If you’re planning to move home, whether upsizing or downsizing, there are several options for dealing with your existing property. The choice you make will depend on your financial goals, mortgage terms, and long-term property investment plans. You may decide to sell your home to free up equity, rent it out to generate income, or retain it as a second residence. Each option comes with advantages and potential costs, making it essential to consider your mortgage lender’s requirements, tax implications, and affordability.
This guide explores the different routes available when moving home, helping you make an informed decision about your existing property.
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Selling Your Existing Property
Selling your home is the most straightforward option if you need funds to contribute to the deposit for your next property. Upon selling, your existing mortgage will be repaid, and any remaining proceeds will be available for your next purchase.
Key factors to consider when selling include associated costs. If you sell through an estate agent, you’ll need to cover agency fees, and solicitor fees will apply for handling the legal aspects of the sale. Additionally, if you plan to move directly into a new home, you must ensure that both transactions—your sale and your purchase—complete simultaneously to avoid complications.
Letting Your Property
Instead of selling, you may choose to let your property and earn rental income while benefiting from potential property value appreciation. However, becoming a landlord comes with financial and legal responsibilities. You’ll need to maintain the property, cover costs for repairs, and potentially pay letting agent fees if you hire an agent to manage the property.
One of the most critical aspects of letting your home is ensuring compliance with your mortgage provider’s policies. Letting a property without informing your lender is considered mortgage fraud. However, you may be able to obtain “Consent to Let,” which allows you to rent out your home while keeping your residential mortgage. Lenders typically approve this on a temporary basis, so it’s essential to check their terms.
Let-to-Buy: A Buy-to-Let Mortgage Option
An alternative to “Consent to Let” is switching your mortgage to a buy-to-let loan through a “Let-to-Buy” remortgage. This involves refinancing your current home onto a buy-to-let mortgage while securing a new residential mortgage for your next property.
Let-to-buy can be an attractive option if you have sufficient equity in your home, as it allows you to raise funds for a new property deposit. Additionally, switching from a capital repayment mortgage to an interest-only mortgage—common for buy-to-let properties—can improve cash flow and increase affordability. However, let-to-buy mortgages come with additional costs, including valuation fees, product fees, solicitor charges, and mortgage broker fees.
Keeping Your Property as a Second Residence
If you work away from home or need a second property for personal reasons, keeping your existing home as a second residence is another possibility. Most mortgage lenders will allow this, but it often comes with restrictions. Loan-to-value (LTV) limits may apply, affecting how much you can borrow.
Lenders are also cautious about borrowers holding two properties in close proximity, so the locations of your properties could impact approval. Most importantly, an affordability assessment will be required, considering both mortgage repayments and associated monthly costs. Managing two properties means demonstrating a stable income and financial capacity to cover dual mortgage commitments.
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Making the Right Decision for Your Property and Mortgage
Whether you sell, let, or retain your property as a second residence, your decision should align with your financial goals, mortgage eligibility, and investment strategy. Selling your home can free up equity for your next purchase, while letting your property can provide passive income and long-term capital growth. However, mortgage considerations, lender restrictions, and affordability assessments play a crucial role in determining the feasibility of each option.
Need Mortgage Advice for Moving Home?
Navigating mortgage options when moving home can be complex, especially when deciding what to do with your existing property. At Contractor Mortgage Solutions, we specialize in mortgage solutions tailored for contractors and self-employed professionals. Whether you need guidance on let-to-buy, buy-to-let remortgages, or second residence mortgages, our expert brokers can help you secure the right mortgage deal.
Get in touch with Contractor Mortgage Solutions today for specialist mortgage advice and ensure a smooth transition to your next home!