Let to Buy Mortgages
Many consumers love this option. Ultimately, it is where you keep your existing property and let it out to tenants whilst buying a new home to reside in.
It can suit those aspiring Landlords or those who have found it challenging to sell their existing home and/or want to remove the mandatory sale from the transaction to ensure their onward purchase is efficiently executed.
However, there are lending challenges as you will have two mortgages and lenders will wish to ensure you can service both mortgages – even if they are not with the same lender. This is where we come in to expertly guide you through this in a stress-free manner – generally!
Note there will be extra Stamp Duty to pay and we have a calculator for that on this site which we hope will help CLICK HERE!
To take full advantage of our expert guidance, complete the form opposite or speak to one of our delightful and friendly advisers – we will be able to advise if Let to Buy is right for you.
Please complete the form opposite or call us as we would love to help.
If you would prefer to send some specific details we can email a personalised illustration – click here to do this
Let to Buy
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What is a Let-to-Buy Mortgage?
A let-to-buy mortgage is a type of mortgage product available in the UK that allows homeowners to let out their existing property and purchase another property which will become their residence.
The Let to Buy mortgage is on the property you will be renting out, allowing you to take a new mortgage on the new purchase in which you intend to reside.
What Is the Benefit of a Let-To-Buy Mortgage?
There are multiple benefits to effecting a Let-to-Buy mortgage. The obvious one is that you don’t need to sell your existing property to buy a new one. The result is there is no chain on this side of your transaction, meaning your onward purchase should be quicker and put you in a stronger negotiation position.
A further benefit is that you are now a Landlord, and having property as part of your portfolio is generally a solid long-term investment for capital growth and income.
This Sounds Amazing! What Are the Negatives?
With being a Landlord comes big responsibility and lots of legislation. Your property needs to adhere to minimum standards such as electrical testing and is Gas Safe. You need to serve precise documents to tenants and ensure their deposit monies are protected and in a timely manner. Things go wrong; you must be up to speed with your knowledge. A good source of information and video is here: www.conranestates.co.uk/landlords/
If you are inexperienced in this field, you should use an ARLA-qualified lettings agent to ensure you are protected. ARLA promotes excellent standards in this industry and ensures its member agents follow a stringent code of ethics and professional standards. Find your local agent here
When renting property, there is always a risk of a tenant not paying or leaving the property, creating a void period. To protect you from the former, we recommend you look to insure against this risk. For the latter, ensure you have a backup plan, such as reserve funds, to continue paying the mortgage in the event of a void period.
How Will I Know if Let-To-Buy Is Right for Me?
Many landlords become known as ‘accidental landlords’ and then become professional landlords due to their success. An accidental landlord is someone who would become a landlord due to circumstances, for example, the inability to find a buyer or wanting to avoid a downward chain. The truth is that it can be potluck at the beginning, and if you are willing to take that initial step, it can change your life. Just ensure any risk is measured, you have a backup plan, and you use experts when necessary.
Can I Raise Capital for My Onward Purchase With a Let-To-Buy Mortgage?
Yes, you can raise capital on your new Let-to-Buy. However, whilst a lender may lend up to 75% loan-to-value (LTV) and a guide, they will have a calculation of minimum rental income to grant the mortgage – typically 125% of the mortgage rate or a set rate. If your property falls short of rental income, assessed by a surveyor, your mortgage could be much less, meaning you don’t have the deposit you need for the new purchase.
How Do I Go About Finding a Let-To-Buy Mortgage?
A let-to-buy mortgage is a two-stage process that requires borrowers to take out two mortgages and, by definition, a complex process. We strongly advise using a fee-free Independent Mortgage Broker who fully understands this process.
An experienced mortgage broker will arrange both mortgages side-by-side and be able to control these as one could adversely affect the other, as referenced in the previous question (i.e. if there is a rental shortfall affecting the capital raising).
Of course, you can go about hunting yourself, but it is time-consuming, and you should benefit significantly by using a professional fee-free expert.
Note that the same lender can do both mortgages, and it may seem to be one seamless transaction, but this is not always the case; it is two separate transactions.
What Is the Difference Between a Buy-To-Let and a Let-To-Buy Mortgage?
A Buy-to-Let mortgage is when you want to buy an investment property to rent to a tenant. A Let-to-Buy mortgage is when you currently live in the property and wish to rent it out and buy a new property for yourself.
What Is the Difference in Mortgage Rates Between a Buy-To-Let and a Let-To-Buy Mortgage?
Essentially, both mortgages do the same thing, but there is the technicality with a Let-to-Buy in that you live there and wish to rent it to a tenant. While these are two different products, rates are typically aligned to one another, so rates should be similar.
Who Does Let-to-Buy Mortgages?
Various banks and financial institutions in the United Kingdom offer let-to-buy mortgages. Some are household names you recognise from the high street, and others you have probably never heard of. Many high street lenders have a secondary mortgage lending brand that they use for Let-to-Buy mortgages rather than their high street brand.
Can I use my home as a Holiday Let?
Whilst unusual, it could be feasible. Take a look at our Holiday Let page so you can learn more about this type of mortgage and the pros and cons to them.
Will My Let-To-Buy Mortgage Be More Expensive Than My New Mortgage for My Purchase?
Banks price their mortgage products based on risk. A non-standard mortgage such as Let-to-Buy or Buy-to-Let reflects a higher risk; therefore, it is highly likely that the interest rate will reflect this risk and be higher than your new mortgage.
I Have Heard That I Must Pay Extra Stamp Duty. Is This True?
Sadly, this could be the case. Anyone buying a second home in the UK will likely incur an additional 3% Stamp Duty Land Tax (SDLT). Ensure you consider it when it comes to crunching your numbers to see if this is a viable cost. Remember this is a long-term investment for you; therefore, what effect will this cost have on your investment over the long term? Please take a look at our snazzy SDLT calculator here
How Can We Help With Let-To-Buy Mortgage?
At Conran Mortgages, we offer a comprehensive Let-to-Buy mortgage service for clients in the UK. Our Whole of Market expertise allows us to provide bespoke options that align with your specific goals and needs. We’ll evaluate your financial situation thoroughly to ensure you get the best possible deal on a let-to-buy mortgage.
Our advanced digital technology and highly experienced team of case managers will ensure that all the paperwork is handled quickly and effectively. You can track the progress of your mortgage right from the comfort of your home or office via our online system. And since we do not charge broker fees, it is a win-win situation for our client.
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