The world of mortgages and property can seem pretty complicated, so we’re doing our best to break everything down for you so you have the knowledge you need to make the decisions that are right for you. In this post, we’ll be exploring the world of let-to-buy mortgages, which are a fair bit more complicated than your standard model.
What is a let-to-buy mortgage?
A let-to-buy mortgage is a set-up that basically involves you holding two mortgages at once. If you already have a mortgage on one property but wish to buy a second, and for whatever reason you aren’t selling your first house, you can look into converting your existing one into a buy-to-let mortgage. This switch allows you to rent out that previous property and also allows you to secure a normal residential mortgage on a new property.
Who would let-to-buy be suited for?
There are plenty of reasons why you might consider getting a let-to-buy mortgage. As property prices are still on an upward trajectory, having two properties increasing in value could prove hugely beneficial financially. On the other hand, you may have fallen in love with a new property but are struggling to sell your current one, in which case a let-to-buy mortgage could be a great solution (although if this is the case, check out the note on ‘consent to let’ at the end of this post).
How does a let-to-buy mortgage work?
Swapping your mortgage over unfortunately isn’t always a super easy process. To do so, your first port of call is to have a new financial assessment with your current lender and if that doesn’t work out you’ll have to look into remortgaging elsewhere. Let-to-buy mortgages aren’t hugely common however and are often interest-only mortgages, which can mean less competitive rates to normal residential mortgages.
When it comes to securing the let-to-buy mortgage itself, the criteria may vary slightly between providers, but here are a few requirements you should be prepared to expect:
- Assurance that the rent you expect to bring in will be greater than the monthly mortgage repayments
- Evidence that you are buying another home simultaneously, normally demonstrated by a copy of your new mortgage
- An age restriction, generally requiring you to be between 25 and 75 years old.
Warning: Stamp duty
This may be a deal breaker. If you’re considering getting a let-to-buy mortgage, it’s important to know that there is a 3% stamp duty surcharge. As you would be buying a second home, let-to-buy properties fall under the remit of second property stamp duty charges, even though you would only be living in the one house. However, if you sell the first property within three years, the government could refund you that extra 3%.
Alternatives: consent to let
If let-to-buy doesn’t sound quite right for you but you’re struggling to sell your property, then Consent to Let might be a better idea. Consent to Let allows you to move into a new property and let out your previous property for a short period of time. Getting your lender to grant you a Consent to Let deal will depend on your specific circumstances and may not be possible however. There may also be more challenges in securing your second mortgage for the new property whilst your previous one is on consent to let. It’s an option worth exploring with your lender or mortgage broker if you aren’t looking to let in the long term.