A Let-to-Buy Mortgage can help you buy a new property, whilst you keep your current home

3 min
Important to know

A mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

A Let-to-Buy Mortgage can help you buy your new home even if you cannot sell your existing home

If you currently own your home, and you want to buy your next residential property, whilst still keeping your current one, a let to buy mortgage may be the answer to help you do that.

Remember that you will need to weigh up the higher stamp duty costs when buying an additional property. However, remember that if you sell your existing property within 3 years of purchasing it, you could claim the money back.

Scenario 1: When you want to rent out your exiting property and buy a new one to live in

If you are looking to keep your existing house, but you would like to move to a new place due to needing more space etc; you could look at a Let to Buy Mortgage. What this means is that you can retain your existing property, and rent it out. To do so, you would convert your existing Mortgage into a let-to-buy and then get a new residential Mortgage for the new property that you want to buy. During this process, you could also take out funds from your existing property to help towards the deposit for the new property or use it for home improvements.

Scenario 2: When you cannot, or do not want to, sell your existing home, but you still want to buy a new home.

A let to buy mortgage could also be an option if you have found a new property you would like to buy but you are struggling to sell your existing property. The benefit of renting your property instead, is that you will not be in a chain, as you will not need to sell a property in order to buy a new one.

A Let to Buy mortgage can let you achieve that.

Things to consider when you rent out your property, and buy a new one.

Before you can rent out your existing residential property you will have to either change your Mortgage to a Let to buy, or obtain a consent to let from your existing mortgage lender. If you don’t, you could be in breach of the contract with your existing Mortgage lender.

You will also have to declare the income you get from renting your property out. You may be liable for additional tax based on the amount of income you receive.

If you don’t have tenants at times, you need to make sure you have surplus savings to be able to cover the cost for the BTL mortgage payments. The extra rental income could help with payments and living costs.

Owning more than one property means that if the value of both properties go up, you will make a profit, however you will also carry the opposite risk.

Are let-to-buy mortgage rates higher?

Let to buy Mortgage usually has a higher risk factor, rather than a residential Mortgage, which means that the rates may be slightly higher than a residential Mortgage.

What are the requirements for a let-to-buy mortgage?

For a Let to buy Mortgage most lenders want the applicant to be over 25 years old.

The maximum LTV allowed is typically 80%.

Most lenders also want the monthly rental income to cover between 125%-145% of the Mortgage interest.

The lender usually would like to see you have sufficient and surplus income to maintain both properties.

Lenders will usually also ask for a copy of offer for your Mortgage for the new property. Using the same solicitor for both the Let to buy and the new residential could also help with a faster and smoother process.

Are there alternatives to a let-to-buy mortgage?

If you cannot get a let-to-buy mortgage, and already have the required deposit to purchase your new home, you can retain your existing mortgage on your current property and apply for a consent-to-let (CTL) from your current lender. CTL is typically granted for up to 12 months at a time. Every lender has their own requirement and your broker will understand your situation and help you navigate through the best way forward.

Shapla

Mortgage Expert

Shapla is a Mortgage and Protection Specialist with years of experience helping people with their mortgage and protection needs. Your Mortgage Experts is led by Luca Bertolino with 20 years experience in financial services and in the property market. Through our advisors' wealth of knowledge and expertise, Your Mortgage Experts have become a trusted adviser that people have come to rely upon for all their mortgage and protection needs.

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