Nowadays there are a multitude of different mortgage products available, but understanding which product suits your situation best can be confusing and stressful.
Let-to-buy is just one product that can be confusing but equally very useful in the right scenarios. In this article, we explain what let-to-buy is and talk about the pros and cons of this type of mortgage product.
What is Let to Buy?
Put simply, a let-to-buy mortgage product allows you to keep your existing residential property whilst enabling you to use equity to purchase a new home. Your existing property will need to be rented out to tenants and the monthly income from this will be taken into account.
Pros and Cons of Let to Buy
There are benefits and drawbacks to most things in life and mortgage products are no different. Let-to-buy mortgages are popular with those who want to purchase a new home whilst keeping their current property, this might be because it is located in a popular area where rental income is high or where there is a good chance that the property’s value will rise in the future.
Let-to-buy mortgages are also popular with people who need to relocate for work and want to purchase a property in their new location whilst keeping their existing property as an investment.
Let-to-buy mortgages may also be used in scenarios where there are complicated chains or buyers have fallen through, this gives you the flexibility to free up a deposit to move-on whilst retaining your current property until the local market picks up and a new buyer is found.
Let-to-buy isn’t without its drawbacks, most notably new stamp duty land tax laws that came into effect on 1 April 2016 mean you’ll need to pay a minimum 3% surcharge on any additional dwelling you own. This will directly impact anyone taking out a let-to-buy mortgage. More information about new stamp duty surcharge, also known ‘Higher Rates on Additional Dwellings’ or HRAD, can be found via this link: https://www.gov.uk/stamp-duty-land-tax/residential-property-rates
Let to buy mortgages are similar to buy to let products and this means the deposit requirements are usually higher than a standard residential or remortgage. A larger deposit will mean less equity is available to be used to purchase your new residence.
If you are thinking of a let to buy mortgage or want to discuss other mortgage options that might be available to you, please contact our expert mortgage brokers on 020 3645 4322 or visit our website.