What's let to buy?
Let to buy is more popular than ever. Homeowners struggling to sell their property are increasingly turning to let to buy to enable them to move. The ranks of accidental landlords have swelled in recent years but more people are turning to let to buy as the ideal solution if their property isn't attracting interest. Or if they need to move quickly to secure another property.
So let to buy can appeal to different people but what exactly is it and is it something you should consider?
Let to buy explained
The typical path to buying a new home is to sell the current home first. But let to buy allows the property owner to keep their current home and rent it out to a tenant while buying a new property for themselves. The income from the tenant pays the existing mortgage. The homeowner's wages pay for the new mortgage. The existing property could be also be remortgaged to release equity to pay the deposit on the new home.
Why would I want to let to buy?
It seems like a convoluted process. But if you are struggling to sell your home let to buy can be a great way to move things along. Or it may be that you need to move but the time isn't right to sell your property. House prices may be stagnant or the economy tanking.
In either of those cases, it makes far more sense to hang onto your home until the market recovers and you can get a better price. There are also other benefits to let to buy.
Benefits of let to buy
- If the selling market isn't strong you can rent your home out instead of selling at a loss.
- The private rental sector is booming. Finding tenants shouldn't be an issue.
- Such is the vibrancy of the private rental sector you should be able to rent your home out and make a profit on your monthly mortgage payments.
- If house prices are rising you can hold onto your property as an investment which will continue to grow.
- If you have to relocate for work let to buy means you don't need to sell at any price.
- Property chains become smaller as you aren't waiting on a buyer or a seller to complete their own deal.
- You can choose the optimum time to sell your current home rather than having to sell before you buy your new home.
What about the disadvantages?
Let to buy mortgages can be more expensive than normal residential mortgages. You will also need a higher deposit. Typically you will need a 25% deposit which probably means you will need to have plenty of equity in your current home. There will also be additional stamp duty to pay. There is also the stress and anxiety which can come from having two mortgages.
Where can I get a let to buy a mortgage?
More lenders are now providing let to buy mortgages. However, they are a specialist product and it would be wise to seek out independent advice. A mortgage broker with access to multiple lenders will be able to find you the best deal.
Most lenders will want to see a large amount of equity in the current property. They will also expect to see a potential return of at least 125% on the rental income to mortgage repayment. Finally, your current home must not be for sale. After all, this defeats the purpose of let to buy.
Needless to say, you should take expert advice before considering let to buy and taking your place among the ranks of private landlords.
If you do take out a let to buy mortgage find tenants easily by listing your property with MakeUrMove the leading online letting agent.