As the market has improved one particular trend has come to light, that is that more and more homeowners are choosing to enter the landlord arena by using Let to Buy.
Let to Buy is often thought of as a product for those homeowners who cannot sell their home (as a result of the economic climate over the last few years) and so instead choose to keep it and rent it out. In short, it is thought of as a product used as a necessity, rather than through choice, for the so-called ‘reluctant or accidental landlords’.
However, as the buy-to-let market has improved a large number of homeowners are seeing the benefits of retaining a property and renting it out to tenants. With the sector picking up at great speed now is the time for would-be landlords to make the move into buy-to-let and start building a property portfolio.
If a property no longer suits the needs of the homeowner and they have accumulated enough savings to put a deposit down on a more suitable home, Let to Buy allows them to turn their current home into a rental property which should, in time, provide a valuable income and capital growth opportunities.
It’s an interesting product and one which most lenders allow – with the exception of Godiva.
One thing we, as brokers, must be careful of is that we’re not facilitating a back door residential. A small number of homeowners may look to switch to a Let to Buy product but continue living in the property, under the pretence of renting it out.
A number of lenders have tightened up on this sort of activity by requiring proof of onward purchase and, rightly so, as this is a sure fire way of ensuring the buyer is using Let to Buy correctly. Of course, this does not work in all instances – there are some genuine cases whereby the homeowner can’t sell the property and decides to revert to a Let to Buy product and move back home with their parents, for example.
As long as lenders and brokers are vigilant and thorough when assessing a customer, the risk of back-door residential should be avoided and Let to Buy will continue to increase in popularity.