What is a Let to Buy Mortgage?

Let to Buy is more of a lending scheme than a mortgage product as such. It is a way for people who own their home outright, or with a mortgage, to release equity from their property so that they can buy another one. The first property is then rented out.

The advantage of Let to Buy is that it enables people to move without having to sell their existing home.

You will end up with 2 mortgages once the let to buy process has completed:

one on your current home
and one on your new home

There are many reasons why people choose to Let to Buy. Perhaps you have found your perfect home but cannot afford to buy it outright. Or, you may want to move closer to family or for a new job but don’t want to sell your current home.

Mortgage Criteria

The main criteria for a Let to Buy mortgage is that you will need to let out your old property once you have moved into your new home. This is usually done through a buy-to-let remortgage. You will need to have a good credit history and be able to afford the mortgage repayments on both properties.

Proof of income will be required for both mortgages in the form of P60, payslips, accounts or SA302 Tax Calculations.

What is the process?

If you are looking to Let to Buy, the first step is to speak to a mortgage advisor. They will be able to assess your eligibility and give you an idea of how much you could borrow. It is important to get professional advice before proceeding as there are a number of things to consider, such as tax implications and the fees associated with taking out two mortgages.

There’s also the normal options to go through, interest rate types etc and whether any of the mortgages could be set up on an interest-only basis.

Once you have found a suitable property to buy, your mortgage advisor will help you to apply for both mortgages.

What’s the difference between let to buy and buy to let?

The main difference between let to buy and buy to let is that with let to buy, you release equity from your current home to purchase another one, which is then rented out. With buy to let, you purchase a property specifically to rent it out.

Buy to Let mortgages are subject to slightly different criteria than normal residential mortgages as they are considered a higher risk. You will usually need a larger deposit (25%+) and will be required to prove your income from the rental income.

Specialist Mortgages

Not on the High Street!

The high street lenders can’t help every mortgage customer and they prefer the simple, low-risk ones.

If your situation is a bit different or needs a more personalised solution then our brokers can help.

Expert advice, for all situations.

Bridging Loans

The most flexible of secured loans and often misunderstood. Bridge loans can be used in so many different ways and can be arranged super fast.

Large Loans

High net worth mortgage brokers understand complex large loans and unique situations and can source bespoke deals from the right lenders.

Let to Buy

Let to buy combines a buy to let remortgage with a residential mortgage. Allowing you to move house while keeping your current home.

What are the risks?

There are a number of risks associated with Let to Buy that you should be aware of before proceeding.

The first is that you could end up with two properties that are difficult to sell, particularly if the housing market dips.
Second, you could end up in a situation where you can’t afford the mortgage repayments on both properties if the rental income doesn’t cover the costs.
Third, there are tax implications to consider as you will be classed as a landlord and will need to declare the rental income to HMRC.
And finally, you will need to find tenants for your old property, which can be time-consuming and stressful.

Despite the risks, Let to Buy can be a great way to move without having to sell your existing home. It is important to get professional advice before proceeding and to make sure that you are aware of all of the risks involved.

Switching to a buy to let mortgage

So you want to swap your residential mortgage for a buy to let? Renting out your own home is an option that many people turn to when their personal circumstances change.

But changing how you use a property also means updating your mortgage, so that they both match. In this article we look at the related mortgage options, eligibility criteria and how to get the best deal by using a broker.

Using a mortgage broker

If you’re thinking of Let to Buy, the best thing to do is speak to a whole of market mortgage broker. They will be able to assess your eligibility and give you an idea of how much you could borrow. They will also be able to explain the process and help you to find the best mortgage deals.

Let to buy is a specialist area of lending which requires an experienced broker to setup and co-ordinate.

CONTACT A MORTGAGE BROKER