Buying a building with two flats, can I rent one out and still get a residential mortgage?
It depends on the terms of the mortgage. Generally speaking, residential mortgages specifically prohibit letting out a property without the bank's express permission -- but as you say, that tends to assume that the whole property is being let, not just a part of it. Conversely, buy-to-let mortgages generally prohibit living in the property yourself! The final arbiter as to what is allowed under a mortgage is the mortgage provider; so the safest option is to speak to one or more banks, and see what they say. (Note that if you're changing the use of part of a property from business to residential, you may need to apply for permission; check with your local council.) I'd talk to a solicitor and see if you can structure the purchase in a way that breaks the property into three pieces. One would be the freehold of the whole building, one would be a long lease on the downstairs part (on which you would get a residential mortgage) and one would be a long lease on the upstairs flat (on which you would get a buy-to-let mortgage). Since there's essentially no price premium for freehold as opposed to long lease, you should be able to raise enough money from the two mortgages to fund the purchase. NO Even worse, most BTL(buy to let) lenders will not lend if you are going to be living in the property.    There are very few lenders that will touch something like this.    It is likely you will also need to use bridging for the time the building work takes at something like 1.5% per month! Try posting the question to http://www.propertytribes.com/ as there are a few UK mortgage experts on that site. The simple answer is to get a residential mortgage first, and once you have secured the loan, do whatever you want.  The bank only cares about what risk they are taking on the day of closing and won't care afterwards so long as you pay the mortgage on time. Residential mortgages are going to give you better rates than rentals, generally.
"Generally, when you own something - you can give it as a collateral for a secured loan. That's how car loans work and that's how mortgages work. Your ""equity"" in the asset is the current fair value of the asset minus all your obligations secured by it. So if you own a property free and clear, you have 100% of its fair market value as your equity. When you mortgage your property, banks will usually use some percentage loan-to-value to ensure they're not giving you more than your equity now or in a foreseeable future. Depending on the type and length of the loan, the LTV percentage varies between 65% and 95%. Before the market crash in 2008 you could even get more than 100% LTV, but not anymore. For investment the LTV will typically be lower than for primary residence, and the rates higher. I don't want to confuse you with down-payments and deposits as it doesn't matter (unless you're in Australia, apparently). So, as an example, assume you have an apartment you rent out, which you own free and clear. Lets assume its current FMV is $100K. You go to a bank and mortgage the apartment for a loan (get a loan secured by that apartment) at 65% LTV (typical for condos for investment). You got yourself $65K to buy another unit free and clear. You now have 2 apartments with FMV $165K, your equity $100K and your liability $65K. Mortgaging the new unit at the same 65% LTV will yield you another $42K loan - you may buy a third unit with this money. Your equity remains constant when you take the loan and invest it in the new purchase, but the FMV of your assets grows, as does the liability secured by them. But while the mortgage has fixed interest rate (usually, not always), the assets appreciate at different rates. Now, lets be optimistic and assume, for the sake of simplicity of the example, that in 2 years, your $100K condo is worth $200K. Voila, you can take another $65K loan on it. The cycle goes on. That's how your grandfather did it." "It doesn't make a lot of sense to buy a house/condo and rent it out now. On the other hand, I think finishing your basement and then renting it out is an excellent idea.  The ROR is excellent as long as you can deal with the ""strangers"" in the basement, have the extra driveway space and negative association with renting out your basement. HTH" I don't know enough about taxes and real-state in the Netherlands to be super helpful in determining whether or not a rental property is a good investment. One thing for certain is that there's some risk in spending everything on a rental property. It's wise to have some buffer, an emergency fund of 3-6 months expenses. If things got dire, you'd still need to live somewhere until your tenant was gone, and you'd want to be able to handle any major repairs that crop up. So, even if it is a good idea to buy a rental property, you should probably wait until doing so doesn't leave you without a healthy buffer. As for owning a rental, you described a scenario where you'd get 6% income on your investment each year if there were zero expenses associated with owning the property. Are there property taxes? Is there a monthly cost to maintain the building the apartment is in? Are rental incomes taxed more heavily than other investment income? Just be aware of the full financial picture before deciding if it's a worthwhile investment. In my experience buy-to-let mortgages charge a higher rate of interest than an personal residential mortgage.  They are regarded as a business enterprise and presumably the banks calculate that they carry a higher risk.  A bank would probably take action if the property on an ordinary mortgage was rented out, as you would be breaking their terms.  Policies could be rendered void.  The terms on an ordinary mortgage disallow renting out the property. You should absolutely go for it, and I encourage you to look for multi-unit (up to 4) properties if there are any in your area.  