What Are Let To Buy Mortgages?
What is a Let to Buy mortgage?
If you’re planning to move house, but don’t want to let go of your original home, you can use a Let to Buy mortgage. This enables you to let out your current home to tenants, whilst taking an additional loan for your new property.

A Let to Buy mortgage involves having two simultaneous mortgages in place. Whilst ordinarily you will take both mortgages with the same lender, it is possible to borrow from two separate lenders if this results in a better deal.

When Would You Consider a Let to Buy mortgage?
You don’t want to part with your current home
Perhaps your home has sentimental value, or you would like to give it to your children when they are old enough.

You need to relocate quickly
If you need to move quickly due to life issues, such as a new job offer or to care for ailing relatives, you might not have time or struggle to sell your home. A Let to Buy Mortgage can help you to fund this type of move without losing your original home.

When you have significant equity in your current home
Let to Buy is only an option if you have enough equity in your current property, as it will be difficult to obtain a mortgage offer without it. If you do have significant equity in your current home, however, a Let to Buy Mortgage can provide a stable source of additional income.

What are the criteria for becoming a Let to Buy Landlord?
In order to become a landlord using a Let to Buy Mortgage, there are fairly strict lending criteria that you will need to meet. Whilst these will vary slightly between lenders, they usually include:

As most applicants release equity from their existing home for a deposit, you will need to have enough equity to cover 25% of the cost of your new home, as a maximum of 75% Loan to Value will be offered.
Most lenders only accept applications from those between twenty-five and seventy-five years old.
To determine whether the mortgage is a viable long-term investment, the lender will want to be confident that the rental yield (income) from your existing property is around 125% of your new mortgage payments. You will usually be asked to provide proof of this, which will need to be obtained from a letting agent registered with the Association of Residential Letting Agents (ARLA).
You will need to meet affordability criteria, which usually requires a minimum salary of $25,000, a strong credit rating, and that the lenders are satisfied that you can afford the mortgage repayments.
Most lenders won’t consider a Let to Buy Mortgage where there is no onward Mortgage in place. You also cannot use the expected rental yield to borrow a higher loan for the onward purchase.

Whilst the deposit is ordinarily paid through equity release, you’ll still need the other funds necessary to purchase a new home available, such as arrangement fees and stamp duty

Tax implications and advantages of becoming a Let to Buy Landlord
There are a number of tax implications and some advantages involved with letting out your home, we recommend that you seek tax advice around the following prior to deciding whether Let to Buy is a financially beneficial option to you.

Rental income is taxable and has to be declared to HMRC

If you own more than one property, an extra 3% stamp duty is required on each additional property

Capital gains tax will be payable on your rental property when you sell it on
It is possible to gain from capital growth if your property increases in value, however, all gains will be taxable

How Can a Mortgage Broker help you secure the right Let to Buy mortgage?
It’s important to realize that, whilst they are similar in principle, there are differences between Let to Buy and Buy to Let mortgage products. In order to establish whether a Let to Buy mortgage will work for you, or if it’s an option at all, speak to a Mortgage Adviser for detailed advice.

Mortgage brokers are able to ensure that you find the most suitable mortgage for your circumstances from a broad spectrum of high street and independent lenders. When considering a Let to Buy Mortgage it’s also very important to seek tax advice.

Why Use The suncapitalists.com -Mortgage Broker?
At The suncapitalists.com -Mortgage Broker, it’s our vision to become the UK’s most trusted and respected mortgage broker. The only way for us to achieve this is by providing straightforward and transparent advice to every one of our clients.

From your first call to your last, we put customer service first before all else so you can be confident in getting expert mortgage advice.

Your home may be repossessed if you do not keep up repayments on your mortgage.

We offer FREE no-obligation advice with no hidden costs. Payment is only taken when we proceed with the application. Therefore if we don’t complete any business, the customer never pays a penny.