Let to buy Mortgages - General advice

Smudgeboy

Hi all

Can anyone give me some high-level, layman's advice on let-to-buy mortgages?

I own and live in a flat and am sick and tired of not having required privacy and things like garden (and stairs!).

However, flat is in very nice condition and in a very good "lettable" area - many of the other flats in the block are let and are always occupied and make good rental income. I would like to keep the flat as:

• A way to finance new purchase
• A safety valve if let-to-buy doesn't work financially
• A long-term investment

I know the basics of let-to-buy - ie, borrowing on the rentable value of the flat - but don't really understand the "numbers" behind it.

Is there a simple way to calculate (roughly) how much i would be able to borrow etc?

Cheers

Smudge

lswwong

Suggest you PM or look up Payless!

And good luck. Keep us posted.

herbiesjp

I think you are getting alittel confused between Let to buy and Buy to let - sound them same but slightly differnet in their use.

Let to buy - is when you have an existing mortgaged residential property and want to buy another. So you let out this first property and then buy another property - as long as the rental income covers the mortgage cost (each lender is different but 125% as a guideline) your NEW lender will disregard this exiting mortgage when calculating how much they will lend you based on your income - so you are not penalised.


A buy to let - is used when there is no valid reason for you to maintain a residential rate - as such BTL rates are higher then normal residential mortgages. On this scenario, the lender on your current mortgaged property offering the BTL would base the loan amount NOT on your personal income, but instead on the RENTAL income the property can achieve. Your new lender would normally disregard, this property then for mortgage purposes, and again lend you the money based only on your new mortgage scenario.


As for the claculation for the BTL - each lender has a different way of calculating what they are happy with in terms of rental cover - are they are ever changing.

It all depends on your circumstances and the figures you are looking at.

budgetflyer

Figures quoted to me were

To work out the maximum you can borrow, simply multiply the
rent by 224.305.35% fixed until 30/09/2007 (APR 6.6%)

If you have high value properties or a large portfolio, the up front costs
of re-mortgaging may have put you off.

However, if you meet the following criteria, we have a new scheme we think
you should consider:-

Have you owned three or more buy-to-let properties for more than three
years and have supporting rental accounts?
OR
Do you have a high income and a low domestic mortgage?

If you can answer 'YES' to either of these questions, you are probably
eligible for the following EXCLUSIVE offer:-

° NO valuation fees.
° £250 'cashback' to help with legal costs, or free lenders
solicitors.
° A special introductory interest rate of 5.35% fixed until
30/09/2007.
° Borrowing ability - up to 85% of the value of the property.
° To work out the maximum you can borrow, simply multiply the
rent by 224.30
° Available to Limited Companies and individuals.
° Possibility to grow the portfolio to aggregate borrowings in
excess of £10 million.
° No extended 'tie-ins'.
° Early Repayment Charge - 12 months interest in the first 2
years following completion.
° Lenders fee - 0.75% add to the mortgage.

For full details please call me on 01494 895416

Griffin78

Smudgeboy wrote:

Hi all

Can anyone give me some high-level, layman's advice on let-to-buy mortgages?

I own and live in a flat and am sick and tired of not having required privacy and things like garden (and stairs!).

However, flat is in very nice condition and in a very good "lettable" area - many of the other flats in the block are let and are always occupied and make good rental income. I would like to keep the flat as:

• A way to finance new purchase
• A safety valve if let-to-buy doesn't work financially
• A long-term investment

I know the basics of let-to-buy - ie, borrowing on the rentable value of the flat - but don't really understand the "numbers" behind it.

Is there a simple way to calculate (roughly) how much i would be able to borrow etc?

Cheers

Smudge

I'm in a similar situation. I bought a flat on my own in August 2003 which I am currently living in. I would like to look into making the next step and purchasing something larger, with a garden etc. I would like to keep my existing property as I believe it is a good asset, the rental income would be good (at least 125% of mortgage repayments). Also, I now have a partner who would joint own a potential new mortgage for a larger property.
The question is, how much could we borrow? Rental income would cover the existing mortgage and more and there would be two of us contributing to a new mortgage rather than just myself. Is it as simple as multiplying expected rental income by a number?
I believe I have two options, a let-to-buy mortgage or a remortgage. My current mortgage is approx 60% of the price of the property so I have some decent equity which could be freed up and used as a deposit for a new residential house.

EdInvestor

BTL mortgages are usually restricted to 85% of the value of the property.I gather some lenders have relaxed the 125% rental income rule a bit recently.

The other mortgage is based on your income.