Moving on without selling up
What to do if you need a let to buy
We all know how complicated life can be and unfortunately its inevitable twists and turns can wreak havoc with your mortgage plans. That’s why some borrowers may become ‘accidental landlords’ and end up needing to do a ‘let to buy’. This is where you have no intention of going into the buy-to-let business as a property investor, but your circumstances change and force your hand.
You might take out a home loan believing you know exactly where you want to live for the next ten years and then something unexpected happens which means you need to relocate or downsize. There are many reasons why you might find yourself in such a position - perhaps a new job, a transfer to a new post in a different region or overseas, a relationship break-up or redundancy.
Sometimes it may make more sense to keep your existing property and let it out, while you look to rent or buy elsewhere. This might be a good option if your relocation is only temporary; perhaps you want to get to know a new area before putting down roots, say if you are downsizing in retirement; or maybe you want to move within the catchment area of a good school for your children without staying there indefinitely.
The wider economic environment may also dictate this course of action. If the property market is going through a ‘soft’ spell, where there is a slowdown in the volume of sales, you might feel you are likely to get a better price for your home when more buyers return to the market. This is particularly pertinent at present, because some housing pundits have forecast a decline in the number of property transactions as buyers postpone decisions until the Brexit picture is clear.
Checklist - What to do if you need a let-to-buy:
- Firstly, speak to your existing lender. Most banks and building societies will try to be accommodating to a request for ‘consent to let’ so long as you have never missed any repayments and you are not asking to increase the size of your loan. Normally, you need to have been living in the property yourself for at least six months to qualify, although NatWest may allow consent to let straight away.
- Some lenders may add a supplement to your mortgage rate or charge a one-off admin fee for consent to let.
- Make sure you notify your buildings insurer that you are leasing out the property or you will not be covered. If you are in a leasehold property, you must also contact the freeholder or the managing agent.
- A lender will not grant consent to let indefinitely. Normally it is just an interim solution for a year or so or until your current deal comes to an end. At this point you are likely to be asked to switch to a buy-to-let deal if you are still renting out the property.
- When you reach the end of your current mortgage deal you should speak to an independent broker to find out whether to stick with your existing lender or if there are more competitive deals in the market.
You may struggle to get consent to let if:
- You are moving overseas and your bank does not lend to expats.
- You do not own much equity in your property (if you borrowed at a high loan-to-value of 85 per cent or above)
- You need to borrow more funds as well as leasing the property.