Let to Buy Mortgage
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The Let to Buy mortgage refers to the owner “letting” his current property out, in order to “buy” another property in which to live. This requires 2 mortgages. It requires the original property being transferred on to a mortgage which allows the owner to rent the property out. The owner will then be able to take out a new mortgage on the house he wishes to buy and live in (his new owner-occupied property). It may sound complicated, but in fact it is not, and it is becoming a lot more common practice in a slow housing market. This method of moving has many advantages to those who are able to do so.
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Written by:
Alison Gibson
Ascot Mortgage Expert
Last Updated:
05.11.2024
Written by:
Alison Gibson
Ascot Mortgage Expert
Last Updated:
05.11.2024
Considering a let to buy mortgage?
When you buy your property, you probably picked it based on a number of criteria. These might have included location, local amenities, the property’s design and certainly price. It was likely to have also included considerations around your lifestyle- where you worked and the size of your family.
What happens if you are offered a new job, at the other end of the country? You will probably look to sell your property and move to one that is more suitable. But in today’s slow housing market, what if the property doesn’t sell? What if you know the property is only able to sell for a reduced price? Your answer could lie in a let-to-buy mortgage, which will finance the purchase of your new property. This will give you the flexibility to either wait for the property to sell, or allow you to keep it.
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Let to buy mortgage criteria
This type of mortgages is geared specifically for those who have a mortgage already, but have ended up needing to move house and are unable or would prefer not to sell their current property, instead renting it out to tenants.
Are they a popular choice?
Increasingly so- a combination of a slow housing market and people often needing to relocate to find work, have meant that these mortgages are tailored to this particular market.
What can I do with my existing property whilst I live in the new one?
With this type of mortgage, it is designed for you to be able to rent the existing property out, to cover that mortgage. This means that you are able to enjoy the benefits of having a tenant in your property, without having to gain a buy-to-let mortgage or change your existing mortgage arrangement. Is it not better for me to rent a new house, until my current one sells?
With let to buy mortgages, which are increasing in popularity, it is likely that the rental yield that you will obtain is higher than your mortgage payments. The same applies if you were to rent- it is likely to cost more than a mortgage for a similar sized property. Therefore, as these types of mortgage are more popular, and thus more competitive, they are designed to make sure that you do not lose money by renting the original property out whilst buying a new one.
Are there any other benefits to a let to buy mortgage?
One of the main benefits is that you get to retain ownership for the property, for as long as you need. This means that you can benefit from any increases in value, which you may lose by selling immediately, or for a reduced price to get a quicker sale. Of course, you also have the option to move back to the property at a later date, if you decide not to sell it at all.
How to find the best value let to buy mortgages
There will be a deposit required, but because you have a current mortgage you can use any equity to refund it. This means that you do not need to be in a position of trying to find a deposit of between 10 and 20 percent of the property’s value, on top of paying your existing mortgage.
Ascot Mortgages are market leaders, well-established buy to let brokers, who can work with our network of lenders to find you a bespoke let to buy mortgage, which suits your needs. We pride ourselves on our honesty, knowledge and efficiency and aim to find you the best offer. We provide an initial free and no obligation consultation in which we can discuss your needs and advise you accordingly. Our fully trained staff will speak to you and determine the best course of action. The following information also provides some key points about let to buy mortgages, what to expect if you are looking to take one out, and what you should look for in order to get the best deal. Of course, speaking to us here at Ascot Mortgages will ensure that you get the best deal, efficiently and with the minimum hassle!
Alison Gibson
Ascot Mortgage Expert
Remortgage
Remortgaging is applied when you keep
living in your present property while applying for another mortgage deal with a new lender. Before finding out how to remortgage and get the best offers from experts like Ascot Mortgages, you have to check meeting what parameters of the deal that can help you succeed the most. The range of background factors varies a lot — from the recently changed loan-to-value ratio or your existing agreement coming to an end.
Whether you are trying to get a more beneficial deal or searching for funding to improve your home conditions, remortgaging is one of the most advantageous scenarios to consider.
