When buying a house, the ideal scenario is that you sell your existing property at asking price, find your dream house and move in. Unfortunately, this is not always the scenario that takes place in the complicated property world and people often find themselves unable to sell their existing property for the price they want and/or in time to buy their dream property.
There is however, an alternative solution for buyers who find themselves in this situation. An existing property can be rented out to tenants with a Let to Buy mortgage. With a Let to Buy mortgage, you remortgage your existing property to release cash that can be used as a deposit on the new property. Monthly mortgage repayments of your existing property are covered by the rental income which allows your salary and other income sources to be used to cover the repayments of the new mortgage.
In theory, Let to Buy can be an ideal solution when you are unable to sell your existing property but still want to make a new purchase and it can be an ideal solution in reality as long as the figures add up.
- You will be responsible for paying 2 mortgages.
- Rental market changes
- Stamp Duty surcharge
- Higher rates
This can be stressful for some people and needs serious consideration before making the decision. Remember that there may a few months out of any given year where you don’t receive rental income and you will still need to cover your monthly mortgage repayments on both properties.
Recent buy to let rule changes mean that landlords now need higher rental income in relation to mortgage repayments. Be sure to investigate fully how much rent you’ll be able to get for your property. You can use our buy to let mortgage calculator for an initial estimate on how much you can borrow.
When you buy a second home, you have to pay 3% on top of the Stamp Duty band. Be sure to include this in your calculations.
Let to Buy rates are generally higher than standard residential mortgage so initial financial calculations might not work out as expected.
Let to buy is still an option in 2019 but with changes to to the buy to let mortgage market and uncertain economic and political times ahead, careful consideration is needed before making the significant commitment to taking on 2 mortgages. Make sure you run a free mortgage comparison to compare the buy to let options available.
Always speak to a mortgage broker at the beginning of your property decision making process for help with working out whether Let to Buy is a viable option for you in 2019. You can use our special Let to Buy calculator to get an instant decision on whether or not this could be possible for you.
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