Can I use my savings to put a deposit down for a second house?

12 April 2022

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Question by Mohammed

I own my house outright, can I use my savings to put a deposit down for a second house and put rental in my current home without taking out a Buy to Let morgage?

Answered by Samantha Secomb

Hi Mohammed,

There are some lenders who would offer you owner occupier residential mortgage terms on the house you are planning to buy (assuming you meet their lending criteria) without insisting you sell your current home.

If you plan to use the rental income from letting out your existing home to justify the borrowing on the new one, then it is unlikely to qualify for a straight forward residential mortgage and you would probably have to use a buy to let arrangement.

Property is great asset class to have in your portfolio - it is hard to own property in the UK and lose money over the long term, but it has the big disadvantage of being "illiquid" - that is to say it isn’t spendable. In some cases that works well because the investor wants to limit spendability or intends to pass the wealth created onto another generation rather than use it during their lifetime. Have a think about how this second property fits into your overall financial plan. In most cases my clients require access to their investments to spend during their lifetime and so property represents only a small part of the overall portfolio of wealth they create.

Hope this helps

Answered by

Samantha Secomb

Chartered Financial Planner, FPFS

On a mission to make unbiased financial advice relevant and accessible to women.