If you have been considering moving to a new home and letting out your current property, you may have a long list of questions and concerns to address. In the following FAQ, you will find information to help you make the right decision.
Before submitting a Let to Buy mortgage application, we strongly advise consulting with an independent broker to ensure you get the best deal to suit your requirements and your budget.
How does Let to Buy help those who cannot sell their homes?
At certain times of the year or at other times when it is difficult to sell homes quickly and for a good price, it is perfectly possible that private rental demand could be extremely high.
If you are unable to sell your home for an agreeable price for any reason, Let to Buy could represent an accessible and affordable alternative. Let to Buy provides struggling sellers with the opportunity to let out their current homes, cover their outstanding mortgage payments and potentially leaving them free to use their own income to justify investing in a second home.
What about saving for a deposit on the second property?
Most lenders will demand an initial down payment of anything from 5% to 30%, as is the case with any conventional mortgage. The difference with Let to Buy is that you may have the opportunity to release some of the equity tied up in your current home, in order to cover the deposit on the new property.
After which, you will simply be liable for the monthly mortgage payments as normal. You may even turn a tidy profit each month, if the rental payment you collect significantly exceeds your former home’s mortgage repayments.
How competitive are Let to Buy borrowing costs?
The vast majority of banks, building societies and lenders do not impose any specific premiums or levies for these kinds of mortgages. Instead, their standard introductory and long-time mortgage rates will usually apply.
It is worth remembering that with specialist mortgages the most flexible and competitive deals are not always available on the High Street.
One of many reasons why it is essential to consult with an independent broker, before submitting a Let to Buy mortgage application.
What can I do to minimise overall borrowing costs?
For the most part, the exact same rules apply as those in relation to a traditional mortgage. For example, offering a larger down payment almost always guarantees lower overall borrowing costs. Your total mortgage balance could also be reduced by repaying the loan over a shorter period of time, while a good credit history can contribute to more competitive APRs and borrowing costs.
Above all else, keeping costs to absolute minimums means comparing the market in its entirety. Rather than limiting your search to the usual High Street lenders, make sure you consider every available option from established and independent lenders alike.
Some of the most competitive deals come from specialist lenders who offer their services exclusively via brokers.
How can I estimate projected rental income?
This is surprisingly simple, though lenders have their own unique policies in place regarding verification of future rent payments. For an accurate idea of how much you’ll receive in monthly rent payments, speak to a local letting agent and arrange a consultation.
It is worth remembering that in most instances, lenders want to see evidence of projected rental income of at least 125% of the monthly mortgage payments on the property. The higher the projected rental income, the more likely you are to qualify for a competitive Let to Buy mortgage.