If you understand how a let to buy mortgage will help you buy a new home, it could make a huge difference to you. It may even open up opportunities you might never have even considered! In fact this blog might even end up making you thousands of pounds! Read Fon to find out more!
Different ways to structure a mortgage to help with your move:
Most people are completely unaware of what options they have open to them when they are looking to move home and of course, there are plenty of reasons why you might be looking to move.
But don’t forget there are also different ways you can do it. Here are just a few:
- Sell your house and get the best moving home mortgage possible on the new property. This might mean looking at a different lender to your existing one (if you already have one).
- If you are a home mover you might be able to move your mortgage to a new property. This is known as porting. However be warned your existing lender might not let you, or may have restrictions of what you can do. You can click here to download a guide about porting here.
- Port your mortgage and borrow extra from your existing lender. If you are tied into a deal (such as a fixed rate) you might have penalties to change mortgage lender if you are looking to move house. An option could be to port and borrow any extra you need from your existing lender.
- Finally the let to buy mortgage solution; keep your existing home and instead of selling it like most people do, why not keep it and rent it? You might then need to raise a deposit for your new purchase, but this can be done by getting a Let to Buy mortgage.
How a let to buy mortgage can really help you move home:
A let to buy mortgage is a great solution if you are keen to hold onto your existing assets but still want to move home.
A let to buy mortgage enables you to release enough equity to use as a deposit for your onward purchase, but at the same time enabling you to turn your once home, into a buy to let.
Benefits of a let to buy mortgage are:
- Avoid the delays of having to sell your home.
- You are able to move much quicker on your new purchase as you are not stuck in a chain.
- You are able to keep your property and turn it into an investment.
Let to buy lending criteria:
Lending rules vary from lender to lender and it can be a minefield, after all how are you expected to know every lenders rules of what is okay and what is not? How then do you even begin to start looking for the best mortgage deal? Its a complex process that’s for sure!
To give you an idea about let to buy criteria, one of the most important considerations is whether you will need a let to buy mortgage and a new mortgage on the new property you are hoping to buy? If you do, then very close attention to detail is required because there is now an added layer of complexity.
In effect you are having two transactions in order to achieve one goal (buying the new house). You can of course have more transactions to achieve one goal as you may also be raising finance on other assets too! So whenever there are multiple transactions all designed for one goal, this inevitably brings more complexity to the fore. Click To Tweet What I mean by complexity, is the lender for the new mortgage on your new home, will want to know all the details of the let to buy mortgage (plus any others) and it will not only have to pass the let to buy lender’s criteria, but also the new residential lender’s criteria too, as both transactions are interlinked.
If there are properties in the background, particularly if they are being used to raise deposits, then the lenders will have specific criteria around this, which is basically assessing whether a property is (what is called in the industry) self financing. In other words, the rent will cover the mortgage over and above a certain threshold.
As an independent mortgage broker I know how difficult it is for us to deal with the banks on our clients behalf. I was going to say I can’t imagine what it would be like for ‘Joe public’ trying to deal with the banks direct, but in fact I do, because I have lots of clients coming to us, after they have had difficulty with their own banks!
One positive piece of advice if that’s okay to share with you is; just because your bank has said ‘no’, does not mean other banks will do the same. So if you are looking to move home and your bank has said ‘no’, don’t think that is the end. Like I said every bank has different rules and lending criteria and fortunately as we are independent mortgage brokers we will be able to give you a sense of whether something is possible or not quite quickly.
Let to buy mortgage top tips:
There are a couple of things that can help get you prepared for getting a let to buy mortgage and most of these things are obvious but they will definitely help:
- Make sure your name is on the electoral register
- Make sure you have all your payslips some where safe
- Make sure you can lay your hands on your latest P60
- Make sure you have at least 3 months bank statements (with name and address on it!). You’d be surprised how many on line bank statements we get with no name and address to match the person. They could be anyone’s!
- If you are self employed or a Ltd company director, make sure your accounts are up to date.
- For self employed and Ltd company directors, make sure you have your last 3 years accounts to hand and the latest 3 years SA302’s (just ask if you aren’t sure what SA302’s are but they are a little bit like a P60 for the employed).
- For self employed and Ltd company directors, make sure your accounts are no older than 18 months. Otherwise you’ll need to get your latest year accounts done.
- One last tip (actually two) for self employed people; plan your accounts early with what your plans for the year are likely to be, and don’t leave your accounts until the last minute. Planning will only help you.
When it comes to a let to buy mortgage – don’t Guess – find out the facts!
All the above points might be fine for you and you might well be reading this blog wondering if your personal circumstances will be okay or not?
The honest answer is without speaking to an independent mortgage broker, you'll never know for sure. Click To TweetAfter all its not possible for you to speak to every bank in the UK. Even if you spoke to one bank, you are still only getting their perspective. Like I said before don’t assume anything, its always best to ask.
We are always happy to have a chat with someone and let them know our thoughts. If indeed you can’t do something right now, we will tell you, but we will also give you some guidance to what steps you need to take moving forward.
How does a lender assess a let to buy mortgage application?
Just to share with you when we are assessing whether someone can do something we assess you in just the same way a bank does. The high level areas a lender will look at are:
- Affordability – is your income enough? Will the rent be sufficient?
- Credit Score – do you have a clean credit score or are there any issues?
- Your current levels of debt.
- Your personal circumstances.
- What your planning to do and does it make sense?
Each one of these points can go into a lot of detail depending on the individual and there may be multiple areas of consideration to be taken into account. For example an employed teacher with no debt and wanting to move house may seem straight forward. That is until you dig deeper. That person may have a property in the background they are hoping to rent, the deposit could be coming from a trust, the employed position has been for less than 6 months, there is a probationary period, the property the person is buying is a new build from a small developer and so does not have the main new build guarantee but something else!
As you hopefully can see, a simple scenario can become complicated with multiple levels of complexity.
The advantages of using an independent mortgage broker:
Just like your story everyone has there own unique circumstances. The key is to work with someone you feel comfortable with and have confidence in and get the best advice possible. There is no point in being anything other than honest and to let you know getting a mortgage is not always easy.
However you can help yourself along the journey and that is to get yourself organised. Collect the paperwork, understand your options and get a clear plan.
If you have a question contact us, we would love to help you out 🙂