Let to Buy mortgages are the simple solution for those who wish to purchase a new home whilst maintaining possession of their current home and letting it out.
A Let to Buy mortgage allows you to release equity in your current home and use it as a cash deposit on your new one. Additionally, by renting out your old home, you can generate another source of income.
Selling is not the only option. Let to buy mortgages allow you to keep your current home as a long-term investment and benefit from any future rises in property value. It also helps you avoid the added stresses selling a property can cause.
Instead of being tied up in a chain or waiting for a buyer, you could opt to move sooner, especially if you’ve got your eye on the dream property. If you have enough equity, you could choose to remortgage with a let to buy mortgage and use the money for your deposit. You would then let out your existing property and use the income to cover the cost of the mortgage, allowing you to take out another mortgage on your new home which your current salary, or other source of income, would cover.
One of the most popular occurrences is that of couples who perhaps meet, and move in together, later in life and already have their own homes. Often, in this scenario, the couple will look to move in to one of the properties whilst renting the other one out on a let to buy mortgage. Alternatively, they may choose to release equity in both of their existing properties and place a deposit on a new home, whilst renting out their old homes.
Understandably, whether it’s a let to buy mortgage you seek, or any other mortgage product, there’s usually some strict criteria to address. Such criteria could look a bit like this:
Typically, mortgage lenders will release up to 75% of the value of your property on let to buy basis. For instance, if your home is worth £200,000, and your outstanding mortgage is £100,000, you could release an extra £50,000 towards your next deposit.
This scenario would result in a let to buy mortgage of £150,000 on your current property which could translate to a monthly mortgage cost of somewhere around the £400 mark.
Like any mortgage deal there are always implications. Here are three things to consider:
An extra 3% is added to stamp duty charges for an ongoing purchase, as it would be your second property.
By renting out your property, there are added taxes. Couples tend to transfer ownership to the low rate tax-payer.
If this makes you a first-time landlord, make sure you have additional funds for any rental voids or issues.
Although these two are similar in that they are both mortgage products for those looking to rent out a property, they work slightly differently.
Usually this is a situation for those already living in the property which they want to let out in order to move elsewhere. Therefore, they’d need to remortgage to a let to buy mortgage in order to release equity for their new property.
These are designed for those looking to buy a property to let out or to remortgage one that is currently let.
Choosing MortgageKey guarantees an honest, friendly and impartial advice. By speaking to one of our advisors, we can carry out a full comparison across the market to unlock the right let to buy mortgage for you. Visit our Let to Buy page for more details. Our professional service has won us awards and our expertise have forged excellent relationships with both our lenders and our customers.
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Representative Example: Annual Interest rate of 2.44% fixed for 2 Years followed by 3.59% for the remaining term. Representative 3.50% APRC Variable. Based on borrowing of 150,000 over 17 years repayments of £899 per month. Total amount repayable £198,466. Includes Lender Fee of £995 and Broker Fee of £695.