house

Let To Buy

What exactly does the phrase “let to buy” mean? In basic terms, you’ll be letting out your existing home in order to buy another to live in. It is the opposite to the more common phrase “buy to let.” It is a useful option if your home has dropped in value or you have difficulty in selling and you want to move. It’s viable in today’s property market because mortgage interest rates are low and there is a high demand for renting in many areas. Uncertainty about pensions has tempted more people to consider investing in property as an investment for their retirement.

How does it work?

Providing you have sufficient equity in your property, you can release cash by remortgaging, probably with an interest only loan. The released cash is used for the deposit on your new home. The rental income should cover the cost of the mortgage, you should allow for short rent free periods between lets and for letting agents fees usually between 10-15% of the rental price. Other costs to consider are contracts and maintenance. Rental periods are normally for 12 months but opt out clauses after 6 months for example can be agreed.

Other points

Other than for short term lets, a buy to let mortgage will probably be required, these mortgage rates tend to have slightly higher rates.

To achieve market rentals, the property should be well decorated and have modern equipment.

Rental income is taxable and Capital Gains tax is payable although there are some allowance. Tax allowances for expenses and mortgage interest have recently been changed.

Before embarking on let to buy be sure to seek professional advice.

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