More and more contractors see the sense in let-to-buy
There has been a steep increase in the number of freelance contractors who are becoming ‘accidental landlords’ - so steep, in fact, that it seems far from inadvertent, writes contractor specialist IFA Tony Harris at ContractorMoney.
Figures from the National Landlords Association show that greater numbers of would-be sellers are choosing to retain their existing property to rent out, rather than go through the hassle of finding a buyer. This has definitely been the case within the freelancer and contractor community.
Rise of the 'next-time' sellers
With factors like stricter lending policies, economic uncertainties and high house prices deterring some first-time buyers, ‘next-time' sellers are increasingly opting to rent out their current house to break the log jam. Contractors that follow this course are then free to bargain hard on the new home purchase as they are chain free, with the effect that the contractor finds themselves in a far stronger position than other would-be purchasers. And as for the mortgage on the original property, the contractor can rest assured in the knowledge that this is covered by their new tenants.
While banks and other institutions are continuing to make it tougher for many homeowners and borrowers, there are still plenty of options for you as a contractor to obtain the funding you need.
The first step is to change your current mortgage status from residential to a buy-to-let through what is known as ‘consent to let’. In many cases this will allow you to apply for a brand new contractor mortgage without the existing borrowing being an issue.
If your current lender does not allow us to do this on your behalf, then remortgaging the existing loan onto a formal buy-to-let mortgage elsewhere is the answer. At the same time, it may be possible to release extra funds to help pay for a larger deposit on the new purchase too.
With the existing borrowing then firmly out of the equation, you are now free to apply for a mortgage on the new purchase and, in most cases freelancers should be able to access lenders that allow this application to be based on a multiple of your annualised contract rate alone, rather than accounts or payslips.
Move now to exploit the rental high
In addition to being able to buy your next home, let-to-buy could also be a very good long term bet because, while tough for some first-time buyers, the current climate does represent the perfect time for would-be landlords because rental demand is so high. Have a review of your circumstances or let us do it on your behalf; you could very well find that you have an excellent long-term investment on your hands.