With nulti-unit properties it is far more common than not that the other units pay the mortgage. To comment on your point about slowly building an asset if the renter covers the payment; that's true, but you're also missing the fact that you get to write off the interest on your income taxes, that's another great benefit. If you intend to make a habit out of being a landlord, I highly encourage you to use a property management company.  Most charge less than 10% and will handle all of the tough stuff for you, like:  fielding sob stories from tenants, evicting tenants, finding new tenants, checking to make sure the property is maintained...  It's worth it. There fees are also tax-deductible... It makes a boat load of sense.  Just look at the world around you.  How many wealthy people rent???  I've met one, but they own investment properties though... There's nothing wrong with it. Living in a two-family house and renting the downstairs was a fairly standard path to the middle class and home ownership in the 20th century. Basically, if market conditions are good, you'll have someone else paying your mortgage. The disadvantage of the situation is that you're a landlord. So you have to deal with your tenant, who is also a neighbor. Most tenants are fine, but the occasional difficult person may come out of the woodwork. That model of achieving home ownership became less popular in the late 60's-early 70's when the law allowed two incomes to be used for mortgage underwriting. Also, as suburbanization became a national trend, absentee landlords became more common Sounds like you are in the right place at the right time, and have stumbled into a good deal. "that would deprive me of the rental income from the property. Yes, but you'd gain by not paying the interest on your other mortgage.  So your net loss (or gain) is the rental income minus the interest you're paying on your home.  From a cash flow perspective, you'd gain the difference between the rental income and your total payment. Any excess proceeds from selling the flat and paying off the mortgage could be saved and use later to buy another rental for ""retirement income"".  Or just invest in a retirement account and leave it alone.  Selling the flat also gets rid of any extra time spent managing the property. If you keep the flat, you'll need a mortgage of 105K to 150K plus closing costs depending on the cost of the house you buy, so your mortgage payment will increase by 25%-100%. My fist choice would be to sell the flat and buy your new house debt-free (or with a very small mortgage).  You're only making 6% on it, and your mortgage payment is going to be higher since you'll need to borrow about 160k if you want to keep the flat and buy a $450K house, so you're no longer cash-flow neutral. Then start saving like mad for a different rental property, or in non-real estate retirement investments." You seem to underestimate the risk of this deal for the inverstors. A person purchasing a residence is happy to pay $70K instead of $150K now, and the only risk they take is that the construction company fails to build the condo. Whatever happens on the estate market in two years, they still saved the price difference between the price of complete apartments and to-be-build apartments (which by the way may be less than $150K-$70K, since that $150K is the price on a hot market in two years). However, an investor aiming to earn money counts on that the property will actually cost $150K in two years, so he's additionally taking the risk that the estate market may drop. Should that happen, their return on investment will be considerably lower, and it's entirely possible they will make a loss instead of a profit. At this point, this becomes yet another high risk investment option, like financing a startup. It depends what rate mortgage you can get for any extra loans...  If you remortgage you are likely to get a rate of 3.5-4%... depending who you go with. With deposit accounts in the UK maying around 1% (yes, you can get more by tying it up for longer but not a huge amount more) clearly you're better off not having a mortgage rather than money in the bank. Does your 8k income allow for tax? If it does, you are getting 6% return on the money tied up in the flat. If you are getting 6% after tax on the invested money, that's way better than you would get on any left over cash paid into an investment. Borrowing money on a mortgage would cost you less than 6%... so you are better off borrowing rather than selling the flat. If you are getting 6% before tax... depending on your tax rate... it probably makes very little difference. You'd need to work out how much an extra 80k mortgage would cost you, how much the 50k on deposit would earn you and how much you make after tax. There is a different route. Set up a mortgage on the rental flat. You can claim the interest payment off the flat's income... reduce your tax bill so the effective mortgage rate on the flat would be less than what you could get with a mortgage on the new house. Use the money from the flat's mortgage to finance the difference in house price. In fact from a tax view, you may be better off having a mortgage free house and maxing out the mortgage on the flat so you can write off as much as possible against your tax bill. All of the above assume ... that the flat is rented all the time. The odd dry spell on the flat could influence the sums a lot. All of the above assume that  your cash flow works whichever route you choose. As no-one on stack exchange has all of the numbers for your specific circumstances it may be worth talking to a tax accountant. They could advise you properly, knowing the numbers, which makes the best sense for you in terms of overall cost, cash flow, risk and so on. "Do you want to split expenses of the new apartment, or split