There are many reasons why you may need to up sticks for a while or consider selling up completely: job relocation, divorce, retirement, outgrowing the property, unaffordability of the mortgage, a desire to travel extensively or a career sabbatical.
However, leaving your property doesn’t necessarily mean you need to sell it or commit yourself to the inflexibility and possible problems of a long-term tenant, such as the lengthy eviction process should things go awry. There are a number of alternatives that may serve you far better.
They also may be suitable for helping to finance a second home, an option that is expected to increase among over-55s once April’s pension changes come into effect. From that time, a requirement to buy an annuity will be abolished, with savers aged 55-plus free to do whatever they like with their pension pots.
1. A let-to-buy mortgage
With property values continuing to rocket in many areas, not to mention the emotional bonds formed with a home, few people are keen to give up their house easily if circumstances change, such as mortgage payments becoming a struggle.
An alternative option to selling is to do the reverse of buying to let: letting to buy. A let-to-buy mortgage allows you to remortgage to a buy-to-let deal. In the process the remortgage can release equity for a second purchase, a situation boosted currently by the historically low mortgage rates available.
With let-to-buy you simply move out of your property and let it out. The rent received covers the new mortgage and upkeep, while you continue to sit on what is hopefully a rapidly appreciating asset and gain another.
Let-to-buy is good for cash poor yet equity rich clients, particularly if they have a good salary but a limited amount of funds to put towards the move.
It is good for homeowners in hotspots who can cash in on the demand for rentals, and for those finding it difficult to sell or keep up financially, who can side-step the problem with this option. It allows you to benefit from two properties potentially rising in value.
To go down the let-to-buy route, it is important to first ascertain whether there is a demand for your property from renters. Is it in acceptable enough condition and near good transport links? Particularly rentable are city centre flats suited to young professionals or houses near a good school that will attract families.
With let-to-buy mortgages you can typically borrow 75 per cent of the value of the property you intend to let. Rental income earned from it must cover the mortgage repayments by at least 125 per cent. The number of companies willing to lend on a let-to-buy basis is limited and it is often advisable to use a mortgage broker to find the best deals.
Bear in mind you will have to pay the mortgage during void periods, when there’s no tenant, and you will need to have funds available for ongoing maintenance and the unexpected large costs that may crop up such as replacing the boiler.
2. Short lets through Airbnb
Letting your property for a few days at a time to holiday and business travellers can generate substantially more income from your property than a long let, with one tenant for months on end. However, it means rather more legwork and maintenance costs.
The Airbnb revolution has seen huge numbers of travellers abandon costlier, less homely hotels to stay in more individual private accommodation. Websites such as Holiday Lettings, Home Away and Owners Direct, as well as Airbnb, have allowed many homeowners to rent out their properties or parts of their properties for as little as a day at a time.
These holiday letting sites typically charge fees that are modest compared to using a lettings agency.
Short lets have come into their own since the Rent Act was changed in 1993, protecting landlords from sitting tenants. The tenant has no security of tenure if they pay in advance and have arrival and departure dates, as with one of these lets.
You get paid the full rent in advance and don’t have the threat of being landed with a sitting tenant.
Check the terms and conditions of your mortgage conditions before sub-letting like this, as it can be a breach of the mortgage and can also invalidate your insurance.
However, many mortgage companies and insurance companies are flexible and understanding over this, so it could be worth talking to them about it.
3. Rental to a housing association
The advantage of renting this way is that it could be a lot less bother in terms of management, avoids having to deal with tenants at all, and avoids the commissions you’d pay to a letting agent. It can also provide an assured rent.
But it’s not a suitable option for all locations. In London there is so much demand from housing associations for properties that you are unlikely to worry about voids, but that may not be the case in other areas of the country.
And although renting your property this way can mean less hassle, you may not achieve the rental levels available on the open private market.
As with short lets, check the terms and conditions of your mortgage conditions before sub-letting, as it can be a breach of them and can also invalidate your insurance.