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We are looking for a buy to let mortgage but only have 15/20% deposit and as first time buyers most lenders are looking for 75% LTV so one financial advisor recommended using another property (Parent) as collateral for the first two/three years then for us to re-mortgage and take their house off the mortgage To me this seems like a good idea but apart from the obvious risks such as falling behind with payments and losing the both houses what are the other risks? how does it work? and is this beneficial to us?

Just a note i know we will receive charges for re-mortgaging

Thank you for any help

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    Be very careful about doing that. It is not as easy as it has been made to seem that you can just re-mortgage and get it off. There are almost as many requirements for qualifying for a refinance as the first mortgage. Additionally if you are worried about the possibility of defaulting along the way, then chances are you are not in a good position to be sure and that means it will be a factor in your refinance too which means it could hold you back like I said. Additionally if the collateral property is paid or not, how much equity and so on factors in how beneficial to you it can be. – GµårÐïåñ Mar 12 '14 at 2:27
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    One query comes to the top of my head. You don't have your own house, but applying for a buy to let mortgage. Why all this necessity to earn a rental property ? Isn't it better to loose one house rather than two ? As a first time buyer, you could use the Help to Buy to buy one for yourself. – DumbCoder Mar 12 '14 at 8:58
  • Alternatively, there are a small number of BTL mortgages available with LTV of 80-85%. Obviously, they'll cost more, but you can always remortgage in the future. – Steve Melnikoff Mar 12 '14 at 12:10
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It is generally not a good idea to use your parents property to buy another property. You seem to be aware of the risks.

  • As you have already highlighted, you could loose both houses.
  • Re-mortgage is not very straight forward, there could be fees and other qualifying requirements

Whether you would like to take these risks is for you to decide. Also what are your alternatives, why do you need to buy this house soon. Else you can wait for few years to buy a house and put aside sufficient funds.

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