The Brighton couple had tried with 2 agents and did not feel they could get what they felt their property was worth in the current market, but they refused to go below what they felt was reasonable and preferred to wait things out. However, they needed to move to Manchester because their new jobs started in a few months.
The local estate agent suggested something contrary to the usual estate agent pattern and suggested they consider not selling the property and see if they can do a ‘let-to-buy’ to which the clients were unfamiliar of the term but open to hearing what it involved.
And that’s where Strive Mortgages came in to help the clients understand what a let to buy is, if it is possible, and if it’s worthwhile for them.
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The challenge
The couple were planning to sell their property in Brighton for around £530,000 and relocate to Manchester to purchase a similar property, but at a lower value due to the house prices in the area, which are around £400,000. Now, they want to explore the possibility of retaining their current property as a long-term buy-to-let investment while still purchasing a home for around £400,000 in Manchester.
The details
The Fullers estimate the current market value of their property to be around £500,000, with a monthly rental value of approximately £1,900. They currently have a Nationwide mortgage of £200,000 on a standard variable rate and have access to £25,000 that they were prepared to use for the purchase. Both of them are employed, earning a combined income of £80,000.
They are in their thirties, have no debt or children, and have found a property they like in Manchester for £400,000. They are keen to explore the possibility of buying the Manchester property without selling their current property.
Strive’s solution
After calculating the Fullers’ finances, we determined that the best solution for them to purchase the property at £400,000 was to put down a 15% deposit, which amounted to £60,000.
However, the clients only had £25,000 in savings, which was only enough to cover the moving costs. Therefore, we suggested releasing the £60,000 from their current home through a buy-to-let mortgage.
The clients then took out a £260,000 buy-to-let mortgage on their current home and a £340,000 mortgage on the new property, with the deposit being funded by their current home and covering the moving costs themselves.
- £500,000 current home
- £200,000 existing mortgage remortgages to BTL mortgage and increased to £260,000 to free up £60,000 deposit for the purchase.
- £25,000 savings used to cover moving costs and stamp duty
- £400,000 purchase
- £60,000 deposit from BTL remortgage
- £340,000 residential mortgage on the purchase
Although the Fullers now have £600,000 in mortgages, the buy-to-let mortgage is considered self-funding and is not factored into the calculations for the purchase mortgage. The rental income from their old home, which is £1,900 per month, covers the mortgage amount, making it a viable investment.
As a result, the Fullers were able to buy a property in Manchester without selling their current home, allowing them to move as chain-free buyers and secure a better purchase price.
This also enabled them to relocate in time for their new jobs. Now, they own two properties that they hope will increase in value over time and provide them with a nest egg for the future. Additionally, they have a foothold in Brighton in case they ever wish to return.
For more information on mortgages for let-to-buy, please contact a member of the Strive Team by emailing info@strivemortgages.co.uk or call us on 01273 002697.
