Let to Buy mortgage

scooby-dog

I would be grateful for some info on let to buy mortgages. I basically understand that you let out your current home and raise money against the rental income to buy your new permanent residence. Can anyone give me more details on the criteria etc?
Our house is valued at around £250k. We have a mortgage with the Halifax for just under £100k on it, which we currently pay about £585 per month for. The house would rent for around £1000 per month. How much would an average lender lend us on a let to buy basis? And then what happens to the current mortgage? Is this transferred to new property, or paid off if enough capital raised from old property to fund new one? Its all a bit mixed up in my head & I'm not sure if I am understanding it correctly! When scouring the internet I ca only find basis explanations of this type of mortgage, no more!
Idiots guide to Let to Buys required please!!!
Many thanks

JoeK_3

A let to buy mortgage is as you have described.

You can raise up to 95% of the property value, subject to the assessed rental income. The rental income will be determined by the valuer acting for the lender, when valuing the property.

On an interest only basis, £195,000 mortgage loan would cost around £975 pm at 6% interest..

This means that if your property was assessed to bring in around £975 pm, the lender would lend you £195,000 on that property.

You could then use the £195,000 to buy your next house or as a deposit for the new house.

JoeK

PoorDave

Why is it that LTB allows up to 95% quite freely, when BTL tends to be 85%? (although 90% is possible).

It seems that the rental coverage only needs to be 100% too, from your figures.

Therefore, ignoring the fact that requirements for 100%+ rental converage can actually be a good thing, in that it avoids poor deals being possible, surely the LTB route is an easier way into purchasing property to rent out. For example, the OP could daisy chain the next purchase into another rental.

kingkano

Interesting information. We are investigating a similar option. I had assumed even though you let-to-buy, you still end up getting a buy-to-let mortgage and as such end up with the same terms and conditions?? I cant find any lender actually offering a 'let-to-buy' mortgage in such words....

The only thing I can think of is its actually just remortgaging normally for 95%, then moving and telling the lender you'll be letting the place (making sure they allow it). Thereby actually having a resi mortgage with letting permission?? Is that about right?

herbiesjp

Be careful with this

Some lenders will only accept the Let to Buy if within certain limits i.e. 75% or 85% borrowing on the original property, so you may not be able to go as high as you want to on the first mortgage.


You have to get consent to let from the first lender, however it is the new lender that is agreeing the LTB mortgage. Basically what they are saying, is that as long as the rental income covers the mortgage payments by say 130% (different lenders have different amounts) then they will "ignore" the first property in the background, and utilise 100% of your income without making any deductions for that mortgage in the background

Obviously if you have other debts, then that will affect your mortgage amount

The reason why Buy to Lets are different to Let to Buys is because they are two different schemes: the first is a mortgage on the let out property, the second is a mortgage on a property that will become your main residence and therefore subject to normal residential mortgage criteria

HTH

sham63

Short piece on Let to Buy here;

http://uk.biz.yahoo.com/11072007/325/buy-move-selling.html



It says that the following lenders offer let-to-buy deals; Northern Rock, Birmingham Midshires, Abbey and GMAC.

kingkano

I dont understand the 2nd part there Herbies. I thought let to buy = letting your current property, to fund the purchase of a new home (ie exactly as it sounds). Buy to let is specifically buying a property with the sole intention of letting it out. With either of these you are getting a mortgage on the property thats being let out though surely??

Sorry to confuse matters or hijack the thread...

herbiesjp

kingkano wrote: »

I dont understand the 2nd part there Herbies. I thought let to buy = letting your current property, to fund the purchase of a new home (ie exactly as it sounds). Buy to let is specifically buying a property with the sole intention of letting it out. With either of these you are getting a mortgage on the property thats being let out though surely??

Sorry to confuse matters or hijack the thread...

No worries kingkano

Not all people will need to fund a new purchase from the original property.

What they do is get enough for a deposit and then apply for the residential mortgage on the new property.

The mortgage on the first property is already in place, and so if you do need extra funds for a deposit it will normally be on a further advance (if you are tied in to that lender). So that property will still be on a residential rate, and you will then need to get consent to let from that lender.

A BTL mortgage is when you buy the property to let out, so you will need a BTL mortgage on that property and teh higher rates offered by BTLs

By doing a LTB, you are hopefully keeping the first property on a residential rate, whilst then being able to get another residential deal on the second property


You will indeed have two mortgages, but going LTB, you can potentially have two cheaper residential mortgages - provided the first lender will give consent to let that is, and not increase the rate

HTH

kingkano

Okay that makes more sense. The way we are thinking of proceeding we would remortgage our current place to a BTL mortgage, increasing the borrowing to cover our move. I guess with your description the alternative would be to contact our present lender and ask about a further advance and permission to let?

thanks.

silvercar

Isn't doing a BTL remortgage on your current home and a residential mortgage on the new place, the same thing. With so many lenders now providing BTL products the mortgage rate shouldn't be higher than a residential one.

scooby-dog

Hi, thanks for all your comments. People are talking about the similarity of a let to buy and just remortgaging up to 95%. As I understood it if you re-mortgage it will be based on YOUR income. If you do a let to buy it is based on potential RENTAL income? We personally could not afford to borrow up to 95% of our property value if it were to be based on income!
Birmingham Midshires website has a section where you can find out level of lending they will do based on various scenarios ie, rental income received etc.
I already have a seperate buy to let with BM so I may approach them for a Let to Buy Quote.
Any more info will be greatfully received!!!!!:D