Let to Buy: How Does it Work and Who is it for?

It is not uncommon to find yourself in a position where difficulties selling your current home stand in the way of a planned relocation.

You have found your dream home at a price too good to pass up but selling the home you live in is proving more challenging than you expected. A frustrating setback, though one that can be overcome by considering let to buy.

Why Would I Let to Buy?

As the name suggests, let to buy refers to the process of letting out your current property to enable you to buy a new home. You let out your current home to tenants, use the rental income to cover your outstanding mortgage payments and take out a new mortgage on the home you want to buy.

Your tenants effectively pay your current mortgage which allows you to arrange a new mortgage for the purchase property.  The important thing to remember is that where a property is difficult to sell, this does not mean it cannot and will not generate an attractive and ongoing rental income.

Do I Need a Different Type of Mortgage?

The short answer is yes. A let to buy mortgage is not quite the same as a conventional residential mortgage. Taking advantage of a let to buy opportunity means first switching the standard mortgage on your current home to a specialist let to buy mortgage, which may have entirely different terms, conditions, and repayment rates (interest).

When applying for a new mortgage for the property you intend to buy, you will need to have the usual deposit, however, if you already have enough equity tied up in your current home, you have the option of remortgaging to use some of this equity to cover your deposit requirements.

Using a let to buy mortgage calculator can be useful for building an understanding of how let to buy works and how much extra you can borrow. It is also essential to compare mortgages from as many specialist lenders as possible, with the help and support of an established broker.

Can I Afford a Let to Buy Venture?

Your broker will help you establish if and to what extent let to buy is something you can afford. To qualify you will need to provide evidence that your rental income will cover your outstanding mortgage payments by at least 100%.

In addition, it is important to factor in the responsibilities and costs of being a landlord. Ownership of two properties means funding the upkeep, repairs, renovations and so on. Not to mention, the fact that rental income can also taxable.

Independent Broker Support….

Letting out a property to enable you to buy a new home can be an effective and often profitable strategy, in instances where selling simply isn’t an option, however, it is a decision that should never be taken without first consulting with an independent broker.

At UK Property Finance, we can provide you with the objective advice and support you need to make the right decision for your financial future. Call or email anytime to book your obligation free consultation with a member of the team.