Buy to Let
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Let to Buy Mortgage
A let to buy mortgage allows you to buy a new property whilst keeping your current home and renting it out to tenants. It tends to include both a buy to let mortgage, for the current property to be let out, and a residential mortgage, for the owner to buy their next property.
Who can get a let to buy mortgage?
Whilst different lenders have different eligibility criteria, they will often consider the following as part of your application:
- Age (lenders typically look for you to be between 25 and 75 years old)
- Your level of equity or deposit available
- Your credit history
- General affordability
- Potential rental income your current property can generate.
Let to buy mortgages are often ideal for a number of reasons. For example, you may be struggling to sell your home when you need to move fast – a let to buy can help you purchase your next property whilst you still own your current one – albeit it is rented out to tenants.
Alternatively, couples looking to move in together that each owns their own home might look to let to buy. They move into one property whilst renting out the other, retaining the ownership of both.
How does it differ from a buy to let mortgage?
A buy to let mortgage is specifically for someone looking to buy a property with the sole purpose of letting it out. A let to buy mortgage is where the borrower already owns the property, but they want to let it out.
A borrower may choose to release equity from their current property (to be rented out) in order to help fund the second property they will live in.
However, a let to buy remortgage would most likely be considered as a standard buy to let remortgage (as the property is already being rented out) and the second property a standard residential mortgage.
As a let to buy consists of two separate mortgages, it’s often advantageous to use a let to buy mortgage broker – as the best deal may not have both mortgages with the same lender.
What deposit do I need?
As a let to buy is considered as two separate mortgages you need to consider the deposit, or perhaps more specifically the level of equity, that you need both.
For the buy to let that is applied to your current property, many lenders will look for at least 25% of the equity in the property. For the new, residential property, a lender may look at a maximum loan to value (LTV) of 80% – 90%.
How much can I borrow?
Whilst the maximum loan to value (LTV) stands at around 80% – 90% for a let-to-buy mortgage, many lenders will be looking for less at 70-75%.
So for a £250,000 property, lenders will let you borrow a maximum ranging between £175,000 and £225,000.
Whilst some providers may place a cap on what can be borrowed as part of a let to buy, these values can be quite high, at around £600,000. However, some specialist lenders will let you borrow more than this, provided you pass the relevant eligibility.
There are many different factors when it comes to a let to buy mortgage, which is why speaking with expert mortgage advisers like Ascot Mortgages can be worthwhile. We can advise you on the best solution for achieving what you want to, whilst sourcing the right products so you get the right deal. Call us today on 01925 711558.