Let-to-buy mortgages
Do you want to buy a new home, perhaps with your partner, but want to keep your current property? Or are you considering downsizing, but hesitant to sell your existing home?
A let-to-buy mortgage may be the answer you’re looking for. By letting out your current property instead of selling it, you can secure a new home while keeping your existing one as a rental investment. Let us guide you through the process and explore how this option could work for you.
Unlocking new possibilities with a let-to-buy mortgage
Let-to-buy mortgages are ideal 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. In the process, you would become a landlord, possible for the first timer. But the mortgage allows you to borrow against your current dwelling to buy a new one for you to live in.
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.
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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.
We're here to help
Got questions or need assistance? We’re here to help. Whether you’re looking for mortgage advice, have specific queries, or just want to discuss your options, our expert team is ready to assist you. Reach out using the form here, and we’ll get back to you as soon as possible. Let’s connect and start making your homeownership goals a reality.
To speak to an adviser, please call us on 020 8421 7999
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.
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.
Things to look out for
- Interest rates are often higher on let-to-buy mortgages (as they are with buy-to-let)
- Your lender will want evidence that your potential rent comfortably covers your new mortgage payments
- We’d advise you to speak to a letting agent to help you gauge how much rent you could achieve.
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 and you be come a private landlord, by default.
How is let-to-buy different from buy-to-let?
Let-to-buy is, in essence, buy-to-let turned on its head. The rent you obtain from a buy-to-let mortgage must be greater than the mortgage you pay on it. With let-to-buy, the rent you achieve on your current home must be more than your mortgage repayments on your new home.
In short: with buy-to-let, the second mortgage you take out is on the rental property. With let-to-buy, the second mortgage you take out is on the home you’ll be living in.
Let-to-buy is a sound alternative to becoming a landlord the traditional way so long as you have 25% equity in your current home, and the rent you can achieve from it comfortably covers the mortgage repayments on your new home.
Call our expert broking team on 020 8421 7999 for advice on your specific circumstances.
Get expert, tailored let-to-buy advice
When you choose us, we’ll assign a dedicated let-to-buy mortgage specialist who will gather details about your situation.
Every let-to-buy is unique, so your advisor will provide tailored advice and approach lenders that suit your circumstances, ensuring the best deal for now and the future.
