Buy Before you Sell

You've just seen that dream property that you do not want to lose. How do you buy it before you sell your current property?

Ideally, you will need a deposit for the new purchase in order to benefit from the lowest rates. If you do not have this to hand, consider raising this money on your existing property (this is called a remortgage or further advance - see borrowing more money). Any additional borrowing should be free of redemption penalties - you do not want to incur unnecessary costs when you eventually sell this property.

Get a rental assessment for your current property - the potential rental income needs to be enough to cover the mortgage payments - including any extra money you may need to raise for the deposit. You have to demonstrate that this property can fund itself.

Many lenders require that your property has been let for at least 12 months before they will ignore it but there are some that will not - some that also have very attractive interest rates. Even better if the lender allows you to make overpayments without penalty because you would then be able to reduce your mortgage when you sell your current property.

You will need permission from your current lender to let the property if you cannot sell it. Most will do this, although some may increase the interest rate.

• *Warnings*
  You might not be able to sell the property, so be prepared to let it out to cover the mortgage.
• If you cannot let the property at the start or from time to time then you will have two mortgages to pay. You're taking a risk that could seriously damage your wealth, make sure you can handle it.
• If you do let the property, make sure you have a proper tenancy agreement otherwise when you come to sell you may not be able to eject the tenant.
• Some tenants may not look after other peoples property as well as they would look after their own. You may have damages and wear and tear to consider.
• Any profit you make from the rental income is taxable at your highest rate. You must inform the Inland Revenue of your income from the property.
• If the property is let for 3 years or more then capital gains tax may become an issue when you do finally sell it.
• Your lender may only give permission to let the property for a year or increase the rate of interest. You may need to consider a specialist buy to let lender if you intend to let the property for a long time
• Make sure the property is adequately insured. You need to inform your insurer that the property is let, they may charge a premium for this.
• Seek professional advice before undertaking the above transactions and make sure you're comfortable with the risk.