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Saturday 21 December 2024
Saturday 21 December 2024
Saturday 21 December 2024
Saturday 21 December 2024
Let to Buy is a fantastic way to retain a property as a future investment. When interest rates were low, this type of transaction was much more common. However, with higher interest rates and the increase in additional rate stamp duty from 3% to 5% (as of October 2024), Let to Buy has become less frequent. Despite these challenges, it’s still a viable option for the right circumstances, and we are here to help you navigate it.
How Let to Buy Works
A Let to Buy typically involves remortgaging your existing property onto a Buy to Let mortgage. The amount you can borrow against your property is based on the rental income you’d receive once it’s let out. This figure is usually established by a survey, but it’s a good idea to get an estimate from an ARLA (Association of Residential Letting Agents) registered agent, as this is often a requirement for most lenders to ignore the running costs of your current property when assessing affordability on your onward purchase.
Challenges in Today’s Market
Higher Interest Rates
The challenge many people face now is that higher interest rates mean tighter affordability tolerances on the rental calculations lenders use. Historically, lower rates made it more straightforward to borrow up to 75% loan-to-value. These days, capital raising against your current residential property to release enough funds for an onward deposit, stamp duty, and associated costs has become trickier.
If you want to work out how much you could borrow against your property and what it might cost, give our team a call—we’re more than happy to guide you through it.
Stamp Duty Surcharge
When you move home and retain your current property, this also triggers the second-home stamp duty surcharge, which is now 5%. This additional cost is something to factor into your financial planning.
For the onward purchase, raising a mortgage is generally similar to a standard application, with the added consideration that you’ll need to show your current property’s future rental income will cover its mortgage payments.
Affordability Considerations
If the rental income comfortably covers the new Buy to Let mortgage payments, many lenders will ignore the running costs of the property. However, some lenders apply their own calculations, and if the rental income only just covers the new mortgage payment, you might find they’ll reduce the amount they’re willing to lend.
These calculations are straightforward and include provisions for such costs—we can help you work through them with ease.
Why Choose Let to Buy?
Let to Buy remains a great opportunity to turn your current home into an investment while moving into a new one. Despite the higher costs and tighter lending criteria, it can still offer significant long-term benefits, such as building a property portfolio or generating rental income.
If you’re considering this option, our team at Barrett Mortgages is here to provide clear advice and support tailored to your situation.
Written by Darren Barrett, Company Director
Let to Buy is a fantastic way to retain a property as a future investment. When interest rates were low, this type of transaction was much more common. However, with higher interest rates and the increase in additional rate stamp duty from 3% to 5% (as of October 2024), Let to Buy has become less frequent. Despite these challenges, it’s still a viable option for the right circumstances, and we are here to help you navigate it.
How Let to Buy Works
A Let to Buy typically involves remortgaging your existing property onto a Buy to Let mortgage. The amount you can borrow against your property is based on the rental income you’d receive once it’s let out. This figure is usually established by a survey, but it’s a good idea to get an estimate from an ARLA (Association of Residential Letting Agents) registered agent, as this is often a requirement for most lenders to ignore the running costs of your current property when assessing affordability on your onward purchase.
Challenges in Today’s Market
Higher Interest Rates
The challenge many people face now is that higher interest rates mean tighter affordability tolerances on the rental calculations lenders use. Historically, lower rates made it more straightforward to borrow up to 75% loan-to-value. These days, capital raising against your current residential property to release enough funds for an onward deposit, stamp duty, and associated costs has become trickier.
If you want to work out how much you could borrow against your property and what it might cost, give our team a call—we’re more than happy to guide you through it.
Stamp Duty Surcharge
When you move home and retain your current property, this also triggers the second-home stamp duty surcharge, which is now 5%. This additional cost is something to factor into your financial planning.
For the onward purchase, raising a mortgage is generally similar to a standard application, with the added consideration that you’ll need to show your current property’s future rental income will cover its mortgage payments.
Affordability Considerations
If the rental income comfortably covers the new Buy to Let mortgage payments, many lenders will ignore the running costs of the property. However, some lenders apply their own calculations, and if the rental income only just covers the new mortgage payment, you might find they’ll reduce the amount they’re willing to lend.
These calculations are straightforward and include provisions for such costs—we can help you work through them with ease.
Why Choose Let to Buy?
Let to Buy remains a great opportunity to turn your current home into an investment while moving into a new one. Despite the higher costs and tighter lending criteria, it can still offer significant long-term benefits, such as building a property portfolio or generating rental income.
If you’re considering this option, our team at Barrett Mortgages is here to provide clear advice and support tailored to your situation.
Written by Darren Barrett, Company Director
