I want to move but I can't sell my house! Can I get a let to buy mortgage? - Simmonds Mortgage Services

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I want to move but I can’t sell my house! Can I get a let to buy mortgage?

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    There are many reasons why you might want to move to a new home. Perhaps you want to downsize or you’ve always wanted to live by the coast. Maybe you are moving to be closer to family or friends. You might need to relocate for a new job. Whatever the reason for moving, it can be frustrating if you find yourself unable to sell your current house.

    But there’s one type of mortgage which could be the answer to your problems – the let-to-buy mortgage.

    What is a let-to-buy mortgage?

    You’ve probably heard of a buy-to-let mortgage, which is the type of mortgages that people take if they are investing in a property with the intention of renting it out and getting a monthly income from it that will cover the mortgage payment.

    This is a common product and is often also called a BTL mortgage. However, a let-to-buy (LTB) mortgage is essential a buy-to-let mortgage taken out on your existing residential property with the intention of renting it out.

    If you want to move but you’re unable to find a buyer, you could consider taking a let-to-buy mortgage. If you have equity in your current property, this could release a deposit for the new property. Some lenders offer special LTB rates while others simply view it as the same as a BTL mortgage.

    Let’s look at some figures to clarify how this works.

    (The figures are simplified and don’t include the effect of taxation purely for illustrative purposes)

    You bought your existing property 10 years ago for £150,000 using a repayment mortgage with a 10% deposit. You’ve paid off some of the capital so your loan balance stands at £85,000, and the property now has an estimated value of £250,000.

    You have found the house of your dreams (property B), which is on the market for £330,000, and you can access a residential mortgage for up to 85% of the value. You also want to include moving fees and stamp duty for property B.

    A let-to-buy mortgage could cover the existing £85,000 plus your deposit of £45,000 and other fees of £10,000. This would give a mortgage on property A of £140,000, and the repayments would be covered by rental income.

    You would also take out a new residential mortgage on property B of £285,000 (£330,000 purchase price less £45,000 deposit), which you would need to cover from your income.

    What circumstances might be appropriate for a let-to-buy?

    As mentioned, if you want to move, but you are struggling to find a buyer at the right price, you might consider this.

    Some other reasons include:

    • You and your partner both already have a property, and you want to buy one together
    • You are moving away for an extended period of time but want to keep your existing property to live in in the future
    • You need to move quickly to a new location and can’t sell the property fast enough
    • You want to keep your existing property to create a portfolio of assets, but you are also keen to move to a new property

    Some lenders allow you to do a let-to-buy, putting a BTL loan on a residential property without you making a new purchase. This may be possible if you want to move in with family or to a rented property, but these products are uncommon.

    What affordability checks are done for let-to-buy mortgages?

    As let-to-buy mortgages will be serviced by renting the existing property out, lenders will be checking on the market rate to see what monthly income is achievable. Most lenders will require the rental income to be at least 125-145% of the monthly mortgage payment to pass their affordability check. Don’t forget that you will also need to factor in an additional stamp duty surcharge of 3% for purchasing a second property.

    What are the general lending criteria?

    While lending criteria varies from lender to lender, often there is a maximum LTV (loan to value) of 75%. Some lenders will offer mortgages for older borrowers, even up to age 80 and beyond, as longer as the borrower meets the affordability criteria. In addition, you’ll usually need to have a good credit score, but there are a few deals around for let to buy mortgage products for those with bad credit ratings. If you are in this situation, it’s worth having a chat with a mortgage broker who can help you find the right product.

    Can I get a let to buy mortgage from any lender?

    Your existing lender may not be able to facilitate this type of mortgage so it’s a good idea to use a reputable independent mortgage broker who can search the whole of the market for the best deal for your circumstances.

    Get your house move off to a great start

    If you want to move home but selling is proving a challenge, contact Simmonds Mortgage Services to find out about let-to-buy options. Call 01184 693037 or email info@simmondsmortgage.co.uk to find out about products that could suit your circumstances.

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    Andrew Simmonds

    Andrew Simmonds is the managing director at Simmonds Mortgage Services. He's been providing mortgage advice to home owners for many years.

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