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?
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.
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.
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.
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.