your income/assets equally too (as for instance with a marriage where no sort of ""yours, mine, and ours"" are split out)? I'm going to assume you have beliefs similar to me in my answer, in that you desire to split expenses of the new place but don't suddenly want to split all of your assets and income 50/50 too. So here's how I'd approach this. I am somewhat unsure of what you mean by ""living expenses"" for your flat. Does this mean the cost of ownership per month - what it takes to not get rid of the place - and no portion of this is interest/mortgage? To make the calculations a little simpler, I'll assume that all the money you pay out as expenses is just gone - none of it remains as equity or is dis-proportionally accumulating value in some other such way. So, you move in with your girlfriend. The cost for her place - the place itself, taxes, utilities, whatever - is 7892 per month. So since you are both getting equal use of the place, you would split this into 3946 per month for each of you. That's it. Well, I don't see how that really matters at all, anymore than if you owned a company or stocks and bonds. If you rent it out for less per month than it costs you, I don't see why your girlfriend should take any part of the loss. Conversely if you make more money per month than it costs you, that is your investment profit - the payment you get for owning the apartment and dealing with renting it out. Now if your girlfriend is going to partner with you in handling renting out the apartment you own and you want to look at this as an investment partnership, then you should pay all expenses out of the income first and then you can split the profit if you really want. One question to ask would be, what if you just sold your apartment completely? Would you give your girlfriend have the money from the sale? If not then I don't see why you would split the investment profit from holding on to the place. While this is what I recommend and would feel comfortable with personally and if the situation was reversed (and it was my girlfriend that owned a place and was moving in with me), ultimately this is about your personal values, beliefs, and relationship. You are very wise to seek something that both of you will find fair, and so you should discuss a proposed arrangement with your girlfriend and see if you are on the same page. If you are both fine with the agreement and feel OK with it, then great - none of us have to like or agree with it, because we aren't a part of your relationship. Psychologically and financially this situation seems the most reasonable to me, but YMMV. After some more thought and from comments, I realize that it's probably best to explore a few possibilities numerically. So I'll run a few sets of numbers which may help pick which one is right for your relationship. This is approximately the same as paying her ""rent"" for getting to live with her. You pay her for sharing her place, splitting the expense: 3946 paid to you. She pays the other 3946 for her place. Financially it's like being room-mates. You can do whatever you want with your place - rent or sell, hold on to it for security, etc. This deal makes your girlfriend financially better off by 3946. The financial advantage to you is wholly dependent on what you do with your place.  This option would give you each the most financial independence, which is why I like it - but you might be keen on being more interdependent.  Which leads us to the next option. Here you behave as before in splitting her expenses, but you include renting out your place as part of the deal. Let's say you get 10k a month for it. You pay the expenses on that place from the rent, then you have 2108 left as 'profit'. You split the profits monthly 1054 to each of you.  There's a bit of problem here, though - what happens when the place is vacant? Do you share the full expense of the rent, so she'd actually be paying you each month while it sits open? What about repairs, taxes (costs and credits), etc?  I would recommend instead what you do, if you go this way, to account for the apartment as an investment and don't pay out ANY of the profits right away. All rents stay in their own account, and you pay expenses from that same account. For you both it's like it doesn't exist, accept it is a nice earning asset. When you decide it has accumulated more than enough to pay for itself and has enough money to cover vacancy, repairs, etc, then when you pull out money for the duration you are together you just pay it out to both of you equally. You might also pull this ""equity"" out and spend it on something for both of you, like a nice vacation, etc - something you both enjoy, so you are still sharing the profits. I don't object to this, and it could be a nice arrangement. I would only note that this makes you have a personal relationship, you live together as roommates, and now you are co-landlords/business partners. That's a lot of types of relationships, and I can tell you from personal experience each type has it's own stresses - and this sort of stress can stack (or if you don't handle it well, multiply). So just make sure you are both clear what sort of responsibility you are really both signing up for up front, and what you'd do if you part.  Combine your apartment expenses, which would equal 14753, so that's 7376 cost to each of you a month. If you rent your place then whatever money you get you split, and whatever costs come up (repairs, cleaning, etc) you would also split. So if you get an average of 10000 a month for the apartment you each are paying living expenses of 2376 total.  But notice that this isn't exactly equal, either. You will pay 5516 less per month than you are now, and she will pay 4485 less than she was before.  