Let-to-buy is when you let out your current home to enable you to purchase a new property. But why would you want to do this?
There are a few scenarios, the most common being:
- Time. You’ve found that dream home and you need to move quickly so that you don’t lose it, but you cannot sell your house at the price you require.
- You want to move, but also would like to hold onto your current property as an investment.
You cannot live in a property that has a buy-to-let mortgage on it, and you cannot rent out a property that has a residential mortgage on it. So, in this instance, a let-to-buy mortgage comes into play.
If you would like to discuss let-to-buy as an option, please call us on 0844 69 333 60 or click here to contact us.
How does let-to-buy work?
A let-to-buy mortgage works very similarly to a buy-to-let mortgage… but the other way around!
The difference is that, rather than purchase a property to let, you’re purchasing a property as a main residence, and letting your current property.
Is let-to-buy a good idea?
Yes, it can be, depending on your circumstances. The rental market for your current property may be good, and it may make sense to let your current property out in the interim. If you convert your current property and mortgage to a buy-to-let, or let-to-buy, you may at the same time need to raise money on it, to help fund the deposit on the property you wish to purchase as your main residence.
It can be a really liberating option and help you to make the move that you want to make.
How much can I borrow on let-to-buy?
Just as with buy-to-let, the amount you can borrow depends largely on the rental income your current property can generate. Remember: the better deals for investment properties are capped at 75% of the value.
Regarding the onward purchase, as this is a residential mortgage, the lender will assess affordability using your personal income, whether it be from employment or self-employment.
What is the difference between buy-to-let and let-to-buy mortgage?
- A buy-to-let mortgage means you own your current property, and buy a new property to let.
- A let-to-buy mortgage means that you own your current property, let it, and buy a new property to live in.
Can I live in my let-to-buy property?
No. That property needs to be let, and you need to reside in the new property you’re buying.
As with a standard buy-to-let mortgage, your let-to-buy mortgage can be arranged on an interest-only basis. The higher rate of stamp duty will apply to the purchase of the residential property, as this will be a second property. And remember to pay tax on the profit you make from renting out your current property.
Let-to-buy mortgages are much more complicated than standard mortgage products and so it is highly recommended that you seek the help of a company like Mortgage Search Go to manage the process for you.
Because of their complexity, these can be difficult mortgages to arrange and they are generally less favoured by lenders. But they can and do happen. And they can and do happen with Mortgage Search Go!
If you would like to discuss let-to-buy as an option, please call us on 0844 69 333 60 or click here to contact us. We look forward to speaking to you soon.