son. Would it be possible for us to release some of the money tied up in our current home to use as a deposit on a new one? We have about £60,000 of equity at the moment and my partner and I have secure jobs. I would also like to swap the mortgage on our first property to a buy-to-let mortgage. I understand that we would have to charge my sister the market rate of rent. Is any of this possible? We would very much like to help my sister.
AR

A Yes, it is possible but what you can’t do is convert your residential mortgage to a standard buy-to-let mortgage in this case. Instead, you have to take out a “regulated” buy-to-let mortgage, which is also known as a family mortgage. According to Pete Mugleston, a mortgage adviser at onlinemortgageadvisor.co.uk: “This is a specialist mortgage that allows a borrower to rent out the entirety of their property – or more than 40% – to a close relative.” Close family member means a child, sibling, parent or grandparent but not cousins, second cousins or aunts and uncles.

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