Let-to-Buy Mortgages

Let-to-buy mortgages are a relatively new product in the mortgage world, and are often — not surprisingly — confused with buy-to-let loans.

As is apparent in the name, this type of mortgage allows someone to buy a new home (generally to live in) and to rent out their existing home to a tenant.

One of the main attractions of let-to-buy loans is that a person can have two standard residential mortgages running in tandem, which means they can avoid potentially more expensive buy-to-let mortgages.

Also, whereas buy-to-let mortgages often require you to put down a deposit of 10%–15%, standard residential loans tend to require smaller amounts.

At the moment, there aren’t too many lenders offering let-to-buy loans although generally this will not be a hindrance. Whether or not you will be accepted will generally depend on whether the proposed rental income on your existing home is deemed sufficient by the lender.

As a rule, lenders will not factor your existing mortgage into their calculations — the new mortgage will simply be assessed using the normal criteria, e.g. affordability or income multiples.

If you have a certain amount of equity in your existing home, you can even take out a let-to-buy loan without a cash deposit. Instead, you simply remortgage your existing home, freeing up an advance of funds, and use this advance as a deposit on the new property.

For more information about let-to-buy, please call one of our consultants on 0845 330 0809.