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Let to buy mortgages

Often for various reasons a homeowner will wish to let their existing home to a tenant and purchase a new property for their own home.

This is known as let to buy and requires a let to buy mortgage.

Normally a mortgage lender will see any existing mortgages on your credit report and would have to remove this cost from your income when assessing how much to lend you.

However as you will only have tenants once you leave the property and cannot evidence any rental income, a let to buy mortgage will allow you to borrow on the assumption that your existing mortgage will be paid by rental income.

These mortgages are very commonplace, however the lenders methods for proving the existing mortgage will be repaid vary greatly.

Some will require that the rental will cover your existing mortgage payments, others will require it to supply more than a quarter extra.

This is why we recommend specialist let to buy mortgage advice for anyone seeking to let to buy.

Let to buy can be a very good way to develop a buy to let portfolio, however the downside is that you will not be able to remortgage typically to raise your deposit as most lenders will not accept a let to buy when they know your existing residential mortgage has only just been arranged.

This is because you should not arrange a residential mortgage with the intention of letting and it would indicate that you were less than truth full about borrowing intentions.

The Pros and Cons of let to buy mortgages

Pros:

  • option to move home without a buyer for your main residence
  • a great way to start as a landlord
  • existing mortgage is ignored for affordability purposes
  • most lenders will allow let to buy

Cons:

  • some of your equity must stay in the first property meaning you need more cash deposit for the purchase
  • you can't capital raise on the existing property without remortgaging as a buy to let
  • if there is a void period without tenants you must be able to meet both mortgage payments
  • your existing residential lender may require a change of your existing mortgage agreement to a buy to let type

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THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT. YOU DO NOT HAVE TO PAY A FEE FOR OUR SERVICES AS WE RECEIVE COMMISSION FROM LENDERS. IF YOU PREFER YOU CAN PAY 1% FEE ON COMPLETION AND WE WILL PAY ANY COMMISSION WE RECEIVE TO YOU. SOME BUY TO LET AND COMMERCIAL LOANS ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY
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