![]() Let to Buy Mortgages Explained |
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Let-to-Buy mortgages explained
Found your dream home but are yet to get a buyer for your existing property? Let-to-buy could be the answer. Read on to learn about let-to-buy mortgages, including the pros, cons and alternatives. What is a let-to-buy mortgage?
Suppose you’ve found the perfect property but can’t secure a buyer for your existing home. In that case, one option is to rent your current property out to tenants—taking out a new let-to-buy mortgage to buy your next home. This way, you don’t lose out on the property you’ve found while you wait for the right buyer or offer for the place you’re selling. How do let-to-buy mortgages work?
As long as you have enough equity in your property, you can remortgage to release some cash to put down as a deposit on your new home. Then, you can use the rental income to cover the mortgage for your existing home and get a new mortgage for the property you want to live in - assuming you can cover the repayments with your salary and other income sources. You’ll essentially have two mortgages:
Let-to-buy vs buy-to-let mortgages
Technically, let-to-buy mortgages are a type of buy-to-let mortgage. But buy-to-let mortgages are taken out by people looking to buy a property to rent out (or remortgage a house they already rent out). On the other hand, let-to-buy mortgages are for when you still live in the property but want to move somewhere else. Who are let-to-buy mortgages for?
Anyone ready to buy but still trying to find a buyer for their property. Let-to-buy mortgages are also popular with couples moving in together for the first time, who each have their own properties. In this scenario, you could move into one of your properties and rent out the other using a let-to-buy mortgage. These mortgages are also a good option if you own a property that you might want to move back into in the future, or keep as an investment. The lending criteria for let-to-buy mortgages
Every mortgage lender has slightly different rules, but most will ask you to meet the following terms:
Pros of let-to-buy mortgages
Some of the advantages of a let-to-buy mortgage:
Cons of let-to-buy mortgages
A few disadvantages of getting a let-to-buy mortgage:
What are the alternatives to let-to-buy mortgages?
Here are a couple of other options you can consider: 1. Consent to let
If you need to move quickly, but you’re struggling to sell your property, you could get permission from your mortgage lender to let your current home and move into rented accommodation. This could work if you’ve found a great location to live or need to move due to a job change or other circumstances. And getting consent to let from your lender means you wouldn’t have to remortgage to rent it out. But lenders don’t have to agree to this, and they might impose a higher rate or fee if they do. 2. Buy-to-let
Alternatively, you can go for a buy-to-let mortgage and move out to rent somewhere else. But this can be complex, costly and you might not meet the eligibility criteria. Neither this or the consent to let option are necessarily helpful if the reason you want to rent out your original property is to buy somewhere else.
3. Second-charge mortgage |