Buy to let early repayment charges (redemption penalties)
Early repayment charges (redemption penalties) are usually the amount that a lender charges when the mortgage is repaid early, before the term which was initially arranged. It usually is highest the earlier that the mortgage is paid off. They are usually calculated by:
- The percentage of the original loan value
- The percentage of the balance still owing on the mortgage
- The percentage of the amount already repaid
- The number of months’ interest
A more flexible buy to let mortgage
Buy to Let Mortgages can be costly if you need to unexpectedly end them early, perhaps if you need to sell the property or you see a great investment elsewhere. A buy to let mortgage with no early repayment charges (redemption penalties) gives buyers an extra layer of reassurance should they not be 100% certain the property will be a long term investment. Being able to sell the property at any time without penalty could put the buyer at a great advantage financially. As this type of mortgage tips the balance in favour of the investor, not the lender. Whether you are looking for your first-time buy-to-let mortgage, or you are a property portfolio owner, using a specialist buy-to-let mortgage broker highly experienced in the BTL sector we will be able to quickly and precisely find you the best value mortgage to match your requirements.
Other benefits with BTL mortgages without early repayment charges
Along with the potential saving of up to 4 percent of the loan value, as with a typical buy to let mortgage, there is the added selling value of a tenanted BTL property. Should the owner be able to sell the property with a tenant in place, potential investors are likely to be encouraged by the prospect of taking on a property which has an established tenant – which saves the cost and hassle of finding a new tenant and vetting them, but it also means that they immediately receive a return on their investment.
As a product, buy to let mortgages with no redemption fee is relatively new on the market, so it is essential that you seek professional advice before taking out this kind of mortgage. Here at Ascot Mortgages we believe in giving you impartial advice, whatever your situation. If you are a buy to let investor we can use our knowledge and excellent reputation in the market to find you a bespoke mortgage offer, for the best price and quickly. We would encourage you to call and speak to one of our trained, friendly advisors who can discuss your requirements with you. Our guide, on buy to let mortgages with no early repayment charges (redemption penalties), is a good place to start.
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FAQ
Yes, if you’re looking to move out of your current home and rent it out while purchasing a new residence, you can switch from your existing residential mortgage to a let to buy mortgage. It’s essential to discuss this with your current lender or consult a mortgage advisor to understand the process and any associated fees.
Most standard residential properties are eligible for let to buy mortgages. However, some lenders may have restrictions on certain property types, such as high-rise flats, non-standard construction properties, or properties with shared ownership. Always check with your chosen lender or a mortgage advisor to ensure your property is eligible.
Yes, the location of the property you wish to “let” and the property you wish to “buy” can be in different cities or regions. The main consideration is the rental demand and property values in the respective areas, which will influence the lender’s decision.
Your credit history is a crucial factor that lenders consider when assessing your eligibility for any mortgage, including let to buy. A good credit score can increase your chances of approval and potentially offer better interest rates. If you have past credit issues, it may limit your mortgage options or result in higher interest rates. However, there are specialist lenders who might consider applicants with less-than-perfect credit, so it’s worth discussing your situation with a mortgage advisor.
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Ascot Mortgages authorised and regulated by the Financial Conduct Authority and can be found on the FCA register (www.fca.org.uk) under reference 776062. The FCA do not regulate some forms of mortgages. The guidance and advice contained in this website is subject to UK regulatory regime and is therefore restricted to consumers based in the UK. There may be a fee for mortgage advice. The precise amount will depend upon your circumstances but we estimate it will be £599 per mortgage account. Ascot Mortgages Ltd give you the option to pay a non-refundable fee of £1299 payable with the application. If this option is taken, Ascot Mortgages Ltd will refund any procuration fee received by the lender.
Ascot Mortgages Limited is registered in England and Wales and have their registered office at 8 Webster Court, Westbrook, Warrington, WA5 8WD. The company’s registration number is 06764971.
We are a credit broker, not a lender. We work with the whole of the lending market. We may receive commissions that will vary depending on the lender, product, or other permissible factors. The nature any commissions model will be confirmed to you before you proceed.
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