- Need to downsize, but don’t want to sell your home?
- Thought about letting your home instead of selling it?
- Introducing let-to-buy mortgages – we’ll show you how
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Let-to-buy mortgages are great if you want to buy a new property, but can’t or don’t want to sell your current home.
You might be looking to move house but are finding it difficult to sell your current home. In this scenario, a let-to-buy mortgage is an option you may not have considered.
It would mean moving out of your current home and letting it out to tenants. But the mortgage allows you to borrow against your current dwelling to buy a new one.
Reasons to take out a let-to-buy mortgage
Let-to-Buy is a popular option for couples who own their own properties but want to move in together. The mortgage allows them both to move into one of their properties and rent the other one.
Another solid reason people take out let-to-buy is for long-term investment. If they believe the property will hold or grow its value over time, it makes sense to hold onto it.
Also, if your home has a lot of negative equity, you might not want to sell. You could let out that home and buy and live in another one until that first home appreciates in value.
Downsize, but keep hold of your cherished memories
Imagine you have a big, old Victorian 4-bed and the kids have flown the nest. Do you want the hassle of all that upkeep and the cost of heating all those empty rooms?
No. But you don’t want to sell the home where your own family made all those memories, either.
Your home could serve a younger family and allow you to downsize with a let-to-buy. Charge more rent than you’re paying for your smaller mortgage and you’re good to go. Here are the calculations to make that work for you.
How let-to-buy mortgages work
In simple terms, let-to-buy is buy-to-let from another perspective. With buy-to-let, your second mortgage is on the property you’re going to rent. With let-to-buy, the second mortgage is on the house you’re moving in to.
In that vein, you take out a buy-to-let mortgage to replace your current mortgage. Rather than lenders using your income as affordability, they use your new rental income.
Rental income from your current home must be greater than your new mortgage repayments. If not, the negative outcome would jeopardise the whole set-up.
Equity and income: what you need
With the figures addressed, you take out a residential mortgage for your new home. It’s this standard mortgage that will use your income upon which to base affordability.
You need at least 25% equity in your property (75% LTV) to enable this all to work.
If you have more than 25% equity in your property, even better. You then have the potential to release this extra equity to fund the deposit of your new home.
Do be aware: interest rates are higher for buy-to-let than residential mortgages. But if you achieve the rent you need, you can still make a healthy profit (or yield).
Your buy-to-let lender will need evidence of your potential rental income. It must comfortably cover the mortgage interest repayments of your second mortgage.
It’s advisable to speak with your local letting agents before applying. They’ll give you a general idea of the monthly rental your type of property is garnering.
In a real sense, not being able to sell your home could have a pleasant upside.
If you need to move fast to buy a new property, this enables you to free yourself from the property chain. Even better, make you a private landlord, by default.
Get expert, tailored let-to-buy advice
That’s it: everything is set to go. No waiting about in tenuous, lengthy chains.
If you choose us, we will assign you a dedicated let-to-buy mortgage specialist. They will take as much information about you and your planned move as they can.
This helps us build up a picture of you and your exact situation. Every let-to-buy is unique in its own way.
Your advisor will talk you through the steps we’ve outlined above. They will tailor their advice around your circumstances and approach lenders suited to it. This will give you the best chance of getting the deal that’s right for you for now and for your future.
That’s how we roll. Call us for a free, no-obligation consultation on 0208 421 7998 or send us your enquiry.