There's nothing morally wrong with this or anything - it's a 100% partnership across the board. Yet advantage is still not equal - you actually will see a larger benefit to your budget than she will. But if you seek equal benefit, you will have to pay 515 a month more than she does.  This sort of thing is basically the model marriage uses, a pure 50/50 partnership, or ""communal property"". And note that one of you will either be paying more than the other, will be benefiting more than the other - no matter what you do! It's impossible to balance both costs and benefits, because your income and expenses are not the same going in. If you go this way you'll need to choose what is most important - splitting the expenses/income equally, or benefiting financially equally. So I say again, ultimately you have to choose based upon your individual and shared values, and also on just what sort of relationship and layers of commitment you want to have together. You could start slow with option 1, then progress to sharing more - that's what I'd recommend, because I like the idea of developing things one layer at a time rather than jumping in head-first (like I have personally done in the past, haha!). Once bitten twice shy, I might just be more risk-averse or careful than you desire to be, but that's a personal choice.  I personally believe the relationship can be far more valuable than any investment, but at the same time I'll take $1 over a relationship that has turned sour any day of the week. This is why I suggest the more gradual, careful approach - to let your love bloom and grow deeper one layer at a time, without the complexities of fully shared finances or investment partnership. Relationships are hard enough, so this is why I favor trying to protect them aggressively from unnecessary complexity. Some favor the ""sink or swim"" model of seeking out trials and challenges, while I favor the ""relationship as tender, growing sapling"" model. I hope seeing these options laid out more is helpful to you, and good luck to you, your relationship, and - lastly - to your investments!" Let me add a few thoughts that have not been mentioned so far in the other answers.  Note that for the decision of buying vs. renting a home i.e. for personal use, not for renting out there's a rule of thumb that if the price for buying is more than 20 year's (cold) rents it is considered rather expensive. I don't know how localized this rule of thumb is, but I know it for Germany which is apparently the OP's country, too. There are obviously differences between buying a house/flat for yourself and in order to rent it out. As others have said, maintenance is a major factor for house owners - and here a lot depends on how much of that you do yourself (i.e. do you have the possibility to trade working hours for costs - which is closely related to financial risk exposure, e.g. increasing income by cutting costs as you do maintenance work yourself if you loose your day-time job?).  This plays a crucial role for landlords I know (they're all small-scale landlords, and most of them do put in substantial work themselves): I know quite a number of people who rent out flats in the house where they actually live. Some of the houses were built with flats and the owner lives in one of the flats, another rather typical setup is that people built their house in the way that a smaller flat can easily be separated and let once the kids moved out (note also that the legal situation for the landlord is easier in that special case). I also know someone who owns a house several 100 km away from where they live and they say they intentionally ask a rent somewhat below the market price for that (nice) kind of flat so that they have lots of applicants at the same time and tenants don't move out as finding a new tenant is lots of work and costly because of the distance.   My personal conclusion from those points is that as an investment (i.e. not for immediate or future personal use) I'd say that the exact circumstances are very important: if you are (stably) based in a region where the buying-to-rental-price ratio is favorable, you have the necessary time and are able to do maintenance work yourself and there is a chance to buy a suitable house closeby then why not. If this is not the case, some other form of investing in real estate may be better. On the other hand, investing in further real estate closeby where you live in your own house means increased lump risk - you miss diversification into regions where the value of real estate may develop very differently.  There is one important psychological point that may play a role with the observed relation between being rich and being landlord. First of all, remember that the median wealth (without pensions) for Germany is about 51 k€, and someone owning a morgage-free 150 k€ flat and nothing else is somewhere in the 7th decile of wealth. To put it the other way round: the question whether to invest 150 k€ into becoming a landlord is of practical relevance only for rich (in terms of wealth) people. Also, asking this question is typically only relevant for people who already own the home they live in as buying for personal use will typically have a better return than buying in order to rent. But already people who buy for personal use are on average wealthier (or at least on the track to become more wealthy in case of fresh home owners) than people who rent. This is attributed to personal characteristics and the fact that the downpayment of the mortgage enforces saving behaviour (which is typically kept up once the house is paid, and is anyways found to be more pronounced than for non-house-owners). In contrast, many people who decide never to buy a home fall short of their initial savings/investment plans (e.g. putting the 150 k€ into an ETF for the next 21 years) and in the end spend considerably more money - and this group of people rarely invests into directly becoming a landlord.  