Let to buy on ex-council house to raise deposit for new home

We were approached by a married couple in their late 30’s looking to remortgage their first home to raise funds for a deposit on their next home.

The couple had decided, that instead of selling their first home – an ex-local authority three-bed house – they would keep it and with the help of finance, turn it into a rental property. They had done lots of research and identified a need for rental property in their area.

This concept is known as ‘let to buy’. Some buy to let lenders exclude this type of transaction from their lending policy because they are worried that the borrower may simply be trying to refinance their existing home rather than move to a new one.

We took the case to a lender which accepts let to buy applications as long as there is evidence that the borrowers are also simultaneously purchasing their next property.

The couple were able to prove that they were in the process of purchasing their next home and had applied for a residential mortgage in this regard.

On the advice of their accountant, they decided that the application would be made personally in their joint names.

Here are the details of the terms offered.

Property value: £450,000

Loan amount: £337,500

LTV: 75%

Rate: 2.89% 2 year fixed

Term: 25 years interest only

Borrower: Joint application in individual names

Lender arrangement fee: £1,995 

Mortgage payment: £812 pcm

Rental income: £2,000 pcm

Gross yield: 5.3% pa

Consultant: Nick Helm, 01732 471608

12th July 2016