Let-to-Buy trend in the mortgage market
While the housing market remains sluggish, homeowners who wish to move but are struggling to sell their home are increasingly turning to Let-to-Buy mortgage products to enable them to rent out their current home and buy elsewhere. As rental prices continue to rise this is a very viable option and involves remortgaging the existing property onto a Buy-to-Let mortgage and taking out a new mortgage to move geographically or up the property ladder. As long as the rental income covers the Buy-to-Let mortgage payments lenders can be reasonably flexible, and if you have equity in your current home this can be released to help with your deposit.
Although the housing market is holding fairly steady at the moment, house sales can take a long time, with property website Rightmove.co.uk reporting that houses were on the market for an average of 105 days, based on sales completing in January 2012. This timeframe is just too long for many movers, who may require a much faster sale for relocation for employment or due to the demands of a growing family. The only way to enable a quick sale in many cases is to drop the asking price, but this is usually a last resort and will often take the value of their home into negative equity or delete any profit from the sale.
Timing is the key here; now is a great time to buy with prices in most regions (barring London and the South-West) still between 5-10% lower than their peak in 2008, but not necessarily an easy time to sell. Let-to-Buy is a great way to hang onto the investment you have already made in your home, enabling you to wait until prices rise whilst also benefiting from a rental income.
Let-to-Buy borrowing is on the increase, with some Buy-to-Let lenders now reporting that around 20% of current applications being received are from Let-to-Buy movers as opposed to professional landlords or investors. An independent mortgage broker will be able to source suitable mortgage products for anyone considering Let-to-Buy, and with not one but two mortgages to secure this advice and support is invaluable.