Is Now the Time to Let to Buy?

With house prices and demand for rented homes continuing to rise, is now the time to let to buy? Consultant Mortgage Broker, Emma Green, explains the process and why now is the opportune time to consider this method of buy to let property investment.

In all the uncertainty over the last 20 months, two things are certain. Firstly, property is worth considerably more than it was 18 months ago. Secondly, we have all become intimately aware of what we love about our homes and, more frustratingly, what we don’t. This leads us to two questions: how can you use the added equity in your home, and could you find a home that better suits your needs while retaining your current property?

What is let to buy?

For all intents and purposes, let to buy is the lesser-known brother of buy to let. Rather than intentionally purchasing a property for the purpose of letting it out as with a traditional BTL, let to buy allows you to rent out your existing property and buy a new home for yourself.

Let to buy mortgages are a form of buy to let mortgage offered by BTL lenders. Rather than a standalone product type, let to buy is usually included in the criteria of a buy to let mortgage, so it’s best to speak to a specialist mortgage broker to guide you to the suitable lenders.

Is now the right time for let to buy?

As mentioned, many homeowners will have an increased amount of equity following the enormous rise in house prices over the last 18 months. Consequently, it might be possible to use that equity as part of a deposit for a new home and to form a 25% deposit left in the property to satisfy the minimum requirements for a buy to let mortgage.

For example

Purchasing a £300,000 BTL property requires a 25% deposit of £75,000. The remaining £225,000 is covered by a mortgage.

If your existing home is worth £300,000, and you only have £150,000 outstanding on the mortgage, you can split that £150,000 of equity between the deposit for the buy to let mortgage and a new home. 

We’ve all spent more time at home over the last two years, and priorities have changed. Many need space to work from home, either part or full time, and having access to green spaces is more important than ever.

Is let to buy suitable for me?

If you want to become a landlord or purchase another investment property while buying a new home, let to buy is a fantastic route to take. By retaining your old property and purchasing a new one, you’ll benefit from double the capital increases in those assets, as well as receiving an additional income in the form of rent.

Of course, there are things to consider before leaping into this process. There are tax implications, which you need to speak to a professional tax adviser about first. This includes Stamp Duty Land Tax (SDLT) and how the additional income could impact your personal tax position. Furthermore, if you’re a first-time landlord, you’ll need to research the professional responsibilities and regulations required.

If you’re interested in let to buy and would like to know more, including the kind of rates available to you, then get in touch with me, Emma Green on 01732 471670 or email me at emmag@mortgagesforbusiness.co.uk, and I will be happy to help.

2nd November 2021