Let-to-Buy Mortgage Advice
What is a Let-to-Buy Mortgage?
Let to buy is the term used to describe any transaction where you let out your current main residence and purchase a new property to live in.
It can be a little confusing as some lenders offer specific let-to-buy products, whilst for others, it is a catch-all term to describe the transaction and normal mortgage products are still applicable.
It's a great way of getting started as a landlord, moving when you are struggling to sell a property or simply waiting out a downturn in the market before selling your current home.
It's different to any normal purchase though, as your purchase mortgage offer would normally dictate that any existing residential properties are sold, or mortgages repaid in full. So, the lender must be aware of the transaction as a whole and be able to accept it.
You will find a let to buy difficult to arrange on your own. They are extremely complex because of having two mortgages that can affect the calculation for maximum loans of each other, and many subtle nuances to the lenders' rules (if they even accept this type of transaction) so you will benefit greatly from having an advisor assist you with this type of mortgage to take up the workload of finding which lenders are suitable.
Whether or not to raise money from the existing property to go towards the deposit, how much to raise, whether to port an existing residential loan or obtaining consent to let are all additional factors that greatly affect the long-term value of any solution you choose.
Again you will find the assistance of a good mortgage broker essential in making these choices.
Typical let-to-buy scenarios
Several common scenarios can be considered a let to buy, some key examples are below that illustrate how different solutions may work.
Let to buy raising the deposit from the current home
If you have no deposit for the purchase, but plenty of equity in your current home, a deposit can be raised through either a buy-to-let/let-to-buy remortgage of the existing property or by a secured loan.
If the existing mortgage is very competitive or had redemption penalties, then your advisor has a string of options to compare in terms of costs.
You may be able to move the existing loan to the new property and avoid paying any early repayment penalties, the cost must be compared versus any new mortgage but also considering the costs on the buy-to-let side.
Alternatively, the existing lender might grant consent to let, meaning repayment penalties would be avoided and the deposit could be raised through a secured loan, leaving you free to arrange any new residential mortgage on the new property (subject to the lenders allowing this type of scenario).
Or the existing mortgage is simply paid off, any repayment penalties settled, and a new mortgage arranged on each property.
As you can imagine, this is extremely complicated, with several complex sets of costs to compare against each other at the same time as being imperative that you know exactly which lenders can accept your circumstances.
If the existing mortgage is not competitive or doesn’t have redemption penalties applicable, then things become somewhat less complex.
Let to buy using a deposit from existing resources
Another scenario is where no additional deposit funds need to be raised. In this scenario though, again, consideration will be given to whether there are redemption penalties, the existing mortgage can be moved onto the new property, whether it is competitive to do so and if that current lender might grant consent to let.
There are still lots of subtle additional considerations here. Consent to let might be offered by some lenders with an increase in the interest rate payable. Or there may be one-off fees or limitations to the period being offered.
Our advice service for let-to-buy mortgages
Our standard advice fee is £299 paid at mortgage offer stage for purchase applications. That’s the point when the lender has received a full application, assessed all documentation, valued the property and made a legally binding commitment to lend.
We don't usually alter this for a let to buy and hence if 2 mortgages are being arranged you will only pay one advice fee.
We’re whole of market and hence work with the vast majority of lenders in the UK so we can help you quickly and effectively assess your options, work out which of those is best for you financially and administer your applications through to mortgage offer.
To get started with our advice service simply give us a call or complete the enquiry form here…