We are The Mortgage Pod, let-to-buy mortgage brokers

Mortgages can get complicated, especially when there are two properties involved. At The Mortgage Pod, it’s our mission to simplify it. We have a lot of experience of working with homeowners to secure let-to-buy mortgages and can help you make sense of your options.

Contact us today to find out if you have enough equity in your home to qualify for a let-to-buy mortgage.

What is a let-to-buy mortgage?

Let-to-buy mortgages are a good choice if you want to move without selling your current property. Here’s how it works: you keep your current home, rent it out, and leverage the equity to buy a new home to live in.

The new “let” mortgage essentially provides capital that can be used to deposit your new home purchase or your second property. If you meet the lending criteria, it might also be possible to borrow more against the current property to fund home improvements or even the purchase of an additional investment property.

If you want to move without selling your current property or are having trouble selling it, a let-to-buy could be an ideal solution. It can also be ideal if you’re part of a couple who both have their own properties, you may be able to keep and rent one, sell the other as well as buying together for you move to move into.

If you don’t have enough equity for a let-to-buy but are looking to move on, your mortgage lender might agree to let you rent your property while you move to rented accommodation – this is known as consent to let.

How does let-to-buy work?

Let’s break it down step by step:

  1. Remortgage your existing home: Switch your existing residential mortgage to a let-to-buy mortgage so you can rent it out.
  2. Release equity for a deposit: The lender will provide an agreed sum based on the equity in the property, which you can use as a deposit on your new residential property.
  3. New residential mortgage: You get a new residential mortgage for the home you plan to live in.

If that sounds complicated, fear not – that’s where we come in. As your trusted mortgage adviser, we’ll help you understand your options and new financial obligations. Needless to say, we’ll also do everything we can to secure you the best rates possible on both deals to keep your monthly repayments at a minimum.

Who is eligible for a let-to-buy mortgage?

If you own your home and have enough equity (or a suitable deposit other than your equity), you might be eligible for a let-to-buy mortgage.

Most lenders typically ask for:

  • at least 25% equity in your home
  • a good credit history
  • proof of personal income
  • proof that the income from the rental property can cover the buy-to-let mortgage
  • an accurate property valuation
  • proof of onward purchase, or even an agreement in principle, which you can get HERE.

Some lenders may have a maximum age, but lending criteria for let-to-buy varies, so it’s a good idea to talk it over with a mortgage broker so we can direct you to the right lender.

Differences between let-to-buy and buy-to-let mortgages

Let’s clear up the confusion: basically, a let-to-buy mortgage is a type of buy-to-let mortgage, but just for a property that you’ve lived in.

Let-to-buy mortgages are for homeowners who want to rent out their current home and buy a new one to live in.

A buy-to-let mortgage is for a landlord purchasing a new property specifically to rent out.

Let-to-buy and buy-to-let criteria are different, and they may come with different terms and rates. They allow a property to be rented, and the rates are usually higher than standard residential mortgage rates due to the lender’s increased risk.

Pros and cons of a let-to-buy mortgage

Pros

A source of income – By letting out your current property, you can earn rental income. This will cover your let-to-buy mortgage repayments, potentially with a profit.

You keep your original property – With a let-to-buy mortgage, you don’t have to sell your existing home. If property prices rise over time, it could be a valuable investment.

Make the most of your equity – If you’ve built up substantial equity, you can use it as a deposit for a new property rather than dipping into your savings.

Move on even if you can’t sell – In a sluggish property market, you might struggle to sell your home, which is very frustrating, especially if you need to relocate. By renting it out, you can move on.

Cons

Managing two mortgages – Two mortgages are a LOT of financial responsibility. Robust contingency plans and careful budgeting are essential.

Extra cost –You must factor in extra fees and additional stamp duty. There is an additional 3% stamp duty surcharge on the purchase of an additional property.

Property management – Unless you hire a letting agent company, you will have the job of a landlord, which involves managing tenants, maintenance, and void periods.

Market fluctuations – If property prices fall, one or both of your properties might depreciate, and you could end up making a loss.

Void periods—There might be times when your property is vacant, meaning there is no rental income to cover the let-to-buy mortgage repayments. This is known as a void period. A Plan B is crucial for this scenario.

Our let-to-buy mortgage service

If you’ve done a bit of research and you think let-to-buy could be right for you, then talk it over with The Mortgage Pod. We’ll help you crunch the numbers, advise on the best combination of the two mortgages, and ensure you are fully prepared for the added financial commitment.

Then, we’ll look at the whole of the mortgage market to help you find the best deals available to you. Our friendly and helpful team will be there every step of the way to ensure the application process goes smoothly until you complete both mortgages.

Looking for let-to-buy mortgage advice? Get in touch

Let-to-buy mortgages have great benefits, like generating rental income. Two mortgages might sound daunting, but we’re here to help you make the right choices and take the stress out of the process. We’ve got plenty of experience with let-to-buy mortgages and can guide you every step of the way. Reach out to us today for a chat with one of our friendly team.

Contact us by phone or get started here.

Frequently asked questions about let-to-buy mortgages

Are let-to-buy mortgages suitable for first-time buyers?

Let-to-buy mortgages are designed for those who already own a home, so they are not suitable for first-time buyers. However, they may be a great way for first-time landlords to dip a toe into the rental market before investing in a buy-to-let property.

How much deposit do you need for a let-to-buy?

You typically need at least 25% equity in your let-to-buy property. However, options with up to 85% loan-to-value are available, depending on your financial situation and the property’s value.

What is the difference between consent-to-let and buy-to-let?

Buy-to-let is a way to finance a new property to rent out. Consent-to-let is when your mortgage provider allows you to rent your owned property out while you move to alternative accommodation, such as a rental property. This is a good temporary option if you don’t have enough equity for a let-to-buy mortgage and you need to move fast.

Do both mortgages need to be from the same lender?

In a let-to-buy scenario, both the buy-to-let mortgage and residential mortgage can be from the same lender, although they don’t have to be. We always recommend consulting a professional mortgage broker to check your options.