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04th October 2011

Can't Sell then Let!

Let to buy is an even newer phenomenonthan buy to let and one which many people are not even aware of.

This type of scheme allows you to buy a new home and let your old one. There still aren't a huge number of lenders offering let to buy schemes, so you may have to hunt around to find one.

As long as the rental income on your existing property will pay your old mortgage, lenders who offer this type of loan will usually offer you a mortgage for the new property based on the normal income multiples, even though you already have an existing property. This means that you end up with two mortgages at normal owner-occupier rates, therefore avoiding the slightly more expensive buy-to-let mortgages.

You will normally need only 5 - 10 percent as a down payment under a let-to-buy scheme. This is considerably less than the 20 percent that is normally required with a buy-to-let mortgage and can be in itself a good reason to go for this type of scheme.

In some areas of the country, it may be extremely difficult for some budding landlords to get a foothold in the property market, for reasons such as the erosion of rental yields by high property prices. But if the property you own has been yours for some time, mortgage payments may be significantly lower than they would be on a similar property bought now. This may mean that your existing home offers the potential for a much better rental yield than would a newly bought property.

If your circumstances have changed, for instance your kids have moved away leaving you in need of a smaller more manageable property for yourself, then it can be a good idea to move into a new property yourself and let your existing one out.

Another fairly common reason for this sort of scheme is that some people want to move away from their existing area for a period of time, but not give up the property. It may be a home that has been in the family for a long time, or you may have a particular affinity for an area. You no longer want to live in the property, but nor do you want to lose it for good.

In such circumstances let to buy can be a good option. You get the benefit of retaining your asset, whilst someone else pays the mortgage for you, as well as having money left over.

Contact Kevin Seager today on 01179 352 148 and arrange for our Independent Financial Advisor to visit and discuss your options.