If you want to let your current home and buy a new home to live in then this is known as ‘let to buy’.
What is a let to buy mortgage?
A let to buy mortgage enables you to let your current home, repay your existing mortgage and raise a deposit to buy a new residential home. You can remortgage your current mortgage to a let to buy product.
How much can I borrow?
The good news is that most lenders use anticipated rental income to determine how much they will let you borrow. They don’t use your earned income for this, so this gives you more overall borrowing potential and buying power for your new property.
Can I raise a deposit from my current property to buy a new home?
Yes, if you have equity available then you can release money out of your current property and use this as a deposit to buy your new home. Let to buy mortgages are usually available up to 75% of the property value.
What are the advantages of a let to buy mortgage?
If you are a homeowner and want to move home then let to buy enables you to move quickly without having to market or sell your property. You can use it to raise a deposit and this can help with overall affordability. In a fast and competitive housing market this can really help you by making you more attractive as a buyer being ready to proceed. It also gives you the opportunity to become a landlord and you can even begin building yourself a property portfolio.
What are the disadvantages of let to buy mortgages?
The main disadvantage of letting to buy is that you will most likely have to pay second property stamp duty rates for your onward property purchase. This will need to be factored into your moving costs and your mortgage adviser will help you with this by taking you through a full home mover budget plan to ensure that your completion goes as smoothly as possible.
If the property that you let increases in value then you may be liable to capital gains tax on the profit made when you sell. Ask your mortgage broker about this.
You will also have to declare your rental income from the property on your tax return and you may have to pay income tax on part of this. Your mortgage broker will run through this with you and can introduce you to a specialist letting Accountant.
What else do I need to know about let to buy?
When you let your property you will need to make sure that you comply with landlord legal regulations. This includes property checks, maintenance, tenant deposits and tenancy agreements. Your mortgage broker will explain this to you and may suggest that you get legal advice from a solicitor.
What insurance do I need for let to buy?
You will need landlords building insurance as a minimum. Your residential home insurance will not cover you for letting. Your mortgage broker will supply you with a quote for this.
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