Yes, you have read it correctly. And no, we didn’t mean buy to let mortgage. After all, we’ve covered buy to let mortgages extensively over the years (and our next article will focus on this popular mortgage product, too).
This is about the lesser known let to buy mortgage. So, in order to take it from out of the shadows, let’s shine a light on what exactly it is.
Benefits of let to buy mortgages
A let to buy kind of does what it says on the tin. You let your existing property out and buy a new one to live in. This sounds easy, of course, but the reality is that in order to do this, you need two mortgages.
The first step is that your mortgage on the property you currently live in is switched to a buy to let mortgage. This enables you to let out your home legitimately (see below).
Then, for the property you’re buying, you take out a standard mortgage.
Why would you do a let to buy?
As a Guildford mortgage broker, this is the number one question that people looking for let to buy mortgage advice ask. So, here are the reasons that our team of Guildford mortgage advisers think are the most pertinent.
1. You’d like to use the equity accrued in your existing home to fund the purchase of a new one
2. You need to move somewhere for work for a relatively short period of time – and know that you’ll be returning to that property and don’t want to sell it
3. You’re in a rush to move to the next property but you haven’t been able to sell your current property
Don’t break the rules
You might ask, why can’t I simply let my current property out and buy another one? Why do I need to switch mortgages?
The answer is that if you were to let your property out with a standard mortgage, you would be in breach of contract. If you’re caught, it’s likely that there would be serious consequences – so it’s worth doing it right rather than breaking the rules.
How do I get a let to buy mortgage?
Much of it depends on how much rent you can bring in for your existing property.
If you can demonstrate that it’s high, then it will stand you in good stead. With let to buy, it’s more about rental income than what you earn, which is usually the most important factor when applying for a mortgage.
However, lenders generally want to see that your monthly rental income will amount to between 125% to 145% of monthly repayments at a “stressed” interest rate (as opposed to the rate you’ll actually be paying). There’s also a borrowing limit of around 75% to 80% of your current property’s value.
You’ll need to prove that you’re buying a new property at the same time as switching your mortgage, too.
Do I need to use a mortgage broker for let to buy?
As a let to buy mortgage specialist, we would say yes. Not because we’re trying to elicit more business, but because it’s genuinely more complex than a standard mortgage.
With let to buy mortgages, you’re kind of creating your own property chain. As a result, certain things need to happen at certain times, which a mortgage broker can manage on your behalf.
As ever when it comes to the debate around should you or should you not use a mortgage broker, it comes down to a few things including: how much time you have, how prepared you are to start and manage multiple mortgage applications with multiple lenders, and whether or not you value a DIY approach to getting a mortgage over getting a professional in to do the job for you.
Thinking of applying for a let to buy mortgage? If so, contact our team of Guildford mortgage brokers on 01483 238280 or e-mail info@complete-mortgages.co.uk.
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