If you get a new job that is quite a distance from your home, or you want to send your children to a school that's not close enough to home and don't want to sell your home, what options are available? Let to buy mortgages are one of them.
Let to buy mortgages allow you to rent out your home to tenants, and then take out an additional mortgage to allow you to buy a new property for residential purposes. If you don't want to sell your existing property, let to buy is a great way around it.
So How Do Let To Buy Mortgages Work? The Bank or Building Society will calculate how much it is possible for you to lend minus your current mortgage, as that should soon be covered by your future tenants rent.
Unfortunately, the deposit requirements are still the same as any other type of mortgage. At the time of writing, that would be the too high 25 percent down payment. Lenders are still being cautious in the wake of the Credit Crunch, so finding a lower deposit threshold in 2011 will be tough to impossible, depending on your pessimism.
What Interest Rates Can I Expect From a Let To Buy Mortgage? At the time of writing (March, 2011) the average interest rate on a let to buy was hovering around five percent. However that is not likely to last much longer, with most of the country expecting the Bank of England to begin rate rises as early as May from its current historic low of 0.5 percent.
Let To Buy Requirements Will Be... The lender would insist on your current home (the soon to be rental) being valued and surveyed, the same would go for the house you wish to purchase. For the rental, the potential monthly rent charges would have to be figured out, but the surveyors will also cover that. They are the only added requirements, the rest are the usual requirements in obtaining a mortgage, payslips, credit checks etc.
You will also be required to pay a down payment of at least 25% of the property value. If you have more money to put down, you should do so as you'll be reducing your payments over time and you'll also be more likely to get a better interest rate.
If you also have budding dreams of creating a little property empire and portfolio of your own, then let to buy can be a very good first option and step on the path to this road. With house prices set to fall this year for the first time in over a decade, the time to begin a portfolio isn't going to get any better than this.
Nothing is ever easy or without drawbacks, let to buy has a few of its own of course. The first being you would need the permission of you current mortgage lender to rent out the property, this will most likely lead to you having to change mortgage policy which in turn might lead to higher interest rates and higher mortgage payments depending on individual circumstances.
Be warned however that your existing property should be in good condition, as if the property is in a state of disrepair the existing lender may not allow you to take on a new mortgage because it may be anticipated that the property is not rent worthy, which would increase the risk.
Let to buy mortgages allow you to rent out your home to tenants, and then take out an additional mortgage to allow you to buy a new property for residential purposes. If you don't want to sell your existing property, let to buy is a great way around it.
So How Do Let To Buy Mortgages Work? The Bank or Building Society will calculate how much it is possible for you to lend minus your current mortgage, as that should soon be covered by your future tenants rent.
Unfortunately, the deposit requirements are still the same as any other type of mortgage. At the time of writing, that would be the too high 25 percent down payment. Lenders are still being cautious in the wake of the Credit Crunch, so finding a lower deposit threshold in 2011 will be tough to impossible, depending on your pessimism.
What Interest Rates Can I Expect From a Let To Buy Mortgage? At the time of writing (March, 2011) the average interest rate on a let to buy was hovering around five percent. However that is not likely to last much longer, with most of the country expecting the Bank of England to begin rate rises as early as May from its current historic low of 0.5 percent.
Let To Buy Requirements Will Be... The lender would insist on your current home (the soon to be rental) being valued and surveyed, the same would go for the house you wish to purchase. For the rental, the potential monthly rent charges would have to be figured out, but the surveyors will also cover that. They are the only added requirements, the rest are the usual requirements in obtaining a mortgage, payslips, credit checks etc.
You will also be required to pay a down payment of at least 25% of the property value. If you have more money to put down, you should do so as you'll be reducing your payments over time and you'll also be more likely to get a better interest rate.
If you also have budding dreams of creating a little property empire and portfolio of your own, then let to buy can be a very good first option and step on the path to this road. With house prices set to fall this year for the first time in over a decade, the time to begin a portfolio isn't going to get any better than this.
Nothing is ever easy or without drawbacks, let to buy has a few of its own of course. The first being you would need the permission of you current mortgage lender to rent out the property, this will most likely lead to you having to change mortgage policy which in turn might lead to higher interest rates and higher mortgage payments depending on individual circumstances.
Be warned however that your existing property should be in good condition, as if the property is in a state of disrepair the existing lender may not allow you to take on a new mortgage because it may be anticipated that the property is not rent worthy, which would increase the risk.
About the Author:
Howard writes for Just Commercial Mortgages the UK's No1 site for the latest commercial mortgage rates and commercial property finance news.
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