Let
& Buy
mortgage
Let To Buy
is another
mortgage
product
available to
customers
which offers
an
alternative
to the
popular "Buy
To Let"
option.
A let to buy
mortgage
works by
allowing you
to borrow
money to buy
a new home
to move
into, while
your
existing
residence is
let out to
tenants. The
new mortgage
lender will
calculate
the maximum
that they
are prepared
to lend you
and not take
your
existing
mortgage
into
consideration
as a
commitment
as long as
the rent
covers the
existing
mortgage
payment. A
deposit
maybe
required for
the new
mortgage
however this
maybe
released
from the
existing
property by
remortgaging
or a secured
loan.
Let to Buy
Typical Rent
Calculation
For the new
mortgage
lender to
ignore your
existing
mortgage the
rent you
will receive
will have to
fit the new
lenders let
to buy
calculation.
A typical
example of
this would
be your
exiting
mortgage
balance
mulled by
the lenders
variable
rate divide
this by 12
and
multiplied
this by 118%
to arrive at
the minimum
rent
required. If
there is a
shortfall on
your let to
buy rental
some lenders
will
annualise
the
shortfall
and class
this as a
commitment
before they
calculate
the maximum
mortgage
they will
offer you.
Let to Buy
Mortgage
Pros and
Cons
Pros
You can rent
out your
existing
property in
order to buy
another home
locally or
in a
completely
different
location
within the
UK
It's a
really good
way to
retain your
property if
you're
relocating
as a result
of a job or
change of
circumstance
for a period
of time and
have a need
to purchase
a new
property
whilst
you're away
It's a way
to retain
your
original
property as
an
investment
and benefit
from the
mortgage
being paid
by the
tenants
It can be of
real benefit
when used to
break the
buyers and
sellers
chain if you
are having
trouble
selling your
property or
if you have
little or no
equity and
would rather
wait before
selling
Let To Buy
can be start
to building
a property
portfolio
that you
could
benefit form
in the
future,
acting like
a form of
long term
pension
provision,
once the
mortgage on
the property
is paid off
The rules
are
different
from Buy To
Let as you
may be able
to borrow a
higher
proportion
of the
property
value, which
means you
may need a
smaller
deposit or
if you have
plenty of
equity in
your current
property
possibly no
deposit is
required at
all.
Cons
It is a
requirement
by the new
mortgage
lender that
you ask for
your exiting
mortgage
lender to
give
permission
to Let To
Buy
You must
inform your
building and
contents
insurer
If your
property is
leasehold
you will
need to make
sure that
your lease
has no
restrictions
on the
letting of
your
property
It is
important to
speak to a
qualified
Mortgage
advisor to
gain all the
facts before
proceeding.
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