Let to Buy Mortgages

Let-to-buy mortgages are a great way to keep hold of your current property and buy a new home.  Let-to-buy mortgages are appealing to those who are struggling to sell, couples looking to move in together for the first time, and those that want to start out in property investment.

Let-to-buy mortgages are made up of two elements:

The first element is a buy-to-let remortgage where your current residential property will be remortgaged on to a buy-to-let deal, if you have enough equity available you may have the option to capital raise up to a maximum 75% loan to value as an approximate figure.

The second element is a new residential mortgage for moving home on your new property. You’ll need to have a deposit available which is usually a minimum of 5%.  Often, this deposit comes from savings, a gift from family, or via capital raising on your existing property as above.

Let-to-buy mortgages can prove complicated due to the nature of running two simultaneous applications side by side therefore seeking help from a let to buy mortgage broker will prove good value.

How you get a let-to-buy mortgage is all about meeting specific criteria in both elements of the mortgage.  Things to consider when getting a let-to-buy mortgage are:

Rental income, what is this and how does exceed your mortgage income by enough to meet lending criteria? Also, do you have enough capital available to cover periods of your property not being let or renovated.

With your residential purchase, you’ll need to have a minimum of 5% deposit available Also, you’ll need to prove your income and affordability along with passing a new credit check.

Usually, the bigger the deposit you put down on your new purchase, the better the let-to-buy mortgage interest rate you’ll qualify for.

Lenders work in bands based on risk; therefore, a 95% mortgage interest rate will usually be higher than a 75% deal where the risk to the lender is reduced.

If you are over the age of 50, we have a mortgage for over 50’s team of advisors that will be able to help and support you with your home move.

It’s always best to seek advice when considering a let-to-buy mortgage application due to the complexities involved, speaking to a mortgage broker, like us, could save you both time and money.

A let-to-buy mortgage is a variation of a buy-to-let mortgage, and while their names may sound alike, they serve different purposes. A buy-to-let mortgage involves purchasing a property with the intention of renting it out to generate additional income.

On the other hand, a let-to-buy mortgage often comes into play with “accidental” landlords. These are homeowners who initially had no plans of becoming landlords but later changed their minds and decided to rent out their current home.

By choosing the let-to-buy route, they avoid the stress of selling their home and buying a new buy-to-let property. Instead, they rent out their current property, using the rental income to support their new residential mortgage payments. It can be a practical and financially beneficial choice for those looking to venture into the world of property investment while keeping their current home.

Before embarking on a let-to-buy journey, it’s essential to consider the various costs involved, including the possibility of stamp duty tax and any surcharges that are payable.

Being proactive and checking this beforehand can save you from any surprises later down the process.

A good place to start with stamp duty changes is the government calculator – https://www.tax.service.gov.uk/calculate-stamp-duty-land-tax/#!/intro.  Your conveyancer will discuss stamp duty charges with you and collect this as part of the legal process.

Our goal is to ensure you have a clear understanding of the expenses, empowering you to make well-informed decisions with confidence.

Yes, people with bad credit are usually ok getting a let-to-buy mortgage with a broker’s assistance and guidance.

For customers with bad credit, it’s not a case of going into a bank or comparing deals online, it’s more complicated than that.  Getting a bad credit mortgage is based on in-depth lending criteria and experience of placing cases.

Let-to-buy mortgages often come with unique lending criteria, which can be stricter. Factors like a low credit score, CCJs, defaults, or late payments may impact your eligibility.

Our vast network of mortgage lenders includes specialists who are well-equipped to cater to various situations, including those with bad credit and ccj mortgages.

If you’re exploring the possibility of a let-to-buy, our mortgage brokers are here to guide you. We offer personalised solutions tailored to your specific needs and credit circumstances.

Rest assured, we’re dedicated to helping you find the right options, even if you’re facing credit challenges. Don’t hesitate to reach out for expert advice and support.

The positives of a let-to-buy mortgage are:

• Maintain your existing property in case you ever needed to move back into it or for an investment.
• Quicker than selling your existing property.
• There may be capital raising options on your existing property that you can use towards your deposit for your new purchase.

The negatives of a let-to-buy mortgage are:

• There is likely additional stamp duty payable.
• The commitment of two mortgage payments in the event of your rental property being vacant.
• Being a landlord can be hard work as there are rules and regulations to meet.
• The responsibility of maintaining two properties for repairs and renovations.

Above are some of the positives and negatives of let-to-buy mortgages as a guide, there may be others more personal to your individual situation.

