What is Let To Buy?
A let-to-buy situation occurs when a homeowner lets or rents out their current main home as a buy to let or even as a holiday let. The let property effectively becomes an investment.
Let to Buy can be a fabulous opportunity, particularly for those that have thought about investment in a buy to let property. If the rental numbers and personal circumstances allow, retention of a current residential property as a Buy to Let or Holiday Let can be a good idea in terms of:
- maintenance costs should be known upfront and there is less chance of being caught out by latent issues
- local connections, in terms of Agents and Tradesmen
- demographics, you should have more knowledge about the type of tenants that will occupy your investment property
- tax planning, as you have occupied the property there are future CGT and other Tax advantages
- a future home for children who may find it increasingly difficult to purchase their own home
How it works
Let to Buy can work in a variety of ways.
Normally the existing residential property is re-mortgaged using a buy to let mortgage, either on a pound for pound basis, or with a larger loan which allows capital raising to provide cash to meet the deposit requirement on the new purchase. If arranged correctly the new residential lender will then ignore the let property mortgage (and rental income), thereby allowing all of your salary to be used in the affordability calculation for the new residential mortgage.
Seems simple? Well it only “seems” that way on paper.
It is quite complex because the interplay between the criteria of two lenders needs to be carefully considered.
Examples of the issues that often arise are:
- the buy to let lender re -mortgaging the current property may use a different, less punitive, calculation for the mortgage/rental coverage from that used by your new residential lender. If your rent is not sufficient to match both lenders requirements, you will find your ability to borrow for the purchase much reduced
- the customer has a product that they would like to “port” to the new property to avoid Early Repayment Charges and although the buy to let lender will allow a let to buy scenario, the residential lender will not and so will not agree to the porting
As a professional mortgage brokerage we are skilled in working with the let to buy scenario and know what questions to ask.
Please call 0800 316 5756 to speak to one of our Mortgage Advisers about the benefits that a let to buy arrangement may be able to provide.