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Home » Services » Mortgage Services » Let to Buy Mortgages » Let to Buy Mortgage FAQs

Let to Buy Mortgage FAQs

Ciarán Power

Last Updated: February 2nd, 2024 at 6:41 pm

Table Of Contents

Introduction

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.

The Basics

What is a Let to Buy Mortgage?

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.

Who can apply for a Let to Buy Mortgage?

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.

How does the Let to Buy process work?

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.

Can I switch from a Let to Buy to a standard mortgage later?

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.

Other FAQs

What are the tax implications of a Let to Buy Mortgage?

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.

How do I determine the rental value of my property?

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.

What happens if I can’t find tenants for my property?

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.

Are there specific legal requirements I need to meet as a landlord?

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.

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