Let to Buy

kaminarikaminari

Hi,

I am trying to understand how this is done. I have a residential mortgage with 115K left and the online valuation is between 375K to 400K.

I have about 45K in savings. I am wanting to buy something in 500K to 525K range. Do I get a mortgage DIP first with my current lender

says I need to have 3 months of rental income proof - but how is that possible if this is my prime residential property?

Very surprised that I was given that information.

With the above figures, am I able to do a Let to Buy or do you require more information?

How do I go about finding a good Mortgage broker? Some more reading over the weekend for me.

Thanks in advance!

K_S

@kaminarikaminari In principle, given the numbers above, a let 2 buy should be possible. Whether you meet affordablity requirements for the onward residential purchase is a different question and depends primarily on your income.

You need the right lenders at both ends, a BTL lender that fits your circumstances, who allows let 2 buy (and allows you to release as much capital as you require for your onward purchase or other reasons) and a resi lender who will disregard the background rental property for affordability, without having to evidence 3 months of rental income.

kaminarikaminari

@K_S Thanks! Some time back I was able to get a DIP of 250K. Hence looking at Let to Buy.

HopeAndDriftWood

We’ve been exploring this option recently too. Information seems thin on the ground! We’re going to try and talk to our mortgage company today. 

lonibra

This actually is/was very common! Perhaps less so now because of the 3% stamp duty surcharge. Lot of people just don't realise that there's such an option.

FaceHead

Government policy for the last decade or so has deliberately made exactly this sort of move less profitable. Yes stamp duty, but also income tax changes, lettings fees etc. There is also the cost of maintenance of the let out property, and any gaps between tenants to budget for, as well as the hassle of managing it (or another fee for an agent to manage it).

Do your sums carefully, and consider whether just moving home and investing you surplus cash elsewhere (or having a smaller mortgage)  is a better option.

To afford the mortgage above, you might be a higher rate tax payer, which makes being a landlord on the side tricky.

kingstreet

If your new residential is going to be with Nationwide, it insists on the property being let for three months beforehand so that really isn't possible. It will allow it if you remortgage your existing property to its subsidiary The Mortgage Works.
Fortunately, many other lenders will take a letter from an ARLA registered Letting Agent as evidence of the potential rental income when determining your property to be let is self-financing for the purpose of residential mortgage affordability.
Whether remortging to formal BTL or obtaining consent to let from current lender a broker is best-placed to piece this together for you to enable you to avoid the pitfalls such as a lower max LTV on the purchase as you already have a residential you are not selling.

amnblog

Note: pay careful attention to Kingstreet’s post above.
Let to buy is perhaps the easiest way for a borrower to get it wrong if they do not use an experienced broker.

Caz3121

kaminarikaminari said:

@K_S Thanks! Some time back I was able to get a DIP of 250K. Hence looking at Let to Buy.

do you expect that to be a higher amount now? income increased? If not the numbers may not stack up
equity release from Let to Buy, assuming 75% mortgage on £400k value = £185k plus £250k = £435k...depending on when you would plan to do this the stamp duty could take a large whack of your savings