Wednesday 17 May 2017

You’ve heard of buy-to-let but what is let-to-buy?

Author: Andrew Page


With rents continuing to rise across the country, letting out a property can be a good way to boost your finances. Let-to-buy is an option for homeowners who are considering renting out the property they currently live in to release equity for another purchase. Allowing potential landlords to keep hold of an existing property, while freeing up their finances, let-to-buy can be a great option for people in a variety of financial situations.

What is let-to-buy?

If you own a property and want to move house without selling your existing home, let-to-buy could be the perfect solution. As with any other type of mortgage, it begins with you making an application to a lender; if it’s successful, you’ll be able to remortgage your property and let it out. The rent you earn should ideally be sufficient to cover the mortgage repayments. This will allow you to release equity for a future purchase and keep hold of your existing property.

Who is let-to-buy suitable for?

Let-to-buy is a popular choice for couples who move in together later in life. If they both already own a home let-to-buy allows them to release funds for a new purchase, without forcing them to sell their existing properties. This can provide the homeowner with a valuable income stream as well as a good long term investment.

Let-to-buy is also commonly used by homeowners whose properties have dropped in value. As Which? says, “Letting out your property could allow you to move into a new home without feeling pressure to sell in a rush and potentially at a loss.” By giving homeowners a bit more room to manoeuvre, let-to-buy can help to limit the impact of fluctuations in the housing market.

Who can apply for let-to-buy?  

In order to apply for a let-to-buy mortgage, you already need to be a homeowner in the UK. Apart from that, the lending criteria are broadly similar to those for buy-to-let loans. In general, this means you’ll need to be between 25 and 75 years old. You’ll need to retain equity of at least 25% in the property, the monthly rental income will need to be around 145% of the mortgage interest and you’ll need to have a good credit rating. There may also be some extra affordability checks depending on which lender you opt for.

If you’re not already a homeowner and want to become a landlord, or if you want to buy an additional property to rent out rather them move from your current home, you’ll need to apply for a buy-to-let mortgage.

To find out more about the different types of mortgages available, contact a member of our team – or take a look around our site.

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Written by: Andrew Page