Let to Buy Mortgages
Let to Buy lets you rent out your current home and buy a new one to live in, using the equity in your existing property to help fund your next purchase – without having to sell first.
What Is a Let to Buy Mortgage?
A let to buy mortgage involves switching your existing residential mortgage onto a buy-to-let deal, so you can rent out your current home, while taking out a standard residential mortgage for the new property you’ll live in – usually arranged at the same time. You can use a single lender that offers both products together, or split the two mortgages across different providers.
Why Homeowners Choose Let to Buy
Let to buy suits people who want to move but can’t sell quickly, or who’d rather keep their current property as a long-term investment than give it up. It lets you change plans easily if circumstances shift, provides a steady rental income, and means you keep any future growth in the property’s value – though it also comes with the ongoing responsibilities of being a landlord.
Common Situations Where Let to Buy Makes Sense
Beyond simply wanting to invest, let to buy is commonly used by people relocating for work who aren’t ready to sever ties with an area, growing families who’ve outgrown a starter home but see long-term value in keeping it, people who inherited a property alongside their own home and want to consolidate into one purchase while retaining the inherited asset as a rental, and those going through a slow chain where a quick sale isn’t achievable but a purchase opportunity can’t wait.
How Much You Can Release From Your Current Home
Most let to buy lenders will allow you to borrow up to 75% of your current property’s value on the new buy-to-let mortgage. The difference between that new borrowing and what you currently owe can be released as equity, which you can then use as some or all of the deposit on your new home.
Worked Example
Say your current home is worth £300,000 and you owe £150,000 on your existing mortgage. Remortgaging onto a let to buy deal at 75% loan-to-value means borrowing £225,000 against that property – releasing £75,000 in equity after clearing your existing balance, which you could then put toward the deposit on your new home.
What If You Can’t Release Enough Equity?
If the equity available doesn’t fully cover your new deposit, you’ll need to make up the shortfall from savings or another source. It’s worth running the numbers early in the process – before you start viewing properties for your new home – so you have a realistic sense of your actual budget rather than assuming the maximum theoretical release will always be available.
How Rental Income Is Assessed
Most lenders require the expected rental income on your existing property to cover between 125% and 145% of the monthly mortgage payment on the let to buy loan. So if your new let to buy mortgage payment is £1,000 a month, you’d typically need to demonstrate achievable rent of at least £1,250 to £1,450. Lenders will also want to see that you can comfortably manage both mortgages during any void periods when the property isn’t tenanted.
Affordability for Your New Residential Mortgage
Your new residential mortgage is assessed in the normal way, based on your income, though lenders will also take your existing let to buy mortgage commitment into account as part of your overall outgoings, similar to how any other mortgage or loan would be factored into an affordability assessment. It’s worth being upfront with your broker about both transactions from the outset, since assessing them together properly avoids surprises partway through the process.
Stamp Duty Considerations
Because you’ll own two properties once the let to buy transaction completes, the additional-property Stamp Duty surcharge applies to your new purchase, even though you’re moving rather than deliberately buying a second home. It’s worth factoring this extra cost into your budget from the outset, alongside your deposit and other purchase costs.
Reclaiming the Surcharge if You Later Sell Your Original Home
If you subsequently sell your original property within three years of completing your new purchase, you may be able to reclaim the additional-property surcharge paid, since HMRC treats this as effectively no longer owning two properties. This is worth keeping in mind if you’re using let to buy as a temporary bridge before eventually selling, rather than a permanent investment strategy.
How Let to Buy Differs From Buy-to-Let
A standard buy-to-let mortgage is for purchasing a new property specifically to rent out. Let to buy is the reverse starting point – you already live in the property and are converting it to a rental as part of moving elsewhere, rather than buying it as an investment from scratch.
Tax Considerations Once Your Property Becomes a Rental
Once your original home becomes a let to buy rental, the same tax rules apply as for any other buy-to-let property – rental income is taxable, and since Section 24 took full effect, mortgage interest can no longer be deducted from rental income directly, with a 20% tax credit applying instead. This is worth understanding clearly, since it can meaningfully affect your net rental return compared with simply thinking of the property as generating gross rent.
Considering a Limited Company Structure
Some homeowners choose to transfer their let to buy property into a limited company structure for tax efficiency, though this typically involves selling the property to the company, potentially triggering Stamp Duty and capital gains tax in the process. It’s worth discussing this with an accountant before your let to buy transaction completes, since restructuring afterward is more complicated and costly than planning for it upfront.
Insurance Considerations
Once your original home is let out, your standard homeowner’s buildings and contents insurance is no longer appropriate – you’ll need landlord insurance, which covers different risks including loss of rent, tenant damage, and landlord liability. It’s worth arranging this before your tenant moves in, not treating it as an afterthought once the mortgage side is sorted.
Finding and Choosing the Right Tenant
A thorough referencing process – credit checks, employment verification, previous landlord references – matters considerably, particularly since you’re relying on this rental income to service your let to buy mortgage. It’s worth using a reputable letting agent with a genuinely robust referencing process, or investing the time to do this properly yourself if managing the property independently.
Managing Two Mortgages and Being a Landlord
Once the let to buy transaction completes, you’re responsible for two separate mortgage commitments and, on your original home, all the usual landlord responsibilities – tenant referencing, landlord insurance, repairs, and managing void periods. It’s worth carefully checking who you’re renting to and arranging proper landlord cover to protect your investment, rather than treating the letting side as an afterthought once the mortgage side is sorted.
Timing: Coordinating Both Transactions Simultaneously
Because let to buy typically involves remortgaging your current property and buying a new one at the same time, coordinating the timing between both transactions is worth planning carefully with your broker and solicitor. Delays on one side can hold up the other, so it’s worth building in some flexibility to your timeline rather than assuming everything will complete on exactly the date you’d prefer.
Exit Strategy: Thinking Long-Term
It’s worth having a clear view of your long-term plan for the let to buy property before you commit – are you planning to hold it indefinitely as an investment, sell it once your circumstances change, or eventually move back into it yourself? Each of these has different implications for how you structure the mortgage and manage the property, worth discussing openly with your broker rather than deciding on the fly further down the line.
Frequently Asked Questions
How much of my current home’s value can I release for a deposit?
Most lenders allow borrowing up to 75% of your current property’s value on the let to buy mortgage, with the difference over your existing balance available as equity.
Do I need to prove rental income to qualify?
Yes – most lenders require rental cover of 125-145% of the monthly mortgage payment, similar to a standard buy-to-let assessment.
Will I pay extra Stamp Duty on my new home?
Yes – since you’ll own two properties once the transaction completes, the additional-property Stamp Duty surcharge applies to your new purchase.
Can I reclaim the Stamp Duty surcharge later?
Possibly – if you sell your original property within three years of your new purchase, you may be able to reclaim the surcharge paid.
Can I use the same lender for both mortgages?
Some lenders offer both products together and streamline the process; others require you to arrange each mortgage separately – we’ll help you identify the most suitable route for your circumstances.
Do I need landlord insurance once my property is let out?
Yes – standard homeowner’s insurance doesn’t cover a rental property; you’ll need dedicated landlord insurance covering rental-specific risks.
Is rental income from a let to buy property taxed the same as any other buy-to-let?
Yes – the same tax rules apply, including the Section 24 mortgage interest restriction for personally owned property.
What happens if I can’t release enough equity for my new deposit?
You’ll need to cover the shortfall from savings or another source – worth calculating this early in the process rather than assuming the maximum release will always be available.
Get in touch with details of your current property and your moving plans, and we’ll help you understand how much you could release and what your options are.
