Let to Buy Mortgage Explained | Let to Buy Mortgage Advice from Go Direct

What is a Let to Buy Mortgage?

A Let To Buy Mortgage is simply another mortgage product available to customers which offers an alternative to the popular Buy To Let option.

A let to buy mortgage works by allowing you to borrow money on your current home to buy a new home to move into, while your existing residence is let out to tenants.

The new mortgage lender will calculate the maximum that they are prepared to lend you and not take your existing mortgage into consideration as a commitment as long as the rent covers the existing mortgage payment.

A deposit maybe required for the new mortgage however this maybe released from the existing property by remortgaging to a Buy to Let or a secured loan.

Most Buy-to-Let Mortgages are not regulated by the Financial Conduct Authority

Let to Buy Typical Rent Calculation

For the new mortgage lender to ignore your existing mortgage the rent you will receive will have to fit the new lenders let to buy calculation. A typical example of this would be your exiting mortgage balance multiple by the lenders variable rate divide this by 12 and multiplied this by 125% to arrive at the minimum rent required. If there is a shortfall on your let to buy rental some lenders will annualize the shortfall and class this as a commitment before they calculate the maximum mortgage they will offer you.

Below is an Example of a Typical Let to Buy Calculation

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Existing Mortgage Balance	Multiplied by Mortgage Lenders Variable Rate	Divided by 12	Multiplied by 118%	Required Rent
£75000	£5063	£421.88	£497.81	£498
£100000	£6750	£562.50	£663.75	£664

The let to buy calculations above are just a guide and for the purpose of the examples the mortgage lenders variable rate used is 6.75%. For further details on let to buy mortgages please complete our mortgage advice form.

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

Pros and Cons of Let to Buy Mortgages

Pros

You can rent out your existing property in order to buy another home locally or in a completely different location within the UK
It's a really good way to retain your property if you're relocating as a result of a job or change of circumstance for a period of time and have a need to purchase a new property whilst you're away
It's a way to retain your original property as an investment and benefit from the mortgage being paid by the tenants
It can be of real benefit when used to break the buyers and sellers chain if you are having trouble selling your property or if you have little or no equity and would rather wait before selling
Let To Buy can be start to building a property portfolio that you could benefit form in the future, acting like a form of long term pension provision, once the mortgage on the property is paid off
The rules are different from Buy To Let as you may be able to borrow a higher proportion of the property value, which means you may need a smaller deposit or if you have plenty of equity in your current property possibly no deposit is required at all.

Cons

It is a requirement by the new mortgage lender that you ask for your exiting mortgage lender to give permission to rent you current home out
You must inform your building and contents insurer
If your property is leasehold you will need to make sure that your lease has no restrictions on the letting of your property
It is important to speak to a qualified Mortgage advisor to gain all the facts before proceeding.

Do you want No Fee Let to Buy Mortgage Advice?

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Let to Buy Mortgages Explained