The one main alternative to a let-to-buy mortgage is to sell your property before you buy a new one, however, we understand that waiting can prove frustrating for some with a specific property in mind.

Alternative shorter-term lending products such as bridging loans are available to help fund a new purchase without selling your existing property.  Albeit, bridging loans can prove expensive and are not for everyone.

Our experienced mortgage advisors will be able to discuss any alternative solutions that are available based on your personal situation.

A mortgage broker can provide support and assistance through your let-to-buy mortgage applications.

Here are some of the things a mortgage broker can help you with as part of your let-to-buy mortgage:

• Find out accurately how much you can borrow.
• Learn how much both mortgages will cost.
• Discover whether you have any capital raising options.
• How much deposit you’ll need for your new purchase.
• Be fully aware of the risks associated with both mortgage deals.

Also, the application process is complicated for let-to-buy mortgages, therefore, having a mortgage broker and a dedicated case manager on your side will prove invaluable. A mortgage team will help you overcome any hurdles that you face along the way such as with underwriting, valuations, or surveys.

Eligibility criteria for let-to-buy mortgages can vary among lenders, but generally, homeowners who want to move to a new property and rent out their existing one can apply for a let-to-buy mortgage.

Lenders typically assess affordability based on rental income and the homeowner’s ability to manage multiple mortgages.

Factors such as income, expenditure, size of deposit, rental income projections, equity built up, and conduct of accounts will be taken into consideration for let-to-buy eligibility.

It’s always best to speak with a professional when considering a let-to-buy mortgage transaction. They are complicated to do right, and mistakes made firing applications off online can prove costly and waste time.

For a let-to-buy mortgage application, lenders usually consider a percentage of the rental income (typically around 125-145% of the mortgage payment) to ensure the landlord can cover the mortgage, even with potential void periods.

A good place to start is to contact local letting agents and look online for similar sized properties to yours in your area to see what a realistic rental figure will be.

Your mortgage broker will then be able to use this rental figure to let you know how much buy-to-let remortgage you’ll be able to get on your existing property.

No, you are not able to live in your property that has a buy-to-let mortgage on it. If you find yourself needing to move back into the property, you’ll need to call the mortgage lender beforehand to see what your options are.

If they are unable to help, then it’s best to seek independent mortgage advice from an experienced broker to get the right mortgage product for you based on your personal situation.

Living in your property with a buy-to-let mortgage will be against the terms and conditions and can result in the lender calling in the full loan.

Yes, if you’re planning on buying a new home to live in and renting out your existing property, you’ll need a buy-to-let mortgage in place.

Your new residential mortgage lender will also want to ensure that your existing mortgage will be on a buy-to-let basis also.

A buy-to-let versus a let-to-buy mortgage:

A buy-to-let mortgage is one transaction, whether a purchase or remortgage, on an investment property.

A let-to-buy mortgage is two simultaneous transactions, the first element is a buy-to-let remortgage on an existing property turning it from residential to buy-to-let, the second element is a new residential purchase for the onward purchase.

The fees associated with let-to-buy mortgages are:

• Mortgage arrangement and product fees.
• Valuations.
• Surveys.
• Conveyancing.
• Stamp duty including any surcharge payable.
• Any letting agent costs.
• Buildings insurance.
• Landlord regulation costs such as gas and electric checks etc.
• Tax on the rental income.

Your mortgage advisor will be able to give you an idea of how much the above costs will be based on your personal situation.  The biggest costs are usually with the stamp duty, you can find out using the government calculator how much this will cost.

A 5% deposit is required for the new purchase with a let-to-buy mortgage.  This 5% deposit typically comes from savings, gifts from family members, or from capital raising from the existing property.

Let-to-buy mortgage interest rates work in bands, therefore, if you have a bigger deposit available that you can put down such as 10% or 20%, the interest rate will likely be lower.  The bigger the deposit you put down the less risk your application is to the lender.

If you are considering a let-to-buy transaction, it’s worthwhile speaking with a professional mortgage broker to know all your options.

Simply approaching your current lender will not allow you to shop around for better deals that are available.  Shopping around for let-to-buy mortgages could save you thousands of pounds in interest over the term of your mortgage.

There’s a risk of void periods where your property is unoccupied and not generating rental income. It’s advisable to have a financial buffer to cover mortgage payments during such periods or explore insurance options for rental income protection.

Remember, the specifics of let-to-buy mortgages can vary based on lenders, individual circumstances, and regional regulations, so seeking advice from a mortgage advisor is often recommended.