A let to buy mortgage typically means you rent out your current residential property so that you can release equity to buy a new home (or in some cases rent/live with family). This could be for several reasons:
- Your property isn’t selling
- You plan to move back into the property
- You want to retain it as an investment
- The value of the property has dropped
The process is a little complicated as you’re applying for two mortgages. You’ll be converting your current residential mortgage to a buy to let mortgage and applying for a new residential mortgage.
As there are two different applications in this scenario you will be assessed in two different ways by your lender/s.
When applying for the buy to let mortgage you will need to consider the following:
- You will be capped on the LTV of your current property to around 75% of its value.
- You will be assessed on the potential rental income and lenders will be looking for around 145% of the monthly payments.
- Your income will be assessed for periods when you have no rental income.
- Having a deposit of at least 25% (which can come from equity release).
With regards to the residential mortgage, applications will be assessed against the usual factors such as income and credit score. However, when assessing your application lenders will also take into consideration the following:
- How much you are borrowing on your buy to let mortgage.
- The potential rental income on your current property (to assess if you can afford both mortgage payments).
It’s important that the process is managed. Speaking to a mortgage advisor with experience in this area will put you in the best possible position, they’ll be able to guide you on your options and find the best deals based on your circumstances.