Let-To-Buy Property

Let to buy mortgages emerged over a decade ago, when many householders found themselves in a negative equity position and were unable to sell their homes without selling at a loss. This become a popular tool again when the market started to change in 2007. This option allows those borrowers to let out their own house, and still maintain outright ownership of the property, whilst at the same time having the opportunity of purchasing another property as well.

Let to Buy mortgages

Let to Buy is an alternative to buy to let, in which a let to buy mortgage product allows the borrower a lump sum of money to buy a new home to move into, whilst the existing residence is let out to tenants in the normal manner.

How does a let to buy mortgage work?

Let to buy mortgages work in the following way: a lender works out how much they are prepared to lend to you, without taking your existing mortgage into account so long as it is covered by rent. Many let to buy mortgages require a deposit, although some lenders will allow a deposit to be released from a property through a re-mortgage or secured loan.

How do lenders work out let to buy rent?

Your original mortgage lender has to be satisfied in order to ignore your existing mortgage, and this will require proof that you fit the new lenders let to buy mortgage calculation. In this instance, the new lender calculates your existing mortgage balance by something known as the let to buy typical rent calculation. If there is a shortfall, lenders will annualise it and count it as a commitment. Let to buy calculations depend on mortgage rates.

What are the advantages of a let to buy mortgage?

Let to buy mortgages let you rent out your existing property whilst buying in a completely different area of the county. You can retain your property as an investment and have your mortgage paid by tenants. Let to buy can be the basis of starting a property portfolio, somewhat like a pension. The rules of let to buy lending are different to buy to let, and can be more flexible and require less equity.

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