Let to Buy

Posted on 6 August 2012 by Lyn


My husband and I have had our house on the market for the last two years, without much success. We live in a remote part of the country, and there is a surplus of properties on the market, which makes it that much harder. We are desparate to downsize and provide our two boys with somewhere with a garden to play in. We do have a couple interested in renting our property, and having made enquiries, our lender is happy for a consent to let. We are wondering about 'let to buy' - the house is valued at £240k, and the house we are interested in is £150k. Our outstanding mortgage is £100k. We have credit card debts of c.£8k, which are interest free and currently being paid off. Will we be able to get a mortgage taking all of the above into consideration? Any thoughts gratefully received.

Lyn

Let to Buy is certainly a possibility for you, whether or not it will work in practise is going to depend on how much deposit you have, how much your anticipated monthly rental income will be and how much you can afford to borrow?

Normally the deposit for your new home would come from the equity released on the sale of your current home.  With Let to Buy this doesn't happen and so the deposit either has to come from savings or by borrowing more on your current property.  You say that your current lender will consent to the let, but do you know if they will let you borrow more for a deposit and whether they will base that on your earned income or the anticipated rental income?  If you can not borrow more from your existing lender you may have to consider remortgaging on to a Buy to Let mortgage.  The amount you can borrow will be determined by the monthly rent and as a guide lenders normally expect this to cover your monthly mortgage payments by 125%.

The mortgage on your new property will be based on your earned income after making an allowance for your existing credit commitments and the usual household expenses.  All being well you will be able to borrow enough between the two properties to cover the purchase price of your new home.

I believe we can help you and that you would benefit from speaking to one of our independent mortgage advisers.  Please call 0344 346 3672 and tell the consultant the date and title of your question, they will then be able to help you find the right mortgage for your situation.

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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