What is a let to buy mortgage?
Let to buy mortgages are mortgages where a borrower rents out their current property and uses the proceeds to qualify for another mortgage.Doing this means a borrower will need to change their current mortgage to a buy to let mortgage and then get a residential mortgage. Borrowers may get a let to buy mortgage for a variety of reasons including;
- They think their property is a good investment
- They don't want to miss out on their new house
- Its a bad market to sell and they don't want to lose money
- Borrowers struggling to find a new mortgage deposit for their homes may remortgage their current home to extract funds and then use a let to buy mortgage to increase their mortgage affordability
How does a Let to Buy mortgage work?
As described above a Let to buy mortgage allows you to remortgage your current property to extract cash for a mortgage deposit and then rent out the property to cover its costs and the cost of your new mortgage.
Some lenders will allow you to rent out your property on a residential mortgage for a short period of time after which you will need to switch to a buy to let mortgage.Buy to let mortgages usually require a larger deposit(30%+) and are usually more expensive than residential mortgages.Your rent will need to cover your mortgage repayments on the buy to let mortgage.
Where can I get a Let to buy mortgage?
Contact a good digital mortgage broker who will be happy to assist and point you towards the right lender.
Let to buy vs buy to let:
They are both similar but don't expect lenders to have similar affordability assessments.The only differentiation is that a buy to let is when you want to simply buy out a property for rental gains while rent to buy is a situation where you have a residential property you which to convert to a buy to let for a short, medium or long term whilst you acquire another residential property.
The let to buy mortgage can provide great value but it is worth thinking about how it changes your tax status and the legal responsibilities of a landlord
Goodluck with your shopping and remember your home may be repossessed if you do not keep up your mortgage repayments!