Let to Buy Mortgage Explained

A let to buy mortgage allows you to convert your existing home into a rental property and use the rental income to pay for the mortgage. Let to Buy Mortgages have become increasingly popular in the UK, offering homeowners a unique opportunity to purchase a new property while retaining their current home as a rental investment. If you’re curious about how this mortgage product works and how it can benefit you, read on.

In this article, we will explore the topic in detail and also answer the frequently asked questions, such as 

What are Let to Buy mortgages?

What is the difference between Buy to Let and Let to Buy mortgages?

How to get a Let to Buy Mortgage?

Damian Youell

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How We Work

1: We contact you and take down your details, income outgoings, name, address etc.

2: We will research the whole market and email you a detailed quote as well as a list of documents to proceed.

3: You upload the documents and information needed via our channel our online portal.

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What are Let to Buy Mortgages?

Let to Buy Mortgages help homeowners use the value of their current home to buy a new one. They do this by getting a new mortgage on their current home and using that money for a new place. Then, they rent out their old home and use the rent money to pay its mortgage. It’s a good option for couples who both own homes and want to live in one while renting out the other.

Key features of Let to Buy Mortgage

  • You can use the money you raise from renting out your home to help you buy a second home. This can be a great way to get on the property ladder if you don’t have enough savings for a deposit on a second home.
  • You can rent out your home for up to 75% of the market rent. This means that you can generate a significant income from renting out your home, which can help you to repay your mortgage more quickly.
  • You can use a Let to Buy mortgage even if you don’t have a lot of savings. This is because the lender will consider the rental income from your home as part of your income, which can help you to qualify for a mortgage.
  • You can move out of your home at any time without penalty. This is because you will only be required to repay the mortgage on the amount that you borrowed to buy your home.

What is the Difference Between Buy to Let and Let to Buy Mortgages?

The main difference between Buy-to-Let and Let-to-Buy mortgages is that with a Buy-to-Let mortgage, you are buying a property solely with the intention of renting it out.

On the other hand, a Let-to-Buy mortgage allows you to purchase a new property while retaining your existing home as an investment. Buy-to-Let mortgages typically require a larger deposit and have higher interest rates than Let-to-Buy mortgages. Additionally, Buy-to-Let mortgages may be subject to additional taxes and regulations.

Let to Buy mortgages can provide an excellent opportunity for those who want to purchase a second property. Not only does it give homeowners a chance to increase their wealth by investing in another property, but it also gives them the peace of mind that comes with knowing they have rental income from their existing home, which can help cover their monthly mortgage payments. In addition, Let to Buy Mortgages are typically more flexible than traditional mortgages. If you are interested in such a mortgage, you can always contact a mortgage broker to help you with your application process.

How to get a Let to Buy Mortgage?

A Let to Buy mortgage allows you to let out your current home to enable you to buy a new one and can provide funds to purchase a new home if there is equity in your current home or you own it outright by refinancing your home and releasing some equity, then using this as a deposit for a new purchase.

Essentially you will be applying for 2 mortgages; one Buy-to-Let mortgage for your current property that you wish to keep and a new residential mortgage for your next property that you wish to purchase. Lenders will take this into account when considering how much to loan you and the assessment of your application. Usually, you would be refinancing your first property to pull some money out as a deposit and sourcing a new mortgage for your next property, which most likely occurs simultaneously as per lender requirements.

Each lender’s criteria may differ, but generally speaking, Let-to-Buy mortgages require a maximum loan-to-value (LTV) of 75%. An important factor is to find out how much your existing property can be rented out for, as lenders are interested in the amount and usually needs to be at least 125% of the mortgage repayments.

Some lenders may require you to have a minimum income to support the Let-to-Buy application, and you must pass the lender’s affordability and income tests for the mortgage on your new residential property. Having a good credit history will be important to your application. We would advise you to contact a market mortgage broker to help you with the application process and get you the best mortgage deal. 

 What are the advantages of a Let to Buy Mortgage?

  1. Flexibility in Property Transition: Let to Buy mortgages offer homeowners the flexibility to move to a new property without having to immediately sell their current home. This can be particularly useful if the market conditions are not favourable for selling or if the homeowner anticipates returning to the original property in the future.

  2. Income Generation: By renting out their existing property, homeowners can generate a steady stream of rental income. This income can help cover the mortgage repayments on both properties or be used as an additional source of income.

  3. Potential Capital Growth: Homeowners can benefit from potential capital appreciation on two properties – the one they let out and the one they move into. If property prices rise over time, this can lead to increased equity and potential profit when selling.

  4. Diversification of Investment: Let to Buy allows homeowners to diversify their investment portfolio by adding another property to their assets. This can be a step towards building a property portfolio for those interested in property investment.

  5. Avoiding the Sales Pressure: Homeowners don’t feel pressured to sell their existing property quickly, potentially at a lower price. They can wait for a more opportune time to sell when market conditions might be more favourable.

  6. Equity Release: Let to Buy mortgages can allow homeowners to release equity from their existing property, which can then be used as a deposit for the new property. This can be especially beneficial if they don’t have immediate access to large sums of money for a deposit.

  7. Tax Benefits: Depending on individual circumstances and local regulations, there might be tax benefits associated with rental income and expenses related to the let property.

  8. Maintaining Property Ownership: For those who have an emotional attachment to their current home or see long-term potential in the property, Let to Buy offers a way to retain ownership while moving to a new residence.

  9. Market Testing: Before fully committing to the idea of being a landlord, homeowners can use Let to Buy as a way to test the waters of the rental market and understand the responsibilities and rewards of renting out a property.

