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Let To Buy

More homeowners across the United Kingdom than ever before are exploring the option of letting out their current home to buy a second property. Let to Buy can be a profitable venture though should not be entered into without careful thought.

In some parts of the UK, Let to Buy activity is increasing by as much as 40% year-on-year. In order to understand the skyrocketing popularity of Let to Buy, you first need to consider its mechanics, potential benefits and limitations.

What is Let to Buy?

The basic principles of Let to Buy are relatively simple. Rather than selling your existing home to relocate to a new property, you retain ownership of your former home and let it out to tenants.

It is more or less the opposite of buy-to-let, wherein a second property is purchased to be let out to both cover the mortgage and generate a profit. With Let to Buy, it is your existing home that you intend to let out, while purchasing a new property to live in.

What is the Appeal of Let to Buy?

The appeal of Let to Buy lies in the prospect of being able to move house as planned, while at the same time generating a reliable stream of income from your current home. Particularly if selling your existing home is proving difficult, Let to Buy could represent a viable and accessible alternative.

Long-term, it is also possible to generate significantly more money by renting out a former home, rather than selling it outright.

Who is Let to Buy Good For?

Given that the private renting sector in the UK is booming, letting out a property and generating a profit can often be simpler than attempting to sell your home outright. If you’re able to let out your home at a price that comfortably covers the mortgage and generates additional revenues, you could be looking at an additional long-term income stream.

In addition, some cite the potential capital appreciation of their current home. If you believe that the market value of your home will potentially rise, you may not wish to sell it at its current price. Instead, it could be better to let it out at a profit for several years, before selling it in the future for much more.

How Does Let to Buy Work?

Applying for a Let to Buy mortgage follows most of the same key principles as a traditional mortgage application. Some lenders may offer specially designed Let to Buy mortgage products.

Primarily, you will be expected to prove that the rental income your home generates will cover the monthly mortgage payments by at least 125% however personal income and equity requirements vary significantly from one lender to the next.

Let to Buy investments are normally made possible by way of a specialist loan that replaces an existing residential mortgage with a mortgage that gives permission for your current residential property to be rented. The new mortgage may also be used to raise additional funding so that a deposit is generated for the onward purchase which will require a residential mortgage to be arranged to complete the purchase.  Mosthave a degree of flexibility to suit the requirements and personal circumstances of the applicant, assuming their financial position is strong enough to qualify for a loan.

Before applying for a Let to Buy mortgage, it is important to first consult with an independent broker. Along with helping you choose the most appropriate way forward; a qualified broker will ensure you get the best possible deal from a reputable Let to Buy specialist.

Always remember that the most dynamic deals on Let to Buy cannot always be found on the High Street. Discuss your requirements and your budget with an independent broker, who will conduct a whole-of-market comparison on your behalf.

Last Updated: Apr 7, 2020 @ 11:31 am
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