Let to Buy Mortgages?

getmore4less

childrenanddogs wrote: »

To give you an overview of our situation - current house is worth approx £480,000, mortgage of £205,000 on it, would rent for approx £1800-2000 pcm (monthly mortgage payments £1100, repayment).

We've recently been thinking about moving and have found a property that we've fallen in love with. We've made a cheeky offer (£570k, asking price is £650k - down from £750k and £850k previously) and to our surprise it's been accepted. BUT.............only if we can move quickly!

So gross yield of only 5% on the existing place at the higher £2k rent.
releasing equity and with costs you are going to struggle to make money on this place as a rental business.

If you could get 75% LTV that would free up £155k so you would need a new mortgage of around £415k on a ltv of 72%

Will you get lending on over £400k? whats the income?

luckyfool

childrenanddogs wrote: »

Thanks, but is this only applicable to Buy to Let mortgages (which is not what we're interested in - instead it's a Let to Buy mortgage)?

Do you need to borrow more money on your current property? If so then you are talking about remortgaging it onto a Buy to Let deal to release equity. If not then you might be able to obtain a consent to let from your current lender, and then get a residential on your new purchase on a Let to Buy basis.

childrenanddogs

Thrugelmir wrote: »

Not your current mortgage however. It will be based on interest rates of 5, 6 even 7% depending on the lenders criteria.

Sorry, I don't quite understand this. What do you mean 'not your current mortgage'?

getmore4less wrote: »

So gross yield of only 5% on the existing place at the higher £2k rent.
releasing equity and with costs you are going to struggle to make money on this place as a rental business.

That's ok, if we don't make money it's not the end of the world as long as it covered costs. If we wanted additional income from the rental we could look at switching it to an interest only mortgage maybe.

getmore4less wrote: »

Will you get lending on over £400k? whats the income?

Yep. Nationwide (our current mortgage provider) have agreed a mortgage of £465k in principle.

luckyfool wrote: »

Do you need to borrow more money on your current property? If so then you are talking about remortgaging it onto a Buy to Let deal to release equity. If not then you might be able to obtain a consent to let from your current lender, and then get a residential on your new purchase on a Let to Buy basis.

We may need to use some of the equity, it is a possibility although not 100% sure at the mo. I thought that a Let to Buy mortgage would let you release equity though?

Thanks for the advice everyone, I appreciate you taking the time to help.

luckyfool

Typically "Let to Buy" is the term given to the new mortgage on the property you are buying, i.e. letting your current property to buy another. There is one Buy to Let lender who have a special range of products for the BTL part of this transaction which they call "Let to Buy" but this is an anomaly. Some of the best rate btl products are not available for LTB scenarios as the lenders see it as offering bridging finance on the cheap (and being higher risk).

I would clarify that Nationwide are ok with your existing property being let out, they are not normally keen on this type of scenario.

herbiesjp

If you need to rasie extra from proeprty1 then it would have to be a BTL.

Nationwide would normally want the BTL already let out, and proof of that income going into your account.

But as you have not moved out, you will not be able to do that.

childrenanddogs

luckyfool wrote: »

Typically "Let to Buy" is the term given to the new mortgage on the property you are buying, i.e. letting your current property to buy another. There is one Buy to Let lender who have a special range of products for the BTL part of this transaction which they call "Let to Buy" but this is an anomaly. Some of the best rate btl products are not available for LTB scenarios as the lenders see it as offering bridging finance on the cheap (and being higher risk).

I would clarify that Nationwide are ok with your existing property being let out, they are not normally keen on this type of scenario.

Thank you. We did discuss letting the property with Nationwide and they were fine with it, although that was when we were planning on using them to finance the new property, but as they don't do a LTB mortgage we may have to go elsewhere, so we'll look in to if they'd be as happy if that were the case.

getmore4less

childrenanddogs wrote: »

Yep. Nationwide (our current mortgage provider) have agreed a mortgage of £465k in principle.

On what basis.

If you are keeping the current loan with them then you need total borrowings of £775k from them

So LTV requirements on the new loan on the new property

What terms on the current loan you need consent to let and further borrowing or a new loan on new terms.

Do oyu have the cash to fund a deposit on the new place.

luckyfool

My understanding of Nationwide criteria is that that they will not ignore the mortgage payment on your existing property unless it has been let out already for 6 months. i.e. Unless you can afford both mortgages from income then it doesn't work as the property will obviously not be let out until you move out and the purchase completes.

getmore4less

childrenanddogs wrote: »

That's ok, if we don't make money it's not the end of the world as long as it covered costs. If we wanted additional income from the rental we could look at switching it to an interest only mortgage maybe.

You miss the point at 5% gross yield you might struggle to break even with interest only.

Say you have 75% LTV @ 5% thats £1500 in interest leaving between £300-£500pm , then you have the other costs to take out of that using an agent that will be 100-200 pm gone then one months void eats 5-7 months of that surplus, a refurb between tennents will need budgeting for.