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House stuck on the market? Why not Let-to-Buy
With the slow down in the housing market many sellers are finding it difficult to get viewings, let alone find a buyer ready to purchase. But with demand for rental property increasing, now could be a good time to consider a Let-to-Buy mortgage.
Under a Let-to-Buy mortgage, rather than sell your property you can let it out and leverage its capital value and rental income to boost your borrowing potential for a new property.
Tony Rice, of specialist mortgage brokers TMP Mortgage Zone, said: "Let-to-Buy works when home owners have significant equity in their current property and is a good tool for being in a position to purchase a new house in a stagnant market. Reports show that demand for rental property is increasing and rents are going up."
There are a number of points to take into consideration before taking a Let-to-Buy mortgage:
1. Check with a local lettings agent that your existing property is 'lettable'.
2. Check that when you remortgage your old property to free up equity for a deposit on a new one, that the likely rent will cover the new mortgage (including void periods) and that the mortgage on the new property remains affordable.
3. Consider using a reputable local agent to find and manage tenants. The fee may be between 10 and 15 per cent, but the cost is tax deductable and some agencies provide a rent guarantee - so you get your money even if the tenant defaults.
4. Make sure your old home is in good decorative order - both inside and out - and has modern equipment.
5. If you let your old home out for more than three years it becomes elgibile for Capital Gains Tax when you come to sell. Ask an accountant to advise you on how to minimise your Capital Gains Tax liability.
[ 30-06-2008 ]
