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Is Let to Buy right for me

Posted on 8 May 2011 by Erica Stephenson


How can I arrange a Let to buy mortgage?

My current home is worth £105,000.  I have a mortgage of £26,000 over 13 years. I could rent out my home for approx £530 a month.  Can I rent out my current home and buy another for between £130-150,000?  Is this possible under Let to buy and where would I get a let to buy mortage. I am tied into current mortgage for one more year. (penalty is £1,000 to leave). I would appreciate advice as cannot find much information about Let to buy on the internet.

Erica

Let to buy (LTB) describes the transaction whereby instead of selling your existing property you elect to keep it and let it out instead.  You won't find any mortgages marketed as being specifically for LTB and the type of mortgage you have on your property will depend on your existing Lender's attitude to you asking for their permission to let it.  Some Lenders will allow you to keep your existing residential mortgage and grant consent for the property to be let, which would mean that you need not worry about the early repayment charge, whereas others will either want you to switch to a Buy to Let mortgage or remortgage to another Lender completely, in which case you would definitely be looking at a new BTL mortgage.

As the equity is tied up in your property and you are not going to be selling, you will need to increase your borrowing to release the deposit for your new residential property.  With a monthly rental of £530 pm you can expect to raise up to 80% of the current home's value, which would give you £84,000. This would let you put down about £52,000 as a deposit on a new residence.  Given the income figure you provided I am not sure that this would be sufficient to support a new loan of up to £100,000 and depending on your level of savings it might be that you will need to look at cheaper properties.

I believe you would benefit from speaking to one of our independent mortgage advisers.  Please call on 0344 346 3672, tell the consultant the date and title of your question, they will be able to look at your situation and advise you accordingly.

Peter

Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.


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