If you have to relocate, want to spend some retirement time abroad, need to reduce mortgage costs or need to leave your property for some other reason, but you don’t want to sell it, there are other options you can try.
Moving abroad – sell or let?
Sell or let is always a difficult question to answer if you are moving abroad, especially if it is for an unspecified length of time. Those who feel fully committed to moving away forever, will probably choose to sell, but others who wonder, “what if I don’t like living abroad,” are likely to be more hesitant to take such a step. And, it is undoubtedly true that if you sell a UK property, it is going to be more difficult to get back into the market due to its high prices.
The alternative is turning the property into a long-term rental, but there can be snags with that. Managing a rental property from overseas is potentially a headache that can only be resolved with the help of a property management company, who will charge a substantial fee. And what if you get a difficult tenant? This will mean additional costs to evict them. Of course, not everyone faces these two scenarios; others may need to get an income from their property without leaving the country. Thankfully, there are options for all situations.
The remortgaging solution
If you are having problems with mortgage payments, one solution is to change to a ‘let-to-buy’ mortgage. It’s the opposite of the famous ‘buy-to-let’ products. This requires a remortgage process that has the potential to provide funds for buying another property by releasing some of the equity. You rent your original property out, ensuring that the rental fees cover the new let-to-buy mortgage and property maintenance. You live in the second property and hopefully watch both your assets appreciate in value. The ‘let-to-buy’ scheme is excellent for those who are cash poor, but have plenty of equity locked away in a property. With let-to-buy mortgages you can typically borrow 75 per cent of the value of the property you intend to let, however, rental income earned from it must cover the mortgage repayments by at least 125 per cent.
Housing associations provide another answer
Another alternative is to let your property through a housing association. There are several advantages to this: you won’t have any property management headaches and you will never have to deal with tenants. Unlike private letting, you are more assured of the property always being occupied. However, this solution doesn’t work in all areas, as the majority of housing associations tend to be in metropolitan centres, like London and the other major cities, where demand for rental properties is especially high. If there isn’t a housing association near you, this solution probably isn’t going to work. It is also worth remembering that you will get a lower rental income compared to the private market.
Short-term lets give bigger incomes
Lastly, there are always holiday letting sites. Short-term lets generate more income than long-term rentals and depending on your location you may be able to get business travellers as well as tourists. Yes, short-term lets are time consuming, but if you need the cash it is an option worth considering as it is relatively inexpensive to advertise on holiday letting sites.
Before you choose any of these options always check your mortgage conditions with regard to sub-letting as breaching them might invalidate your insurance.