Let to Buy

The term ‘Let to buy’ refers to when someone lets out the property they currently live in, so that they can purchase a new residential property. There are a few reasons why you might want to do this, one of the most common being timescale, for example someone has found their dream home and can’t wait to sell their existing property or they simply can’t sell their property for the price they are looking for.

Another common reason is that someone wants to keep hold of their existing property as they believe it is a sound long term investment and would prefer not to sell it. Of course, by changing the use of a property i.e. from residential (a property you live in) to buy to let (a property you let out), you’ll need to change your existing mortgage to a buy to let mortgage and also take out a new residential mortgage on your new home that you will live in.

It’s important to note that you cannot live in a property that has a buy to let mortgage against it and you can’t rent out a property that has a residential mortgage against it without the lender’s prior consent.

A MORTGAGE IS A LOAN SECURED AGAINST YOUR HOME OR PROPERTY. YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT.

1. Get an idea of the value of your current property

The first step is to get an idea of how much your current property is worth and compare what it is worth and the mortgage amount you still owe. Look at similar properties in your area and their recent sale prices, it’s best to look at 3 to 5 properties that have similar characteristics to yours and compare prices. A local estate agent will also be able to give you an estimate and it’s best to ask at least 3 to get the best idea of your property’s market value.

2. Find out how much you could expect to make in rental income from your property

A letting agent will be able to give you an idea of what your property could rent for. The amount you can rent your existing property out for has a large bearing on how much you can borrow, so it’s important to get an accurate a figure as possible.

3. Speak to your existing mortgage provider

It might be feasible for you to port your existing residential mortgage to your new residential property. Likewise, it might be feasible for your existing lender to grant you consent to let your existing property. Therefore, it makes sense to speak with your existing lender as well as seeking independent advice to ascertain the best course of action.

4. Speak to an independent mortgage adviser who can advise you on your options

Let to Buy transactions are much more complex than standard residential mortgages or buy to let mortgages and so we recommend that you take advice from an independent mortgage adviser, and make sure that they’ll manage the whole application process for your through to completion.

This is because applying for two mortgages at once, both a residential and buy to let mortgage, can be complex and the process needs to be managed as a whole to avoid hold ups. The timing of completion on each mortgage is also key – you cannot complete on the buy to let mortgage while you still live in the property without the lender’s consent, so typically it would be necessary to complete each mortgage on the same day.

5. Make sure you can afford the additional debt you would be taking on

The kinds of things you need to think about is whether you could afford the payments on both mortgages if your rental property was empty for several months, or if interest rates rise and your repayments increase.