Let To Buy
Using a let to buy mortgage to raise capital and move home
Chances are, you haven’t heard much about let to buy. It works in the complete opposite way to buy to let as the title suggest. It can be a great way to move home whilst also keeping a hold of your original residential property. This way you can benefit from an increased property portfolio. Whilst also making sure you have moved into your new dream home.
Essentially the way let to buy works is that you let out your current home to buy a new one. You use the rental income generated from the let of your current home to fund a new purchase. Lenders will also take into account earnings but the new rental income boosts that a lot. This means with a let to buy mortgage in place you will own one rented home and then your own residential.
Let to buy also helps with the chain when it comes to property purchasing. This means that you will not have to rely on selling your current property in order to purchase and move to your new one. It takes out that necessity and can greatly speed up the moving process.
Generally a let to buy will have a loan to value cap of 75%. This means that you will have to have equity in your home to be able to pull money out. The letting of the property will cover the mortgage on that property and your own earnings will cover the new purchase. You will have two mortgages set up both with the same lender. A let to buy can seem confusing, that is why it’s so important to seek professional advice.
What will my budget be?
You could almost say a let to buy is similar to a remortgage. You are using the equity in your home in terms of rental income to provide a lump sum towards a new purchase. Whether this covers the whole purchase is entirely up to your situation. This is why it’s important to get advice on this to make sure you know exactly how much you could get towards a new home.
The best way to asses what sort of rental your let to buy will achieve is to speak to a letting agent. They will be able to give you an estimate on how much rental your property could achieve. Once you have this figure, come and speak to us. We will use this projected rental figure along with your house worth and current mortgage balance to give you an idea of what you could lend. Not all lenders are happy to do a let to buy mortgage. Speaking with us and getting our impartial advice can be key in knowing how to move forward with this.
Let to buy mortgage process
You’ve found a new house you want to buy. You have an idea of exactly how much you can get rental on your property. And you know how much you can pull out towards a new property.
It’s time to apply for a let to buy mortgage. The marketplace for lenders who will offer these deals is lower than your normal residential mortgage. This is because they are considered more of a specialist type of mortgage. We will do all the research for this mortgage on your behalf and present you with the best deals available for your circumstance. This along with our client agreement will be passed onto you accompanied by a phone call or meeting to discuss them. If you are happy with this you sign up with us and we proceed to the let to buy mortgage application.
Let to buy mortgage application & offer
We fill out the full mortgage application on your behalf and submit it to the lender. They will then assess this information along with the relevant paperwork we submit to them such as ID, payslips, bank statements etc. They will send out valuers to look at both your property that is proposed for rental and your new home. The valuers will need to agree with your projected rental for the property in order for this to go through so it is important you get an accurate estimate from a letting agent.
Once the application is looked over and accepted a formal mortgage offer will be sent out to you. At this point you will begin the legal process. We have a great panel of solicitors we can recommend that we work with. Ask us to provide you with a free quote for this process. At this point our mortgage process is finished and we hand you over to the solicitors. But we still don’t stop our duty of care.
After your let to buy mortgage completes
We continue our duty of care and continue to check on the legal process to make sure you are moving along swiftly. We will also look to sort out relevant life insurance and buildings and contents to cover you properly. It is key to look at insurance when you have big liabilities such as properties.
There is one thing you must watch out for in this process. The fact that you now own two properties will mean you fall into the second property stamp duty surcharge. This is 3% on top of the normal stamp duty. This is something you must be aware of when purchasing your new property. Whilst you will be building a portfolio, this does come at that added tax cost.
How else we can advise you
We advise on the full range of mortgages from self builds through to a commercial site. Having a lot of experience in the market place really helps us understand lenders and get you the best deals. Having helped many clients from being fresh first time buyers through to moving home. We also advise on the specialist service that is equity release. There is not a lot of things we haven’t seen. Please do be advised as well that we also cover the full remit of financial advice including pensions and investments.
Get in touch with us today to discuss your let to buy needs and how we can help.