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A homeowner may take out a let to buy mortgage to buy a new property. The borrower moves into the new home and lets out the old property to tenants. The mortgage product is ideal for an individual who needs to move to a new home but does not want to sell the old property. The rent from the old home covers the existing mortgage dues of the property.
The new mortgage lender requires you to inform your existing lender about your intention of using your former home as an investment property. You must determine if your old home is leasehold. It is crucial to ensure that the lease has no constraints on letting out the property.
Lenders make available a wide assortment of products for let to buy mortgages. You may choose from fixed rate and tracker mortgages. There are cash back policies on the loans. Lenders fix a package according to rental income calculation.
You new mortgage lender will not take into account your existing mortgage as long as the rent you expect to receive matches the mortgage calculation estimated by the lender. To work out the rent, you must multiply the old mortgage balance by the interest rate, divide the product by 12 and multiply the result by 118%. This should be the minimum rent for the old property.
A significant advantage of a let to buy mortgage is that it allows you to borrow a sizeable proportion of the worth of the home. The equity in your old home enables you to borrow with a smaller deposit. If you have considerable equity, a lender may agree to a package with no deposit, at all. It would be difficult to secure a buy to let mortgage product with similar terms for purchasing a rental property.
The package allows you to rent out your existing property and move to any location within the country. You do not have to concern yourself with the hassles involved in a sale, if you have to move out within a short notice.
The monthly rentals serve as a regular source of income. A part of the proceeds goes towards redeeming the mortgage on your old home. If your old home is large for your needs, you may move to a smaller and less expensive property and avail of the income generated by your former home.