Mortgages & Financial Services

Let to Buy Mortgages

A 'Let to Buy Mortgage' can help you to purchase your next property without the need to sell your existing home.

Ideally, you would sell your property and then purchase your next property simultaneously. Unfortunately, this is not always the case. You may have not found a buyer, a sale has fallen through, an exciting property has just come to the market, or you simply do not wish to sell the property you currently own.

One alternative is to let your existing property and use the rental income from this to fund/partly fund the mortgage for your new property.

If you have enough equity in your current home, you can possibly remortgage and release some cash to use towards a deposit on your new home. You then let out your current home and use the rental income to cover the mortgage on your existing home. This then allows you to get a mortgage for a new home, assuming you can cover the repayments with your salary and other sources of income.

Mortgages for Let to Buy

With Let to Buy, you will likely have two mortgages. You will need a 'Let to Buy deal' for your current property and a 'standard residential mortgage' for the property you want to buy.

With Let to Buy you will be able to release equity from your property by borrowing at a higher Loan to Value(LTV). For example, if your home is worth £200,000 and your mortgage is currently £130,000 you may be able to borrow £150,000 and use thw extra £20,000 towards a deposit on the new property.

You will also take out a new residential mortgage to fund the purchase of your next property.

How is Let to Buy different to Buy to Let ?

Unlike Buy to Let mortgages which are taken out by people specifically looking for a property to let out (or to re-mortgage one they currently let out), Let to Buy mortgages are used when you live in a property and want to move elsewhere without the need to sell.

What is the lending criteria for Let to Buy mortgages?

Lending criteria will differ depending on which lender you’re with but most lenders will:

■ offer a maximum LTV of around 75% (so you’ll need to have a decent amount of equity in the house)
■ have a maximum age at application of 70 (many are lower than this)
■ want to see evidence of an onward purchase
■ Furthermore, your current property cannot be listed for sale or be sold subject to contract.

Rental Potential

Since buy to let rules have changed, lenders now require landlords to be able to achieve a higher rent in relation to their mortgage repayments. You’ll need to find out how much rent you’ll be able to achieve on the property to ensure you can meet this. Our mortgage advisers can give you the likely rental income from your property.

The best way to find out how much rent a property is likely to achieve is to speak to our Letting Agency department, simply call us on 01642 885511. We can give you advice on what you need to do before letting to ensure you are compliant with current regulations.

Is Let to Buy a good idea?

■ Let to Buy can help to ease the pressure when you’re in a property chain. If you need to sell your property so that you can buy your next home it can be extremely stressful. Let to buy removes some of that stress by taking the time pressure off.
■ The rental income you receive, may exceed the new mortgage payments on your current property. The excess income can possibly be used to reduce your monthly mortgage payment on your new property or reduce your mortgage term.
■ Additionally, this may also put you in a very strong position when negotiating on your next house purchase, potentially saving £000's on the purchase price of your new property as you are no longer involved in a chain.
■ You may be able to move sooner, as you are no longer needing to find a suitable buyer.

What are the downsides to Let to Buy?

■ There’s no getting around the fact you’ll be responsible for two mortgages and that can be worrying for some people.
■ You’ll be hit by the stamp duty surcharge (3% on top of the Stamp Duty band) when you buy a second property. Although if you sell your first home within 36 months of completing on the purchase, HMRC will make a full refund.
■ Let to Buy rates are not as good as standard residential mortgages (because of the increased risk) so you may not get as good a rate as you expected.
■ And, of course, if you own two properties and house prices fall you’re hit twice as hard.
■ You will be responsible for the maintenance of your rental property. You may choose a Letting Agent to manage this on your behalf.
■ You may be taxed on the income received on your rental property. You should seek professional tax advice in this regard.

What are my other options?

If you need to move quickly and you are struggling to sell your property, one other option is to seek consent from your lender to let your current property and move into rental accommodation.

If you have a residential mortgage, you are not able to rent out the property without the lender’s permission. While the obvious option is to remortgage to a buy to let mortgage, it is also possible to keep your residential mortgage but receive consent to let from your lender.

However, lenders do not have to agree to give consent to let and may impose a higher rate or fee.

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