  10. Potential for Refinancing: If property values increase, homeowners might have the opportunity to refinance the let property in the future, potentially securing better mortgage terms or releasing further equity.

It’s essential to note that while there are several advantages to Let to Buy mortgages, they also come with responsibilities and potential risks. It’s always advisable to consult with financial experts or mortgage brokers to understand the full implications and benefits based on individual circumstances.


What are the disadvantages of a Let to Buy Mortgage?

  1. Extra Stamp Duty: When you buy an extra property, you’ll be slapped with an added 3% stamp duty. But, if you sell that second home within three years, you can get that 3% back.

  2. Double Trouble with Falling House Prices: If the value of houses drops, both your main home and your rental property will lose value.

  3. Heavier on the Wallet: Juggling two mortgages can be pricey. Plus, if no one’s renting your first home, you won’t have that rental income to help with the bills.

  4. More Hassle: Managing two mortgages can mean more work, more responsibilities, and sometimes extra costs.

Next Steps

Juggling one mortgage can be a bit of a puzzle, but dealing with two? That’s a whole new level of complexity. You’ll be handling multiple transactions, and the lenders for both properties will need to be happy with each other – it’s a bit like a financial game of chess. But don’t worry; that’s where a top-notch mortgage adviser comes in. They’ll look at the whole market, weigh up all the options, and help figure out if a Let to Buy is the right move for you. It’s like having a personal guide through the mortgage maze.

Damian Youell

Feel Free To Start WhatsApp Chat With Us...

How We Work

1: We contact you and take down your details, income outgoings, name, address etc.

2: We will research the whole market and email you a detailed quote as well as a list of documents to proceed.

3: You upload the documents and information needed via our channel our online portal.

Feel Free to Contact Us

FAQs for Let to Buy Mortgages:

What is a Let to Buy mortgage?

A Let to Buy mortgage allows you to rent out your current residence while purchasing a new residential property.

How does rental income affect a Let to Buy mortgage?

Rental income from your original property can help cover mortgage repayments, making it a popular option for many.

Are there different types of mortgages available for Let to Buy?

Yes, there are various mortgage types, and a mortgage broker can guide you to the most suitable deal based on your needs.

How much equity do I need in my current property to qualify?

Sufficient equity is essential, often around 20-25% of the property price, but it varies from lender to lender.

How is a standard mortgage different from a Let to Buy mortgage?

A standard mortgage is for a primary residential property, while Let to Buy caters to those looking to rent out their current residence and buy a new one.

What is the stamp duty land tax for an additional property?

Purchasing an additional property incurs an extra stamp duty charge, known as the additional stamp duty land tax.

How does the stamp duty for a Let to Buy compare to a Buy to Let property?

Both involve additional stamp duty costs, but the exact amount can vary based on the property price and other factors.

Do I need a specialist lender for a Let to Buy mortgage?

While some standard mortgage providers offer Let to Buy options, a specialist lender might have more tailored products for this market.

What happens if I decide to become a residential purchaser after a Let to Buy?

If you choose to move back into your original property or sell it, you might need to switch your mortgage type or repay certain charges.

How does a residential mortgage differ from a Let to Buy?

A residential mortgage is for your primary home, while Let to Buy is for renting out your current property and buying a new one.

What’s a repayment mortgage in the context of Let to Buy?

A repayment mortgage means you’re paying back both the interest and the principal loan amount monthly. It’s one of the mortgage options available for Let to Buy.

How does the rental property market influence Let to Buy decisions?

The rental market’s health can impact rental income, making it a crucial factor in deciding on a Let to Buy mortgage.

What’s the significance of the purchase price in a Let to Buy mortgage?

The purchase price of the new property, combined with the value of your current property, can influence the mortgage deal you get.

Why is a property portfolio mentioned in Let to Buy discussions?

Let to Buy can be a stepping stone for those looking to build a property portfolio as a long-term investment.

What does it mean to be in a property chain?

Being in a property chain means your property purchase is dependent on the sale of your current residence. Let to Buy can be a solution for those wanting to break free from the chain.

Why is Let to Buy a popular choice among homeowners?

It offers flexibility, potential rental income, and the chance to benefit from rising house prices on two properties.

What is an accidental landlord in the context of Let to Buy?

An accidental landlord is someone who didn’t initially buy a property to rent it out but ends up doing so, often due to market conditions or personal circumstances.

How can a mortgage adviser assist in the Let to Buy process?

A mortgage adviser can provide expert advice, guide you through the lending criteria, and help you find the best mortgage product for your needs.


About The Author

mortgage broker damian youell

See some of Damian’s client reviews below

Damian is an experienced mortgage broker, founder of NeedingAdvice.co.uk Ltd and company director. With over a decade working as a mortgage broker he has a strong understanding of hard to place mortgage cases. With hundreds of 5 star client reviews. hundreds of repeat clients his work speaks for himself.

He started NeedingAdvice.co.uk as a one man band with the philosophy of putting clients needs ahead of his own. This ethos of offering excellent customer service has helped the business grow over the years. He gets satisfaction on getting cases pushed through to offer stage where other mortgage broker and companies have failed.

Throughout his time as an adviser he has carved out a niche area of advice helping clients with their business protection requirements too. Having helped hundreds of client with Relevant Life Policies, Shareholder Protection Insurance, Keyperson Policies and other important protection requirements of large to small businesses.

At home he is a family man and likes to spend his time with his four children and wife Lisa. He enjoys going on holidays spending time with friends and going for walks.