Buy to Let & Let to Buy – what’s the difference?
What is a buy to let?
A buy to let property (BTL) is simply a property that’s been purchased as an investment, with the intention of letting / renting the property out – this can be a good way to earn some passive income on a monthly basis, and capital appreciation on a long-term basis.
A good BTL investment will mean that the difference between the rent coming in and the costs associated (including mortgage payments, letting agent fees & insurance) leaves you with a monthly surplus. If the value of the property goes up over the years, you will also benefit from the increased equity in the property – this is capital appreciation.
There are pros & cons of buy to let investing which should be discussed with an independent mortgage adviser and a tax specialist to understand the risks and potential benefits.
What is a let to buy?
A Let to Buy is a property that was initially purchased as your home but later converted into a buy to let property along with an onward residential purchase.
The property that was once your residential home would be re-mortgaged onto a buy to let product, with the intention to let out to tenants. In most cases, you would include additional borrowing with the re-mortgage which would act as the deposit for your onwards residential purchase or cover the full costs of the purchase if there is enough equity in the first property.
Completing a let to buy can be a great way to move home whilst retaining an investment and improving your quality of life with an extra income.
Not all mortgage providers will offer lending for this type of transaction and criteria varies between provider, with some having restrictions and rules in place stipulating that both mortgages are arranged through the same provider, so it’s important to speak to and independent mortgage broker to see if you might be eligible and to explore the costs associated with it.
Sam Mason – 21st July 2022