Let To Buy
Can't Sell Your Home? Try Let To Buy And Move Into Your New House
Let to buy offers opportunities for people who wish to buy a second home. Like buy to let, let to buy has its origins in the 1990s economic recession. While some people took the opportunity to buy property to rent out to the large numbers of people who had lost their homes at the end of the property boom, there were also large numbers of people who simply could not sell their homes. The property market was dead.
However, the property market bust did not stop people from needing to trade up to bigger homes or trade down to smaller homes. Whether they were starting families or suffering from empty nest syndrome, there were plenty of people who needed to sell their homes so they could move to other homes. This is how let to buy was born. Let to buy is similar to buy to let, though it may not require a special kind of mortgage. Let to buy was created because people who couldn't sell needed to rent out their old homes to cover the mortgage payments on their old homes.
While the current economic outlook is healthy, let to buy is being used again. Property remains stagnant in some areas and people still need to be able to move. It can also be used to break a property chain. Instead of having to wait till everyone in the chain has sold before buying a new property, homeowners can use let to buy to rent their homes and buy a new property, knowing that they will not be out of pocket.
Let to buy works like other rentals, in that people arrange to rent out their old home, either privately or through a letting agent. This is usually for an amount that will at least cover the mortgage payments on their old home, though in some cases, they may even make a profit. It is important to check that letting your home does not violate the terms of your mortgage agreement, so remember to discuss the letting idea with your existing mortgage lender.
Funding The Let To Buy Deposit
Covering the old mortgage is useful, but what about the deposit on the new property? If you don't have savings you have two options: either a buy to let loan on the old property or a let to buy loan. With a specialist let to buy loan, you may be able to borrow a significant amount of the value of the old property. This may give you enough money to fund the deposit and pay for a few extra treats as well.
In effect, your old home becomes a second home, which you can then decide to keep as an investment property and get into buy to let by the back door. There are a few risks with letting out your home. If the second home is let for more than three years, owners will be liable for capital gains tax on any increase in value during the letting period. However, this may seem a small price to pay for being able to move into your new home. If you need to move and can't sell your old property, it's certainly worth considering let to buy.
