Let to buy mortgage

Boogiecat

Hi


Has anyone here experience of a Let to Buy mortgage?


I've been offered this as an option because I'm struggling to sell .
As I understand it, as long as you have plenty of equity, the mortgage lender retains 25% of the value upon which you pay interest only, they then release the equity in the property value as a deposit to purchase a second property to live in, with a top-up mortgage. You then rent out the first property, and the income covers the interest on property 1, plus some of the mortgage on property 2.


I'm nervous because I currently only owe £21,000, and although officially have 13 years left on the mortgage, am on target to have it paid off in 7 or 8 years, so the thought of now borrowing potentially £60,000 over 15-20 years (till I'm 68!!) is terrifying.


Any experience or advice would be gratefully received.


Thanks
Boogiecat

dimbo61

You become a Landlord! You may have to cover Void periods, repairs etc.
You have more debt but own 2 properties and earn income from one BUT also pay TAX on that Income.
£60K on top of the current debt or total?

ViolaLass

Boogiecat wrote: »

Hi


Has anyone here experience of a Let to Buy mortgage?

Buy to Let.


I've been offered this as an option because I'm struggling to sell .
As I understand it, as long as you have plenty of equity, the mortgage lender retains 25% of the value upon which you pay interest only,

this bit makes no sense. I think you mean that you can borrow up to 75% of the value of the property, NOT that the lender retains 25% (if they retain it, why would you be paying interest on it?)

they then release the equity in the property value as a deposit to purchase a second property to live in, with a top-up mortgage. You then rent out the first property, and the income covers the interest on property 1, plus some of the mortgage on property 2.

The rent on the let property will also need to cover voids, repairs, improvements, fees, tax etc etc

amnblog

If you are struggling to sell will you also struggle to let the property?

If it makes you nervous, dismiss the idea. There is no value in losing sleep over it.

JPB123

Originally Posted by Boogiecat
Hi


Has anyone here experience of a Let to Buy mortgage?

Buy to Let.


I've been offered this as an option because I'm struggling to sell .
As I understand it, as long as you have plenty of equity, the mortgage lender retains 25% of the value upon which you pay interest only,

this bit makes no sense. I think you mean that you can borrow up to 75% of the value of the property, NOT that the lender retains 25% (if they retain it, why would you be paying interest on it?)

they then release the equity in the property value as a deposit to purchase a second property to live in, with a top-up mortgage. You then rent out the first property, and the income covers the interest on property 1, plus some of the mortgage on property 2.

ViolaLass wrote: »

The rent on the let property will also need to cover voids, repairs, improvements, fees, tax etc etc

No, it's Let to Buy. Where funds are being released from a property that was previously on a residential basis, it's called Let to Buy. Perhaps you should check that YOU understand the terminology before calling other people stupid for not getting it exactly right.


Div.

I am an Independent Mortgage Advisor


You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.

ViolaLass

JPB123 wrote: »

Div.

How terribly polite of you. I'm not aware that I called the OP stupid, I simply pointed out that what she had written didn't make complete sense.

JPB123

ViolaLass wrote: »

How terribly polite of you.

Just giving you the same approach you gave the OP.

I am an Independent Mortgage Advisor


You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.

ViolaLass

JPB123 wrote: »

Just giving you the same approach you gave the OP.

I think you've inferred a tone in my original post. Let's agree to disagree.

Boogiecat

Now then children, play nicely!


Thanks for the replies.

Dimbo61 - about £60,000 in total for mortgage. I would pay interest on about £21,000, port my existing mortgage to the second property - I currently owe about £21,000, then they would lend me another £40,000. (My flat is currently for sale at £84,950).


I have rented it out before, when I went travelling. It's much more marketable as a rental because it's only got one bedroom. Nobody seems to want to buy a one bedroom unless they get it for peanuts. The other flats that are for sale in our buildings are much cheaper, but also half the size of mine. The let to buy option was brought up by a mortgage advisor because I'm struggling to sell it but still want to be able to get a house. The rental income more than covers the mortgage , management fees etc.


I was asking if anyone has experience of this let to buy , as it seems to be a recent thing. Equity release, basically. I don't know if I'm brave enough! However if my flat doesn't sell (I'm not letting it go for peanuts) then I'll have no option but to rent it out.

SunReader

However if my flat doesn't sell (I'm not letting it go for peanuts) then I'll have no option but to rent it out.

Everything has a value and the market will usually decide it. If the flat has rental potential, and, at your valuation, a reasonable yeild, then it will attract attention of investors if not homebuyers if the price is realistic.

It hurts taking a hit on an asset i know, but don't fool yourself into holding onto an unrealistic valuation. You could end up doubling your problems here if you don't think things through.

Some ER schemes can have hefty early repayment charges and the extra interest charged -even before interest rates likely go up next year could nuetralise the deal -assuming full occupancy and getting paid etc.

Thrugelmir

Boogiecat wrote: »

they then release the equity in the property value as a deposit to purchase a second property to live in, with a top-up mortgage.

Some lenders won't be happy with the source of the deposit. They'll expect you to inject some of your own capital.

You then rent out the first property, and the income covers the interest on property 1, plus some of the mortgage on property 2.

Crunch the numbers make allowance for all costs and tax. Along with void periods. The end result maybe not be what you expect. Over optimism is the downfall of many.