The Rise of Let to Buy Mortgages: A Savvy Solution in Changing Housing Market Conditions
In recent times, there has been a noticeable increase in the number of enquiries from individuals seeking let-to-buy mortgages. This growing trend is driven by various factors and has emerged as a creative solution to navigate the shifting landscape of the housing market.
What is Let-to-Buy?
Let-to-buy is an approach that allows homeowners to retain their current property while also purchasing a new one. It works by remortgaging the existing primary residence, and if there's sufficient equity, pulling out funds to use as a deposit for the new property.
The mortgage for the retained property is often calculated based on rental income and subjected to stress tests, much like a buy to let mortgage. This approach can be structured as either a repayment or interest-only mortgage.
Why the Uptick in Let-to-Buy?
Several factors are contributing to the growing interest in let-to-buy mortgages:
Slower Housing Market:
With the housing market experiencing fluctuations, many individuals are opting for let-to-buy to secure their dream home without waiting for their current property to sell.
Future Planning:
Some clients choose let-to-buy as a means of retaining their property for future downsizing, location changes, or investment.
Couples Combining Resources:
Couples are increasingly coming together to purchase property, and both partners may wish to keep their former main residence. Let-to-buy facilitates this arrangement.
Income Generation:
Keeping the current property as a rental can provide an additional income stream, making it an appealing option for homeowners.
Benefits and Considerations
Let-to-buy mortgages offer a range of advantages, including a relatively quick decision-making process and the potential for another income stream. However, there are considerations to keep in mind, such as the additional stamp duty or land transaction tax on the new purchase and the complexity of managing two transactions simultaneously.
It often involves working with two sets of solicitors, one for the let-to-buy part and one for the onward purchase. Furthermore, it results in a higher overall indebtedness due to holding two mortgages.
"With market conditions changing over the past year, more clients are seeking to secure their onward purchase without delaying proceedings and risking missing out on their dream home. As such, creative solutions like let-to-buy are becoming more prominent, and luckily something we're well versed in." - Jonathan Southgate, Founder.
As the housing market continues to evolve, let-to-buy mortgages are proving to be a flexible and practical solution for those looking to make a smooth transition to their next property while maximizing the potential of their current one.