If you are planning on moving home, whether up or downscaling; you have a few options in relation to your existing property:
Selling your property
You may choose to sell your existing property which is particularly helpful if you require assistance raising the required funds for a deposit upon the new purchase. Upon the sale of the property, the existing mortgage will be repaid and the excess amount will be passed over to you as the seller. These funds can then be used to contribute to the deposit upon a new property purchase.
The important factors to consider when selling your home include the costs. For example, you will need to pay associated fees if you choose to market the property through an estate agent, as well as solicitor’s fees to tend to the legal aspects of the sale. If you wish to move straight from your existing home and into a new property, you will also need to ensure that the sale and purchase transactions complete simultaneously.
Let the property
As an alternative to selling, you may choose to retain your property and let the property out. The main advantages to this are the receiving of regular income from rental payments and “capital appreciation” which is when a property increases in value over time. However you must also consider the costs associated with the letting of your property. You may wish to let the property via an agent and you will need to constantly ensure that the property is maintained appropriately for your tenants.
The other major point of concern is the stance of your mortgage provider. It is mortgage fraud to let the property without notifying the Lender accordingly; however they are able to grant you “Consent to let” which will allow you to let the property whilst your mortgage remains on a residential basis.
Another option is to progress a “Let to Buy” application. This is the process of re-mortgaging your property onto a “Buy-to-Let” basis. The advantages to this are similar to letting your property with your existing Lender via “Consent to let”; however you can also look to raise funds as part of the re-mortgage, if you have sufficient equity within the property, to put towards the deposit upon the new purchase. If your existing mortgage is capital and interest repayment, you will most likely be able to convert this to interest only; the favoured repayment type for Landlords. Conversely, you must consider the additional costs relating to a re-mortgage application such as product fees, brokerage fees, solicitors and valuation fees.
Keep the property as a Second Residence
You may decide that you would like to keep your existing property as a second residence; if you work away from home for example. The majority of Lenders will allow this, however, the important factors to consider here include loan to value restrictions on the amount you can borrow. Most Lenders will also be reluctant to allow you to have two properties in close proximity; therefore the locations of your two properties will be key.
Furthermore, an affordability assessment taking into account two mortgage payments and associated monthly outgoings will have a significant impact on the amount that you can subsequently borrow.