Mortgages
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Let-to-buy mortgages can help you simultaneously buy your next house and let out your former home - but there are plenty of risks to consider first.
Let-to-buy involves renting out the home you live in so you can buy a new one to live in elsewhere.
You’ll switch your current residential mortgage to a let-to-buy mortgage and get a new residential mortgage for the house you’re moving to. These happen at the same time.
Your previous home is then let out to tenants and the rent pays the let-to-buy mortgage, so you can use your income to pay your new residential mortgage.
With a let-to-buy mortgage, you need to apply for two new mortgages:
Often this will be with the same lender who specialises in offering let-to-buy mortgage solutions, but it can be with two different lenders.
The let-to-buy mortgage lender allows you to raise a deposit for your next property by taking out extra borrowing without taking your current mortgage into account as a commitment.
The projected rental income will have to cover the repayments once it's remortgaged as a buy-to-let property and you'll still need to have enough equity left in your property to meet your lender's minimum buy-to-let loan to value (LTV) ratio.
For example, if your home is worth £200,000 and you still have £100,000 to pay on the mortgage, you might want to borrow some of your equity for a deposit on your next home.
A let-to-buy lender with a minimum buy-to-let LTV of 75% might let you borrow £50,000 from the property as a deposit to purchase your next home and convert your previous home to buy-to-let.
If your next home also costs £200,000, you’ll put down the £50,000 deposit and get a residential mortgage to cover the remaining £150,000.
The rent you receive on your previous home will need to be enough to cover the let-to-buy mortgage comfortably.
Let-to-buy products are for anyone who can't, or doesn't want to, sell their previous home before buying the next one.
Some typical examples are:
A let-to-buy mortgage is actually a type of buy-to-let mortgage – the main difference is that it’s geared around accidental landlords and people who don’t set out to build a property empire.
Because of this, it can be arranged while you’re still living at the property.
This usually isn’t the case with a buy-to-let mortgage, as you can’t get one on a property you live in – you need to have already vacated. So a buy to let mortgage is usually for a property you’re buying or you own, but while you already live elsewhere.
As with all mortgages, each provider will have its own set of lending criteria, but most will ask for:
Make sure you’ve considered all the pros and cons before you apply for a let-to-buy mortgage:
There are a few alternatives to get you moving when the state of the property market’s making it hard to sell up:
You move out, perhaps into rented accommodation, before taking out a buy-to-let mortgage on your previous home.
The drawbacks are that it can be complex and costly and you might not meet lenders' buy-to-let criteria.
Some lenders will grant you consent to let on your residential mortgage, allowing you to move and let out your home for a relatively short length of time.
But it might be harder to get a second residential mortgage to buy another home for yourself while you have consent to let.
If you really need to move for work or other reasons, consider whether you might be better off simply selling up and going into rented accommodation for a while.
Although you might not get the full value you'd hoped for when selling your home, it'll put you in the advantageous position of being a chain-free buyer on your next home, which could help you to drive a better bargain.
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THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
PLEASE NOTE: THE FCA DOES NOT REGULATE MOST BUY TO LET MORTGAGES