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UK Property Finance

Let to Buy Mortgages from 4%

 

How much can be raised on a let to buy mortgage?

The amount available to borrow is determined by the rental possibility of the property. *All rates quoted are subject to individual circumstances.

The vast majority of lenders require the rental income to be 125% of the monthly interest only mortgage payments based on a notional interest rate of 5%, for example:

  • Property valuation: £100,000
  • Mortgage amount : £85,000
  • Monthly mortgage payments based at 5% per annum: £354.17
  • Minimum rental income required: £442.71

Letting your residential property to purchase another:

You don’t always need to sell your existing home to buy another. Re-mortgaging your existing property onto a let to buy mortgage is a great way to keep the asset and gain rental income. Mortgage lenders will usually process the let to buy and the mortgage to purchase a new residential property together. Depending on the equity available in your existing property, you may be able to raise additional funds on the let to buy mortgage which you can use as a deposit towards the new property. This could mean you can purchase your new home without a cash deposit!

The process of a let to buy mortgage is similar to buy to let mortgages, the only difference that let to buy mortgages are regulated by the FCA. In terms of interest rates, a let to buy has a similar cost to a standard buy to let, whereas on your main residence you usually have access to low-interest rate mortgages.

Example:

  • Current property value £200,000
  • Existing residential mortgage £80,000
  • Purchase price of new property – £250,000

The maximum loan to value on a let to buy mortgage is 75% of the property value so we could raise £150,000. After the mortgage of £80,000 is cleared, you will have £70,000 towards the purchase of the new property.

The maximum loan to value on a residential mortgage is 90% if you are not a first-time buyer. On average, depending on affordability, or if you have any credit issues, you may be limited to 75% loan to value. Based on only being able to raise 75% on the purchase mortgage you can raise the £187,500. The deposit will be from the let to buy property meaning you will not require a cash deposit.

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