Assuming that you can read German, here's a relevant newspaper article and a related press release. Banks in New Zealand tend to take a lien that is higher than the amount of the loan, so that your only option for a second mortgage is with them. ASB wanted 50% more than the value of the loan when I had my mortgage with them. Of course, with house price inflation the way it's been in NZ, the value of your house may have outstripped the lien anyway, and you can mortgage the rest of it with anyone you like. I suspect your lawyer will need to inform the other lienholder, but you don't need their permission. "It's a little unusual, but I don't think the financial terms are completely unreasonable on their face. What you describe is similar to an interest-only loan, where you make payments that only cover the interest due each month, and the entire principal is due as a single ""balloon payment"" on a specified date (in this case, the date on which the condo is sold).  Your monthly payment of $500 on a principal of $115K is equivalent to an annual interest rate of 5.22%, which at least is not completely usurious.  With a traditional mortgage you might pay a rate as low as 3%, if you had sufficient income and excellent credit - but I don't know, from what you've said, whether that's the case.  Did you make the current arrangement because you were unable to get a loan from a bank? The main difference here is that instead of the balloon payment being a fixed $115K, it's ""75% of the gross proceeds of the sale"".  If the condo eventually sells for $155K, that would be $116,250, so that's slightly advantageous to them (assuming that ""gross proceeds"" means ""before deducting commissions for either the buyers' or sellers' realtors or any other costs of the sale""), and thus slightly disadvantageous to you.  If the condo appreciates in value, that's more of a win for them and more of a relative loss for you.  But it's also possible that the value of the condo goes down, in which case this arrangement is better for you than a fixed balloon payment.  So this deal does prevent you from getting a larger share of any gains in the value of the property, but it also helps insulate you from any losses.  That's important to keep in mind. There's also the issue of needing their consent to sell.  That's potentially problematic - usually in a joint ownership scheme, either owner has the right to demand to be bought out or to force a sale.  I guess it depends on whether you think your parents would be likely to consent under reasonable circumstances, or to insist on holding the property against your best interests. It's true that you aren't building equity with this arrangement, and if you thought you were, you are mistaken or misled.  But let's compare it with other options. If you would qualify for a traditional 30-year fixed mortgage at 3%, your monthly payment would be slightly lower ($484), and you would be building some equity because your payments would reduce the principal as well as paying the interest.  But a 30-year loan builds equity very slowly at first - after 7 years you'd have only about $20,000 in principal paid down. If we assume that 5.2% represents the interest rate you'd otherwise pay based on your creditworthiness, then your monthly payment would be $631.  So compared to that, you have an extra $130 per month that you can save or invest in whatever you want - you're not forced to invest it in your house. Note that in either case you'd still be paying the condo fees, property taxes, insurance, and maintenance yourself.  So we might as well eliminate those from consideration.   It might be a good idea to find out what other options you would have - perhaps try to get an interest rate quote on a traditional mortgage from a bank, based on your income and credit history.  Then you can decide what to do, taking into account: your financial situation; how much of a monthly payment could you afford? your relationship with your parents; are they likely to be reasonable about renegotiating?  Do they in general tend to respect your wishes?  Would it harm your relationship if you tried to get out of the deal, and how important is that to you? To what extent do you actually want to pay for equity in this property? Do you really believe it's a good investment, and have evidence to support that?   Your options include: Try to renegotiate the terms of the loan from your parents Try to ""refinance"" the loan, by getting a loan from a bank and paying off some agreed-upon amount of principal to your parents Try to force the sale of the condo and move to another house, financing it some other way Consult a lawyer as to whether your agreement with your parents is legally enforceable.  For instance, do they have a lien on the property?" Will buying a flat which generates $250 rent per month be a good decision? Whether investing in real estate is a good decision or not depends on many things, including the current and future supply/demand for rental units in your particular area. There are many questions on this site about this topic, and another answer to this question which already addresses many risks associated with owning property (though there are also benefits to consider). I just want to focus on this point you raised: I personally think yes, because rent adjusts with inflation and the rise in the price of the property is another benefit. Could this help me become financially independent in the long run since inflation is getting adjusted in it? In my opinion, the fact that rental income general adjusts with 'inflation' is a hedge against some types of economic risk, not an absolute increase in value. First, consider buying a house to live in, instead of to rent:  If you pay off your mortgage before your retire, then you have reduced your cost of accommodations to only utilities, property taxes, and repairs. This gives you a (relatively) known, fixed requirement of cash outflows. If