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Transcript: Let To Buy Mortgages Explained

Hello – My Name is Erik

A lot of people don’t want to sell their existing house because of current difficulties in the housing market. At the same time the property investment market looks appealing at present when the property market isn’t very strong.

What is a let to buy?

Instead of selling your home to release equity to put down as a deposit on your new purchase it is possible to refinance your existing house to raise money for a new deposit. This old property is then rented out to cover the mortgage and you move into the new home.

Key Issues

  • Ensuring you have enough equity in your property to raise a 75% buy to let mortgage and still have sufficient money to deposit.
  • The expected rent – your old property must be of a type and in an area suitable for renting out.
  • The ability to obtain a mortgage on the property.

Assessing The New Property

Valuer will usually be looking for the rent on your existing property to be 125% of the mortgage payment on your new buy to let mortgage (the one you obtained by refinancing your residential property and moving out of it). This does vary but the higher the better.

Your new lender for your new residential property will also be concerned with the rental income on your old property. They will take professional advice – usually asking for an Association of Residential Letting Agents Letter confirming the rental income as well as taking the valuers assessment of the value of your new property. It’s important you consider carefully any concerns any of these professionals raise with regards to your property.

Critaria and Choice of Lenders

Some lenders will not allow you to remortgage a residential property onto a buy to let. For example Coventry Building Society did not offer this facility at the time of application.

Naturally you will not have a tenant yet in this kind of application. Some lenders will only ignore background buy to let properties that are currently tenanted. For this reason you will need to ensure the mortgage lender for your new purchase is fully aware of your plans.

Better rates are always available at lower loan to values. You will need to take this into account.

Key Risks/Thoughts

The future state of the rental market, interest rate changes and your personal finances are all risks you need to take into account. Property investment is a long term venture and you should not enter it looking to make short term profits as you can lose as well as make money. Your personal finances must be strong enough to withstand any short term issues.

If you need some advice on your let to buy move please complete the form below and we’ll help you decide how to proceed as well as finding you the best rates from the whole of the mortgage market.