Let-to-Buy: How to Assess Affordability

Let-to-buy can be a fantastic option where selling your home the conventional way is impossible or not preferable. For an overview of borrowing costs and typical let-to-buy rates, use our helpful let-to-buy calculator.

How does let-to-buy work?

Let-to-buy bears many similarities to a classic buy-to-let investment opportunity. With let-to-buy, the whole process works in reverse.

Many homeowners, upon finding their dream property, encounter difficulties selling their current home. In other instances, those who have spent years or decades investing heavily in their current home would rather hang onto it than sell it.

In both instances, let-to-buy could be the ideal option. This is where you retain ownership of your current property, let it out to tenants, and use the rental payments to cover your current mortgage. You are then free to take out a new mortgage on the property you intend to buy, leaving you with just one mortgage to pay from your own income.

Your tenants effectively pay your previous mortgage, and you ultimately end up with the two homes under your ownership.

Switching mortgages

Let-to-buy can be flexible and affordable, though it is not without its complexities. Letting out a property under the terms of a standard mortgage usually goes against most lenders’ terms and conditions.

It is therefore necessary to switch the mortgage on your current home to a specialist buy-to-let mortgage, as you will subsequently be letting the property out to tenants rather than living in it. This may also mean a higher APR than the prior conventional mortgage, along with additional borrowing costs applicable to buy-to-let mortgages.

This is one of many reasons why comparing the market in its entirety for a competitive deal is essential. After gaining a basic overview of what is on offer with our let-to-buy calculator, call to arrange an obligation-free consultation.

Establishing affordability

All applicable costs of a let-to-buy need to be carefully considered before applying for a new mortgage or buying a second home.

For example, owning a second property may increase stamp duty liability. Rental income tax is also payable on the money earned by letting out a property.

In addition, becoming a landlord means taking responsibility for the upkeep and maintenance of two homes. Mortgage arrangement fees, legal fees, valuation fees, and completion fees may also apply. all of which should be discussed with a broker before applying. You can even use our UK mortgage calculator to work out all the costs.

Let-to-buy is therefore not an ideal solution for all homeowners but can prove a profitable venture for many.

Independent broker support

If you have any questions about the let-to-buy process or are considering investing in a second home, we can help. Book your obligation-free, cost-free consultation with one of our experts to discuss the options available.

We will help you assess affordability, eligibility, and whether letting go is the right move for you. Call or email anytime to learn more.