What’s a Let to Buy mortgage?

Let to Buy mortgages are one way to earn rental income from property. You rent your current home out to tenants, and buy a new home to live in. You will then have two mortgages – one for each of the properties.

A Let to Buy could suit you if you're finding it hard to sell your current home. It’s also a way to boost your finances, downsize, or hold onto a house you love.

In this article we’ll look at why it’s a mortgage option for over 50s – and if it might work for you. Don't forget a mortgage is a loan secured against your home. You may lose the property if you don't repay each month

How does a Let to Buy work?

There are a couple of steps to taking out a Let to Buy mortgage.

1. Switch your current mortgage to a Let to Buy deal. This allows you to rent out the home you've been living in. You can use the rental income to cover your monthly mortgages costs.

2. Take out a residential mortgage for your new home. If you freed up some equity with your Let to Buy mortgage, you could put it towards the residential mortgage. The rental income from your original home could cover your new home’s monthly mortgage costs.

Need more help? Saga Mortgages is here to solve your Let to Buy needs. We work with award-winning brokers Tembo to bring you expert advice and the best deals from the entire market. See what options could be available to you by creating your free plan

What are the benefits of Let to Buys?

All mortgages come with certain benefits and risks. Here are some of the reasons a Let to Buy mortgage can work for over 50s.

You could make more profit

As the owner of two properties, you have even more of an investment opportunity. You could benefit from any rise in value to both your current and old home. But you should also bear in mind that the value of one or both homes could fall.

You can move in a tough market

When the property market is volatile, it can take longer to sell your home. A Let to Buy allows you to move to a new home without waiting for things to improve.

You get a regular income

The income from your rental property should cover its monthly mortgage costs. But if you have a surplus each month, you can spend it how you like. It could go towards your second mortgage costs or boost your monthly budget.

When you become a landlord, you might want to get landlord insurance.

What are the risks of Let to Buys?

As well as all the benefits of Let to Buys, there are also risks to weigh up. If you want to discuss them with an expert, Saga Mortgages is a great place to start. You can talk to the friendly team seven days a week on 0330 018 3071. Lines are open Mon-Thu 9am-8pm, Fri 9am-5:30pm, Sat-Sun 10am-3pm.

Here are some of the risks that can come with a Let to Buy mortgage.

You need to pay for two mortgages

People tend to use their rental income to cover their Let to Buy monthly costs. But if the rent doesn’t cover this, you’ll need enough income to cover the shortfall. On top of this, there’s the cost of your new standard mortgage payments too.

When it comes to affordability checks, you will need to prove you can afford all mortgage costs.

There are extra tax costs

You must pay a Stamp Duty surcharge when you purchase a second property. It’s an extra 3% on top of the normal Stamp Duty cost. But if you free up some equity when you remortgage your original home, you could use this to cover the extra cost.

You might not get the best rates

Let to Buy mortgage rates tend to be higher than standard mortgage rates. This is because lenders see greater risk in you having two mortgages. And with higher rates comes higher monthly repayment costs.