Last Updated: February 2nd, 2024 at 6:41 pm
Navigating a Let to Buy mortgage often raises specific questions, especially for those new to this type of property investment. Here, we address a range of commonly asked questions to help you understand Let to Buy mortgages and the associated responsibilities of becoming a landlord.
A Let to Buy Mortgage allows you to rent out your current home and purchase a new property to live in. It involves taking out a Buy to Let mortgage on your existing home and a standard residential mortgage on your new home.
Homeowners who want to move to a new property but keep their current home to rent out are eligible. Applicants should have enough equity in their existing home and meet standard mortgage eligibility criteria, including creditworthiness and income stability.
The process involves remortgaging your current property with a Buy to Let mortgage, which then frees up equity to use as a deposit for a new residential mortgage. You become a landlord for your existing property while purchasing a new one to live in.
Yes, you can switch back to a standard mortgage if you decide to move back into your original property. However, this would require fulfilling the criteria for a residential mortgage at that time.
As a landlord, you’ll be liable to pay income tax on rental earnings from your let property. Additionally, when purchasing your new home, you may face higher Stamp Duty charges, as it could be considered a second home. It’s essential to consult with a tax advisor for a comprehensive understanding of your tax obligations. Your mortgage advisor can also shed some insight into what your obligations may be.
Researching the local rental market is crucial. Look at similar properties in your area to gauge market rates. Consider factors like property location, size, and condition. Sometimes, getting a professional valuation from a letting agent can provide a more accurate rental price.
Periods without tenants, known as ‘void periods’, pose a financial risk as you’ll need to cover the mortgage without rental income. Having a financial buffer to cover these periods is advisable. Effective marketing and competitive pricing can also help minimize void periods.
Yes, there are several legal requirements, including obtaining a gas safety certificate, ensuring electrical safety standards are met, and providing an Energy Performance Certificate (EPC). You’ll also need to protect your tenants’ deposits in a government-approved scheme and ensure your property meets all health and safety regulations.