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Let to Buy Mortgage – a guide

What is a Let to Buy Mortgage?

If you’re a homeowner with a Standard Residential Mortgage in place but are hoping to let it out to tenants, you will need to transfer your property onto a Let to Buy mortgage. Often known as ‘accidental landlords’ many Let to Buy applicants use this option to retain ownership of their existing property when they move to another home.

Ordinarily you will have two mortgages in place at the same time but not necessarily with the same lender. The terms and conditions of a Let to Buy mortgage allow you to let out your existing property and take out an additional loan to buy another residential property. It will not be legal to let out your home without this type of mortgage in place, unless you own it outright.

Is Let to Buy right for me?

Let to Buy mortgages will be helpful to homeowners in a wide variety of circumstances, provided you are able to meet certain criteria. Some common circumstances where using a Let to Buy mortgage would benefit you are;

  • If you need to relocate quickly, whether this is to take advantage of a business opportunity or for personal reasons, it will allow you to rent out your home if you don’t have time to or don’t want to sell it
  • If you’ve been left a family home by a deceased relative and for sentimental reasons you don’t wish to lose the property but you also don’t want to live in
  • If you’ve found the new home of your dreams but are struggling to sell your home in time to make an offer, a Let to Buy mortgage will allow you the time you need to sell, without missing out on the opportunity.

What’s the lending criteria of a Let to Buy Mortgage?

There is some variation between Mortgage Lenders and mortgage products, however, typical lending criteria for Let to buy mortgages are:

  • You should have an onward purchase mortgage in place
  • You are ideally aged between twenty-five and seventy-five years old
  • Most lenders will want you to have lived in your existing home for a minimum of six to twelve months
  • Usually you will need proof from an ARLA (Association of Residential Letting Agents) letting agent that the rental yield from your existing property will cover the repayments on your mortgage for your new home
  • A minimum income requirement is common, usually of around £25,000
  • You must be able to release equity from your existing home to cover the deposit requirement, which is typically 25%

What if I only want to rent out my property for a short period?

Depending on your mortgage terms and conditions, in some circumstances, it may be possible to arrange a ‘Consent to Let’ authorisation from your Mortgage Lender. This is perhaps helpful if you leave your property to live with an ailing relative or work abroad for a short period of time.

What about buy-to-let stamp duty?

Additional Stamp duty of 3% per property owned in addition to your residential home will apply in these circumstances, so you should consider the extra stamp duty charges when calculating rental charges.

Speak To An Expert

Our team of experts are experienced in catering for a range of clients, needs and property types. With a vast array of qualifications and accreditation from the financial accreditation agency you can be confident of quality service and sound advice.

Are there any drawbacks to Let to Buy mortgages?

As Let to Buy mortgages are higher risk products, most lenders offer less competitive interest rates than you would find on Standard Residential Mortgages, particularly on the high street.

The increased responsibility of making two sets of mortgage payments, as well as the financial and tax implications of becoming a landlord could be seen as a drawback, however, seeking expert mortgage advice and thoroughly researching the rental income potential can balance these factors.

Are there any alternatives?

Buy to Let Mortgages

Buy to Let property is usually bought specifically to let out, however, in some cases it may be possible to remortgage your current home onto a Buy to Let mortgage and take a separate residential mortgage for your new home.

A Second Charge Mortgage

Second Charge mortgages can be used to purchase a new home, if there is sufficient equity in your current home for security.

How can a Mortgage Broker help?

Let to Buy mortgage applications can be complex, however, they offer a viable option for many homeowners who want to move, without selling their current home. Here at the Mortgage Co, we can explain your options in clear terms, helping you to understand which mortgage works best for your individual circumstances and goals and which lender can provide the best Let to Buy deal.