Let to Buy Mortgages
What is a Let to Buy Mortgage
People are often confused between the terms Buy to Let and Let to Buy. Let to Buy is for those who want to borrow money on their existing home to enable them to buy a new home to live in and let out your existing home to tenants.
When the new mortgage lender calculates how much they are prepared to lend, your existing mortgage is not included in the calculation as long as the rental income covers the mortgage repayment.
For a variety or reasons homeowners may want to let out their existing home and buy a new one to live in. Mortgage lenders see existing mortgages on your credit files and, in order to work out how much you can borrow, this needs to be taken out of the calculation. As you will not have tenants until you leave the property the Let to Buy works on the assumption that your existing mortgage will be covered by the rental income.
Let to Buy Typical Rent Calculation
To ensure your existing mortgage is not included in the calculation the new lender will use their own let to buy calculation. As a guide to the minimum rental required to satisfy this calculation take your monthly interest only mortgage payment and add 25% = minimum monthly rental needed.
Does a Let to Buy Mortgage work for you?
What you need to consider:
Let to Buy mortgages are an alternative to the Buy to Let option. It finances your move to a new property whilst allowing you to retain ownership of your existing property and to rent it out. As long as your monthly rental income can cover your interest only mortgage payments the new lender may not take the mortgage in to account when working out how much you can borrow to purchase your new home.
The APRs quoted above are costs for comparison. The actual rate will depend on your circumstances. Ask for a personalised illustration.