Are Let To Buy Mortgages a Better Option Than But To Let Mortgages?
If you want to move home but keep your current property and let it out, you are likely to need a 'let to buy' mortgage to fund your new purchase. Many people have taken this approach as they want to keep their existing home as an investment or because they plan to move back to it at a later date.
You may need to move home as you have a growing family or because you need a bigger house. However, you may want to keep your existing home as you believe it is a good investment. In this instance, a let to buy mortgage would be the ideal solution for you.
How Do Let To Buy Mortgages Work? When applying for a let to buy mortgage, the lender will work out what they are prepared to lend you based on your income and outgoings without taking your existing mortgage into account. Lenders often make the assumption that the rent you will receive from letting your existing home will cover the mortgage payments.
In line with many buy to let mortgages where you borrow money to buy a property with the sole intention of renting it out you will typically need a 25 per cent deposit. This has been particularly true since the 'credit crunch' of 2008 where banks have become more cautious about their lending.
What Interest Rates Are Available On Let To Buy Mortgages? Rates for let to buy mortgages vary significantly from lender to lender. Whilst current mortgage rates are around 5 per cent, this may increase over forthcoming months following hints from the Bank of England that interest rates are set to rise to combat inflation.
What Is Required To Obtain A Let To Buy Mortgage? To obtain a let to buy mortgage, both the new property and your existing home would need to be valued. In addition to a capital value, a rental income assessment would have to be obtained on your current home to check that the rent was sufficient to meet the monthly mortgage payments. In addition, proof of earnings such as payslips is generally required.
A let to buy mortgage can help you move home without being forced to sell your existing property. For example, you may have to relocate with your work, but not want to sell your home in a depressed property market.
Many people have also used a let to buy mortgage as the first step to building up a property portfolio. If you want to invest in property to supplement your income or as an alternative to a pension, a let to buy mortgage can be the perfect way to begin. And, with property prices expected to recover in coming years, now could be a great time to begin your property investment.
When considering a let to buy mortgage, bear in mind that you may need consent from your current mortgage lender to rent out your home. Some lenders will charge a fee for agreeing this, whilst others may increase your interest rate if you are not living in the property.
If your current property is a 'leasehold' property, you may also require permission from the leaseholder to let your home. Again, it may be worth seeking advice from a professional before making any firm decisions about let to buy finance.
About the Author:
Howard writes for Just Commercial Mortgages the UK's No1 site for the latest commercial mortgage rates and commercial property finance news.
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