Let to buy
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What is a let to buy mortgage?
It is a loan secured against your current home that allows you to rent it out and also allows you to potentially raise a deposit to purchase a new home. Let to buy mortgage criteria is similar to buy to let criteria.
The main difference between a residential mortgage and a let to buy mortgage is that the amount you can borrow is assessed mainly using the rental income from the property being mortgaged rather than your own income. This allows your own income to be used, and to service a mortgage on, the onward property purchase.
How much equity do I need to leave in my home?
Most lenders will consider lending up to 75% of the property value therefore the other 25% equity remains in the property. The actual equity amount that will be required to be left in the property is frequently dictated by the expected rental income of your current property.
Most of our advisers have been landlords for many years, they have the knowledge to potentially allow you to help secure your financial future with owning a second property. Chatting with an existing landlord and mortgage broker will be beneficial for you to know how much you will need for the deposit and other costs.
Will the ‘Let to Buy’ mortgage affect the amount I can borrow to purchase my next home?
It could do however many lenders will regard the mortgage as being self-financing from the rental income. This allows all your main income to be used when assessing affordability and the amount you can borrow to buy your next home.
Are there additional costs that I need to consider?
Yes, on top of normal purchasing costs when you decide to keep your current home to rent out and buy a new home to live in, you will need to pay a 3% surcharge on the Stamp Duty Land Tax on the full purchase price of the property you are purchasing.
This one-off cost will put many people off renting their current property however owning a second property may significantly enhance your long term financial security.
To work out whether it is worthwhile for you, speak with an independent mortgage broker who will crunch the numbers and present them to you in an easy to understand format which will allow you to make an informed choice.