LET TO BUY MORTGAGE

What is Let To Buy?

Let To Buy mortgages allow you to borrow money to buy a new home to move into and let you keep your old home to let out to tenants. Your new home can be any where in the UK. This type of loan basically means that you can move without selling your existing home first.

Lenders are continuing to be more flexible in their approach and are coming up with more and more ideas to help the homebuyer and those who wish to invest in additional property.

The rent you get from letting your old home must be somewhat greater than what you are currently paying on the mortgage on your old home. This is to cover any problems you might have in getting the rent paid by your tenants.

If you are buying property to let and need a let to buy mortgage or just some questions answered then call us now. Advice from our brokers is free and impartial and you will be under no obligation. They are here to help you.

Let To Buy Mortgage Conditions

Most lenders require a rental income between 30% and 50% higher than the mortgage payments on your old home. Sometimes the requirement maybe smaller but you will undoubtedly end up paying a higher interest rate.

As in any mortgage the lender will look at income multiples when determining how much they will lend to you on the new home. If the rent from your old home adequately covers the mortgage on the old home to the extent indicated above then the normal income multiple rules apply.

However if this is not the case a lender may deduct the annual mortgage repayments on your old home from your income before applying the normal income multiple rules. For instance if you earn £55,000 a year and your mortgage payments on your old home total £15,000 a year then the income multiple would be applied to £40,000. If the multiple used were 3.5 then you would be able to borrow £140,000.

Lenders are likely to require a 15% to 20% deposit on the new home for larger loans or maybe down to 10% for smaller loans.

Benefits of Let To Buy

This type of mortgage means you do not have to give up ownership of your old home if you are forced to move or want to move for a few years. By doing this you will b able to move back at some point in the future if you want to. You may feel that your old home will hold value better or rise in price quicker than properties in the area you are moving to.

You are able to keep your old property as a long-term investment while speculating on a new home, which you can improve while you live there.

Once you have the mortgage for your new home you will then have two mortgages both at normal residential rates instead of the normal scenario where the second of the mortgages would be at a higher interest rate.

If you want to get into property investment in a bigger way then this could be a great opportunity as the first stage in building up a property portfolio.

You can also use this type of mortgage as a chain breaker mortgage if you are having problems selling your property and need to move home as soon as possible. It can also used to avoid paying for an expensive bridging loan if your house isn’t selling and you think it could still be some time before it sells.

Potential Problems

Your old home may not be a suitable property for letting to tenants, so check with local letting agents to see what they think. Also you may find that there are so many rental properties in your area that the rental market is very slow and getting a tenant could be very difficult.

You may also find that the mortgage lender on your old home is not happy to allow you let the property and you may need special provisions from them to do so. Similarly if your old home is a leasehold property then you will probably require permission from the freeholder and it might not be forthcoming.

You will have to inform the buildings and contents insurer on you old home and you may have to change insurer if they are not prepared to cover you when you let the property.