Let To Buy Mortgages
Everything you need to know about getting Let To Buy Mortgages.
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What Are Let To Buy Mortgages?
Let To buy mortgages are generally for people that want to move home, but for one reason or another want to keep their existing home.
Essentially, you release equity from your current property in order to put a deposit down on your next, whilst keeping your first property to rent out.
There are some things to consider before doing this. Firstly you’ll be a Landlord, and do you want to be a Landlord. There are obviously costs involved in doing this. For Example two mortgage broker fees and having to manage two mortgages.
Reasons To Consider Let To Buy Mortgages
The most common reason is probably to release equity from your first home to buy a new one.
However, there are other reasons you might consider Let to buy mortgages.
- You need to move and can’t wait for your current property to sell before doing so.
- You have been unsuccessful in selling your home, and will lose your new one if you can’t make progress.
- Maybe you want to buy a property with a Partner. However, you don’t want to give up ownership of your property.
- You are moving out of the area temporarily, and intend to return at some point.
What Is The Difference Between Buy To Let And Let To Buy Mortgages?
A Buy to let mortgage is usually taken out with the sole intention of renting out the property. Usually for business Landlords that want to make money from property.
However, Let to Buy Mortgages are generally taken out in order for you to purchase a new home.
Let to buy Mortgages Lending Criteria
There are some key differences between Let to Buy Mortgages and the residential mortgages you may be used to. This is some of the key criteria most let to buy mortgage lenders will have:
- Maximum age usually between 70-75
- Rent to be higher than the mortgage payments. And not just higher but usually around 35%-45% higher.
- Max loans of around 75-80% of the property value.
- Proof that you’re buying the house you say you’re buying with the money released.
Do You Need To Use A Mortgage Broker For Let to buy?
It’s probably a wise decision. Strictly speaking the answer is no. However with Let to Buy Mortgages there is a lot going on. A specialist Mortgage Broker will know how to package everything correctly.
The other reason is lots of Let to Buy mortgages are only available through intermediaries or mortgage brokers. If you want the best deal, you may have to speak to an Advisor.
Can You Take Out Both Mortgages With The Same Lender?
You may be able to. Some lenders don’t mind this at all. However some are really not fans and may insist you don’t take out both mortgages with them.
And of course some lenders don’t offer both types of mortgages. Some will do Let to buy mortgages only, and others only residential mortgages.
Let to buy And Consent To Let
Let to Buy mortgages are generally interest only and specifically designed for renting out a property. Consent to let is used when you simply ask your lender if you are able to rent out your property.
Consent to Let can be useful if you are tied in to a product. Usually when you are tied in to a product you probably have early repayment charges. You may not want to pay these, and if you’re not raising funds it may be worth asking for Consent to let. You can then remortgage to a buy to let product at the end of your product period.
Becoming A Landlord With A Let to buy Mortgage
Possibly the biggest thing to consider is do you want to become a landlord? Becoming a Landlord is a big thing. You should consider carefully if you want to be responsible for a property that someone else is living in.
However if you know you want to be a Landlord Let to buy mortgages are the perfect gateway to your first rental property.
Is Let To Buy A Good Idea?
Let to buy mortgages can be a good idea if you are ready to become a Landlord, as mentioned above. They may also be perfect, allowing you to raise funds for a deposit and receive an income from the rental property going forward.
How Much Can I Borrow On Let To Buy Mortgages?
Let to buy mortgages usually allow you to borrow between 65% – 80% of the property value. Most common would be 75% of the property value. However, it depends on the amount of rent you can get on the property as well.
Affordability for Let to Buy Mortgages are usually worked out by the property value and the rental income.
How Much Deposit Do I Need For A Let To Buy Mortgage?
Similar to the previous question. Usually you would need 25% deposit for Let to Buy Mortgages. However sometimes you can get one with a 20% deposit. But the more deposit you put down, the better the rate you will likely get.
Can I Borrow Money Against My House To Buy Another Property?
Yes! This is the very definition of Let To Buy Mortgages. They allow you to raise capital on your existing property to buy your next home.
There are of course other ways. For example you could just sell the property and buy the next. However, Let to Buy Mortgages are also the entry into being a Landlord.