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Let to Buy mortgages

With demand for rental property at a high and rental incomes rising as a result, an increasing number of home-movers are looking at keeping their existing property to let out as a long-term investment whilst the mortgage is paid by the tenants.

There are a number of reasons why you may wish to buy a new property but don't want to sell and instead look to rent out your current home.  This is particularly a great option to consider for any of the following situations:

With let to buy, homeowners rent out their current main home – often raising a new mortgage on the back of it – before using the cash to buy a new property to live in. 
  • You have found a new home and selling your property has proved difficult.
  • You need to re-locate for your career however may wish to one day return to your original property.

However, let to buy may have repercussions for your existing mortgage lender.

First speak with your current lender for consent to let as letting out your home without your lender’s agreement means breaking the terms of your mortgage contract. Do be aware that even if your current lender gives you consent to let, they may well vary the terms of your original agreement and even increase your interest rate and monthly payments.

However, if you wish to raise capital or cannot get consent to let from your current lender, you may want to consider a let to buy mortgage.  This type of mortgage allows a buyer to raise money on their existing property, which may then be rented out, to assist with the purchase of a new home.   

Letting out your current property could allow you to proceed with your new home purchase knowing that the rent generated will cover the cost of the outstanding loan on your current home. This will then allow you to take out a new mortgage on your new home in the normal way. Let to buy also means you will own two homes rather than one, so you can potentially benefit from two lots of property price growth (though you will suffer twice the pain if the housing market goes into reverse).

Mortgage interest payments on the loan for the home you are letting out can be offset against rent to cut your income tax bill.

Let to buy offers an extra tax break as well. With traditional buy to let you have to pay Capital Gains Tax if you make big profits when you sell your investment property. However, if your rental property has ever been your main home – which it will have been in let to buy – then you can qualify for a reduction in your CGT bill when you sell. Tax law can change at any time, so always get advice from a specialist tax adviser.

There is a lot to consider, so it may pay to use an experienced broker to help arrange the deal on your behalf. Blackstone Financial Solutions will be delighted to talk to you and take the time to ascertain your needs and financial circumstances before advising on the options available to you.

Because you have taken on additional commitments, we’ll also give you expert advice on protecting you and your mortgage. Again, we’ll explain your options and make sure you have the right kind of policy for you.

You can be sure we’ll look after you, your mortgage and your home.

Call Blackstone on Bristol 0117 403 0097 to discuss the options available. 

“We needed to upsize and did not want to sell our apartment so we consulted Khalid to help us to secure a buy to let mortgage and a mortgage to buy a new property. Khalid provided us with a range of options and was very clear in explaining the various solutions available in the market. As Khalid had helped us with our first mortgage we were confident that he was the right choice to help us with our changing circumstances. After presenting various options to us Khalid helped us with all of the paperwork so that we could acquire our property. He is always professional, friendly and ready to help with all of our questions. We are very happy in our new place and have since been in discussion with Khalid about other financial matters. We would not hesitate to recommend Khalid, and indeed have done so on many occasions to our friends and family.”

JRSM, LONDON
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