Let to Buy Mortgages

Jones & Young provide let to buy mortgage products to landlords to help them grow their property portfolio. 

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What Is a Let to Buy Mortgage?​

A let to buy mortgage is an arrangement where a homeowner rents out their existing home and purchases a new home to live in.

This arrangement allows the homeowner to keep their original property as an investment while moving to a new home. Let to buy mortgages can be useful for individuals who want to keep their existing property, for example, if they need to move for work but plan to return later.

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Reasons to Consider Let to Buy:​

A let-to-buy mortgage works much like a standard mortgage, with a few key differences. The mortgage rate for a let-to-buy mortgage is typically higher, and you will likely be required to put down a larger deposit. Importantly, let-to-buy mortgages are usually interest-only. This means the monthly mortgage payment will only cover the interest rate on the loan, while the original amount borrowed will be repaid at the end of the mortgage term.

When it comes to purchasing a new house, a let to buy mortgage—also known as a rent to buy mortgage—offers you a great deal of options.
You can move forward with the acquisition much more quickly and with less stress if you don’t have to sell your current property and wait for a buyer.
You have the option to withdraw equity from your current property and use it as a down payment on another property.
You can keep both properties in your portfolio.

How Does Let to Buy Work?​

With a let to buy mortgage, you must first gain consent from your existing mortgage lender to let out your current home. Once this is obtained, a let-to-buy mortgage is usually taken out on the existing property, while a residential mortgage is taken on the new property.

This means you’ll essentially have two mortgages at the same time, one for each property. The rent received from the tenant in the existing home is often used to cover the mortgage repayments on the let-to-buy mortgage.

How the Let-To-Buy Remortgage Works

To be able to rent it out to renters, you remortgage your current property on a let-to-buy basis. It is customary to remortgage for a sum higher than your existing outstanding mortgage balance in order to release additional equity from your home.

Your let-to-buy affordability tests will be based on the anticipated rental income from the property. Your personal income will be the basis for the mortgage affordability checks on the new house.

How the Residential Mortgage Works​

The lender determines how much you can borrow by evaluating your income. The main difference is that, in addition to determining what you can pay, they also have to take your buy-to-let remortgage’s impact on your cash flow into account. In our Ask the Mortgage Experts article, we go into further detail on how to release equity from one house to purchase another.

How is Let-to-Buy Different From Buy-To-Let?​

Let-to-Buy And Consent to Let​

You’re not typically allowed to rent out a home that has a standard residential mortgage on it. In order to rent out such a property without remortgaging it onto a buy-to-let basis, you would need to get consent to let from your existing mortgage lender.

Consent to let is where your existing mortgage lender allows you to rent out your property while you still have your current mortgage on it. Not all lenders will grant consent to let, and whether it’s an option for you will depend on your situation. Consent to let is typically granted for a period of time such as 6 – 12 months, and will often be under the condition that you intend to move back into the property at the end of this period or sell it.

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Let to Buy for Mortgage FAQs:

We’ve done our best to try and answer some of the most frequently asked questions about let to buy mortgages:

What are the benefits of a let to buy mortgage?
The primary benefit of a let to buy mortgage is the potential for capital growth and rental income. Additionally, it may provide flexibility for homeowners who want to buy a new home without needing to sell their existing one. Another potential benefit could be the opportunity to take advantage of lower let to buy mortgage rates.

 Considerations include the initial costs, such as stamp duty and fees, the residential mortgage rates and buy-to-let mortgage rates, and the potential for rental income. It is also crucial to consider whether you can afford two mortgages at the same time if you cannot secure a tenant. It’s also good practice to seek fee free mortgage advice and explore available mortgage deals.

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