the value of property goes up by the time you retire - it doesn't cost you anything extra, because you already own your house. If the value of property goes down by the time you retire, then you don't save anything, because you already own your house. If you instead rent your whole life, and save money each month (instead of paying off a mortgage), then when you retire, you will have a larger amount of savings which you can use to pay your monthly rental costs each month. By the time you retire, your cost of accommodations will be the market price for rent at that time. If the value of property goes up by the time you retire - you will have to pay more on rent. If the value of property goes down by the time you retire, you will save money on rent. You will have larger savings, but your cash outflow will be a little bit less certain, because you don't know what the market price for rent will be. You can see that, because you need to put a roof over your own head, just by existing you bear risk of the cost of property rising. So, buying your own home can be a hedge against that risk. This is called a 'natural hedge', where two competing risks can mitigate each-other just by existing. This doesn't mean buying a house is always the right thing to do, it is just one piece of the puzzle to comparing the two alternatives [see many other threads on buying vs renting on this site, or on google]. Now, consider buying a house to rent out to other people:  In the extreme scenario, assume that you do everything you can to buy as much property as possible. Maybe by the time you retire, you own a small apartment building with 11 units, where you live in one of them (as an example), and you have no other savings. Before, owning your own home was, among other pros and cons, a natural hedge against the risk of your own personal cost of accommodations going up. But now, the risk of your many rental units is far greater than the risk of your own personal accommodations. That is, if rent goes up by $100 after you retire, your rental income goes up by $1,000, and your personal cost of accommodations only goes up by $100. If rent goes down by $50 after you retire, your rental income goes down by $500, and your personal cost of accommodations only goes down by $50. You can see that only investing in rental properties puts you at great risk of fluctuations in the rental market. This risk is larger than if you simply bought your own home, because at least in that case, you are guaranteeing your cost of accommodations, which you know you will need to pay one way or another. This is why most investment advice suggests that you diversify your investment portfolio. That means buying some stocks, some bonds, etc.. If you invest to heavily in a single thing, then you bear huge risks for that particular market. In the case of property, each investment is so large that you are often 'undiversified' if you invest heavily in it (you can't just buy a house $100 at a time, like you could a stock or bond). Of course, my above examples are very simplified. I am only trying to suggest the underlying principle, not the full complexities of the real estate market. Note also that there are many types of investments which typically adjust with inflation / cost of living; real estate is only one of them. This may effect how much, or under what terms a bank is willing to loan us I don't think this is likely, an investment is an investment whether it is money in a savings account or a loan. However, talk to your bank. Is it worth getting something by a lawyer? Definitely, you need a lawyer and so do your parents. There is a general presumption at law that arrangements between family members are not meant to be contracts. You definitely want this to be a contract and engaging lawyers will make sure that it is. You also definitely want this to be a proper mortgage so that you get first call on the property should your parents die or go bankrupt. In addition, a lawyer will be able to advise you of the pitfalls that you haven't seen. If both of my parents were to pass away before the money is returned, would that document be enough to ensure that the loan is returned promptly? No, see above. Tax implications: Will this count as taxable income for me? And if so, presumably my parents can still count it as a tax deduction? Definitely, however the ATO is very keen that these sorts of arrangements do not result in tax minimisation. Your parents will get a deduction at the rate charged; you will pay tax on the greater of the rate charged or a fair commercial rate i.e. what your parents would be paying a bank. For example, if the going bank mortgage rate is 5.5% and you charged 2% they get the deduction for 2%, you pay tax as though they had paid 5.5%. Property prices collapse, and my parents aren't able to make their repayments, bank forecloses on the place and sells it, but not even enough to cover the outstanding loan, meaning my parents no longer have our money. (I could of course double down and pay their monthly repayments for them in this case). First, property prices collapsing have no impact on whether your parents can pay the loan. If they can it doesn't matter what the property is worth. If they can't then it will be sold as quickly as possible for an amount that covers (as far as possible) the first mortgagee's indebtedness.  It is only in reading this far that I realise that there will still be a bank as first mortgagee. This massively increases the risk profile. Any other risks I have missed? Yes, among others: Any mitigations for any identified risks? Talk to a lawyer. Talk to an accountant. Talk to an insurance professional. Anything I flagged as a risk that is not actually an issue? No Assuming you would advise doing this, what fraction of savings would you recommend keeping as a rainy day fund that can be accessed immediately? I wouldn't, 100%.