Let to Buy: a step-by-step guide
The term ‘Let to buy’ refers to when someone lets out the property they currently live in, so that they can purchase a new residential property. There are a few reasons why you might want to do this, one of the most common being timescale, for example someone has found their dream home and can’t wait to sell their existing property or they simply can’t sell their property for the price they are looking for. Another common reason is that someone wants to keep hold of their existing property as they believe it is a sound long term investment and would prefer not to sell it. Of course, by changing the use of a property i.e. from residential (a property you live in) to buy to let (a property you let out), you’ll need to change your existing mortgage to a buy to let mortgage and also take out a new residential mortgage on your new home that you will live in.
It’s important to note that you cannot live in a property that has a buy to let mortgage against it and you can’t rent out a property that has a residential mortgage against it without the lender’s prior consent. The let to buy process is considerably more complex than the process for a standard residential or buy to let mortgage, but Which? Mortgage Advisers can offer you advice about a let to buy mortgage based on your personal circumstances. Call 0800 316 4071 to speak to one of our independent mortgage advisers about your let to buy mortgage, or find more general advice below in our step-by-step guide.
1. Get an idea of the value of your current property
The first step is to get an idea of how much your current property is worth and compare what it is worth and the mortgage amount you still owe. Look at similar properties in your area and their recent sale prices, it’s best to look at 3 to 5 properties that have similar characteristics to yours and compare prices. A local estate agent will also be able to give you an estimate and it’s best to ask at least 3 to get the best idea of your property’s market value.
2. Find out how much you could expect to make in rental income from your property
A letting agent will be able to give you an idea of what your property could rent for. It’s best to choose a letting agent who’s registered with ARLA (The Association of Residential Letting Agents). The amount you can rent your existing property out for has a large bearing on how much you can borrow, so it’s important to get an accurate a figure as possible.
3. Speak to your existing mortgage provider
It might be feasible for you to port your existing residential mortgage to your new residential property. Likewise, it might be feasible for your existing lender to grant you consent to let your existing property. Therefore, it makes sense to speak with your existing lender as well as seeking independent advice to ascertain the best course of action.
4. Speak to an independent mortgage adviser who can advise you on your options
Let to Buy transactions are much more complex than standard residential mortgages or buy to let mortgages and so we recommend that you take advice from an independent mortgage adviser, and make sure that they’ll manage the whole application process for your through to completion.
This is because applying for two mortgages at once, both a residential and buy to let mortgage, can be complex and the process needs to be managed as a whole to avoid hold ups. For example, it can be the case that neither lender wants to be the first to approve the mortgage and you can enter a kind of stalemate. The timing of completion on each mortgage is also key – you cannot complete on the buy to let mortgage while you still live in the property without the lender’s consent, so typically it would be necessary to complete each mortgage on the same day.
Which? Mortgage Advisers are completely independent and impartial and we can advise you on different lenders’ timescales and practices, and be there for you every step of the way up to completion. For personalised advice on how much you might be able to borrow and which lenders fit within the timescales you’re looking to work to, call and speak to one of our expert advisers today on 0800 316 4071.
5. Make sure you can afford the additional debt you would be taking on
Our expert advisers can give you personalised advice around affordability based on your circumstances. The kinds of things you need to think about is whether you could afford the payments on both mortgages if your rental property was empty for several months, or if interest rates rise and your repayments increase. It’s important to consider these possible eventualities upfront, and make sure you’re prepared for them.
6. Be aware of your responsibilities as a landlord
Becoming a landlord is not something to take on lightly and it’s important to do your research beforehand. We’ve developed a handy interactive guide to becoming a landlord which covers areas like the legal aspects to consider and advice on tricky areas like problem tenants. If you’re looking for more information on Buy to Let in general we’ve also got information on using a letting agent versus going it alone and a buy to let calculator designed to give you an idea of what you could potentially borrow.
7. Apply for each mortgage and track your progress
If you’ve done your research and are happy to go ahead the next step is to begin the application process for each mortgage. You may have already spoken to an independent adviser about your plans. Should you choose to use our fully advised Which? Mortgage Advisers service you’ll be assigned a dedicated Mortgage Adviser who will talk you through the steps above and give you personalised advice based on your circumstances, before managing the application process from start to finish for you – chasing up lenders and solicitors to help take away some of the stress and hassle of applying for 2 mortgages. Call to speak to one of our expert advisers today on 0800 316 4071.