Can't sell?...Let to buy

Published on 19th November 2009

Since the credit crunch has made selling your property so much more of a lottery , a trend that we are increasingly seeing emerge is where homeowners rent out the home they cannot sell in order to enable the next step up on the ladder.

If you are struggling to sell your home in the current market because you don't want to accept a low offer, but are still keen to move then let to buy could offer you a way out. We have many clients that need to move in order to take on a new Contract for instance but who are struggling to sell their home quickly because of the downturn in the property market and mortgage drought. For many of us, the idea of settling for a low offer on our much loved asset can be a galling prospect, especially when there are promising signs that the housing market may be on its way to full recovery in the future.

A let to buy approach can offer you an opportunity to hold on to your house until house prices pick up again and you can again achieve the offer you are looking for, whilst giving you the chance to purchase a new property. Whether you are moving in anticipation of a new contract, a new addition to the family or just fancy a change of location, there are a number of let to buy options available to Contractors.

Lenders join the let to buy bandwagon

Many of the major lenders with whom we have negotiated our specialist contract based underwriting are now recognising the demand for let to buy criteria and have risen to the challenge. Woolwich are offering rates as low as 1.98% on a 60% loan to value (LTV) mortgage, rising to 2.79% at 70% LTV and 5.49% at 80% LTV as long as you can get permission from your current lender to let the property.

Halifax is offering slightly different rates but all they require is a letter from a letting agent estimating the potential rental income on the property. Ideally this potential rent will cover your existing mortgage by 125% but there is no formal permission needed from your current lender. The current rates available at Halifax include 3.39% at 60% LTV, 3.75% at 75% LTV and 4.99% at 85%.

Although these rates are higher than some of the rates available elsewhere, they do offer you the chance to purchase your new property without having to sell your old home. This allows you to take advantage of the current low property prices when you purchase, without taking a hit on the value of your home when you sell You can then wait until prices recover before selling your existing property.

Our clients are already letting to buy

Case Study

We have helped many Contractors to move into their new homes by applying these principles. A recent client didn't want to sell her current house at the current market lows but wanted to take advantage of the suppressed prices to purchase a new property. By remortgaging her current property on to a buy to let, which she then plans to rent out, she released money for the deposit on her new property. The new lender was then able to ignore the buy to let mortgage as it's deemed to be self funding and apply the full income multiplier to her contract based income, therefore maximising her borrowing potential.

Another client we helped didn't need to release funds from their current property to fund the deposit for the new place. In this case, the client simply needed a letter from an ARLA approved letting agent estimating the potential rental income for the property. The new lender therefore ignored the current residential mortgage as it is again deemed to be self funding.

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