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19 Dec 2014

Mortgage Advice

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Let to Buy Mortgages Explained

Let to 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 to a Buy to Let 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 multiple by the lenders variable rate divide this by 12 and multiplied this by 125% to arrive at the minimum rent required. If there is a shortfall on your let to buy rental some lenders will annualize the shortfall and class this as a commitment before they calculate the maximum mortgage they will offer you.

Below is an example of a typical let to buy calculation

Existing Mortgage Balance

Multiplied by Mortgage Lenders Variable Rate

Divided by 12

Multiplied by 118%

Required Rent

£75000
£5063
£421.88
£497.81
£498
£100000
£6750
£562.50
£663.75
£664

The let to buy calculations above are just a guide and for the purpose of the examples the mortgage lenders variable rate used is 6.75%. For further details on let to buy mortgages please complete our mortgage advice form.

 

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 rent you current home out
  • 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.

 

Do you want fee free Let to buy mortgage advice?

If you would like to speak to a mortgage advisor without obligation about let to buy mortgage schemes please contact us for no broker fee mortgage advice.

 

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YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

Think carefully before securing other debts against your home, your home may be repossessed if you do not keep up repayments on your mortgage.

Go Direct.co.uk is a trading style for website purposes of Go Direct UK Ltd.

Go Financial Services is a trading style of Go Direct UK Ltd which is an appointed representative of Personal Touch Financial Services Ltd which is authorised and regulated by the Financial Conduct Authority. Registered in England & Wales Company 5703224. FCA Number 456600

We normally do not charge a fee for mortgage advice, however a fee paying option is available. Our typical fee would be £500

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