When you own a property and want to move you may be reluctant to sell as you feel the property could be a good long term investment – so would it be possible to let the property out and still buy a new main residence? – Here we discuss this in detail.
What is a Let To Buy Mortgage?
A Let-to-buy mortgage is a mortgage product that allows you to rent out your property to purchase another, for you to live in, this involves, potentially having two mortgages at the same time. You may change your existing mortgage to a Let-to-buy mortgage, so you can let out your current home, and take out a residential mortgage on the new home you are looking to buy.
Why should I get a Let to Buy Mortgage?
If you are thinking about considering a let-to-buy mortgage, one common reason could be that you want to use the equity you have built up in your home as a deposit, this will enable you to move to a new home, whilst also keeping your current home as a long-term investment for you and your family and provide additional income.
Let-to-buy mortgage could also be more suitable for homeowners because you may be in a hurry to move to a new home and cant wait to sell your current property, or you may have struggled to sell due to the current situation with the property market. You may want to purchase a property with a new partner, but keep on your current home, you may have decided to move away to another area, as you have re – located for your employment, but have the option of moving back to your home in the future.
What is the difference between a Let to Buy & Buy To Let Mortgage?
Let-to-buy and buy-to-let are not the same, they are very different, with a buy-to-let mortgage you are purchasing a property specifically to rent it out, where with a let-to-buy mortgage, you are purchasing a new property to live in yourself and renting out your current home.
Am I able to rent out my current home?
You would either have to switch your current mortgage to a Let-to-buy mortgage, or your current mortgage lender may allow you to let it out, this called a consent to let – this is generally only allowed if you only intend to rent it out for a short period of time. This may not be available with your current lender, so you may have to look at remortgaging with another lender, who would allow you to switch to a Let to Buy mortgage.
Who offers let to buy mortgages?
Many high street lenders offer this product, but knowing if you will qualify for them is the tricky part. All lenders have their own unique criteria that you need to qualify for. This is where the help of a broker is invaluable and can save you time and money.
Can I take out my Let to buy Mortgage along with my new residential Mortgage with my existing lender?
Possibly Yes you can, It may be that your current lender will be able to switch your existing bad credit mortgage to a let to buy product and you could take out the residential mortgage on your new property with them. Even though your lender may offer you this option – it is a good offer compared to what other lenders are offering? – Using a mortgage broker who can explore the mortgage market and give you advice is important and could save you a lot of money.
Would I have to pay further Stamp on my new residential property?
Yes, you would have to pay a 3% stamp duty surcharge as you will have an additional property. This could add thousands to your initial costs, so you should try and ensure that you have budgeted for this. You would have to pay Stamp Duty as you would technically be buying a “second home”. It seems, you may be able to claim some money back if you were to sell your Let to Buy property within three years. We do not give advice to clients in relation to stamp duty charges and how you can reclaim this back – so you should speak to a conveyancer for advice in this area.
What costs would there be for letting out a property?
Finding a tenant – You could advertise the letting yourself however most people use letting agents to source a tenant. They can charge a one off fee for their tenant finding service and you could ask them to manage the property for X% per month.
Tax – You should speak to an accountant and get tax advice as you will more than likely have to pay tax on this income and complete a tax return.
Gas Safety Certificate – This has to be done annually.
Electrical Safety Inspection – You have to get an Electrical Installation Condition Report (EICR) to make sure national electrical standards are met. This report has to be redone every 5 years.
Energy Performance Certificate (EPC) – This is a report of how energy efficient your property is. This report has to be done before any tenant viewings can take place and is valid for 10 years.
Smoke & Monoxide Alarms – These have to be supplied and fitted.
Landlord License – Some local authorities require you to have a license in place, so look into this.
Landlord Insurance – Having a suitable insurance policy in place is a must. This could be buildings &/or contents insurance.
No Rental Income Periods – If the property is unoccupied, so no rental income is coming in – you will still have to pay the mortgage.
What costs are there to arrange a Let To Buy Mortgage?
You would have to pay:
Conveyancing Fees – Depending upon the conveyancer you use they may charge their fee upfront, on completion or a bit of both.
Valuation Fees – Your new mortgage lender will require a mortgage valuation to take place and potentially this will have an upfront cost.
Broker Fees – Your chosen broker may charge a broker fee which could be payable upfront, on offer or on completion.
Arrangement Fees – The lender may charge you an arrangement fee. This could be paid separately or possibility be added to the mortgage.
There may be additional fees involved, your Mortgage adviser will be able to tell you what they would be and when payable.
How do I obtain a Let to Buy or a Buy to Let Mortgage?
To find out what lenders are offering these mortgages, what the rates are and all associated costs can take up a lot of time and become quite confusing. Using an experienced mortgage broker such as the Money Hub, who can walk you through your options in a clear and transparent way is ideal. Please either call the office or complete the enquiry form above.
This is where you let out your existing home and in turn buy a new property for you to live in. This can be achieved by changing your existing mortgage to a let to buy mortgage and then you arrange a standard residential mortgage for your new purchase.
You can approach your existing lender as ask for consent to let out the property alternatively you could remortgage the property. Whilst remortgaging the property you could capital raise a deposit for your new home.
No – Your lender would have given you the mortgage on the basis that you are renting it out, so if your circumstances change and you wish to move back in, you will need to discuss this with your lender and more than likely remortgage the property back to a residential mortgage.