If you want to move home but keep your current property, let-to-buy could allow you to turn it into a rental instead of selling it.
The key is making sure the rent, available equity and mortgage on your next home can all work together.
What is a let-to-buy mortgage?
Let-to-buy is an arrangement where you rent out your current home while buying another property to live in.
In many cases, you remortgage the existing home onto a suitable buy-to-let mortgage. You then arrange a standard residential mortgage for the onward purchase.
Consent to let works differently. Your current lender gives you permission to rent out the property under your existing residential mortgage, subject to its terms.
Before choosing a let-to-buy mortgage
RENT
Check your current home can be let
The expected rent and property need to fit the buy-to-let lender’s criteria.
EQUITY
Work out what may be usable
Your property value and mortgage balance affect how much equity may be available for the next deposit.
TWO MORTGAGES
Check both sides of the move
The rental mortgage and the mortgage on your next home both need to meet lending criteria.
COSTS
Budget for keeping two properties
Property tax, mortgage fees, landlord costs and periods without rent can all affect your cash position.
How does a let-to-buy mortgage work?
A let-to-buy mortgage works by treating your current home and your next home as two linked lending decisions.
CURRENT HOME
Move it onto suitable rental borrowing
A buy-to-let lender may assess the expected rent, property value, mortgage balance and loan-to-value. If you raise extra funds, the rent must still support the larger mortgage.
NEXT HOME
Arrange the residential mortgage
The residential lender may review your income, outgoings, credit score, deposit and wider commitments. How it treats the rental property can vary between mortgage lenders.
WORTH KNOWING
A let-to-buy plan can work on one side and fail on the other. Check both mortgages before you commit to the move.
Let-to-buy, buy-to-let or consent to let?
Let-to-buy
You keep and rent out your existing home while buying another home to live in.
Buy-to-let
You buy a property specifically for rental use rather than as part of a home move.
Consent to let
Your residential lender gives permission for renting out a property under the existing mortgage, subject to its conditions.
Let-to-buy mortgage criteria
Let-to-buy mortgage lenders can assess both the rental property and your wider finances. On the rental side, how lenders assess landlords can vary by property, expected rent, experience and wider borrowing. Common checks include:
Expected rent
The rent may need to support the buy-to-let mortgage under the lender’s own rental calculation.
Equity and loan-to-value
The property value, mortgage balance and any extra borrowing determine the new loan-to-value.
Residential affordability
Income, outgoings, your credit profile and the new deposit can affect how much you can borrow for the next home.
Property and landlord profile
The existing property must meet the lender’s rules. Some lenders also consider landlord experience and other debts.
How to apply for let-to-buy
A let-to-buy application works best when both mortgages are planned together rather than one after the other.
Check the existing mortgage
Confirm whether you need to remortgage onto buy-to-let. Another mortgage arrangement may suit your plans instead.
Assess the rental
Estimate the market rent and how much the buy-to-let lender may support.
Check the onward purchase
Review your deposit and residential affordability before committing to the new property.
Coordinate the applications
Plan the valuations, underwriting and mortgage offers together. This can help both sides complete smoothly.
Can you release equity for the next deposit?
If your existing property has enough equity, you may be able to borrow more when moving it onto a buy-to-let mortgage. You could then use some of those funds towards the deposit on the next home.
Visible equity is not the same as available borrowing. The lender still needs the rent to support the mortgage, and the resulting loan-to-value must fit its criteria. Releasing equity also increases the debt secured against the rental property.
Check both sides of the move
Test the rental property first, then check the residential borrowing for your next home.
Let-to-buy mortgage rates and lenders
There is not usually one single let-to-buy mortgage rate because two types of mortgage are involved. The property you keep may use buy-to-let mortgage rates, while the new home uses residential mortgage pricing.
Let-to-buy mortgage rates can vary with loan-to-value, rental income, the property and your circumstances. Let-to-buy mortgage lenders can assess the rental property in different ways. Their treatment of the new residential mortgage can also vary.
A let-to-buy mortgage broker can compare the two sides together rather than looking at each mortgage deal in isolation.
Stamp duty and other let-to-buy costs
Keeping your current property can increase the upfront and ongoing costs of the move.
Property tax on the new home
If you still own your current home when you complete the onward purchase, higher property tax rates may apply. SDLT applies in England and Northern Ireland, with different property transaction taxes in Scotland and Wales.
Mortgage and legal fees
You may face lender fees, valuations and legal costs on both mortgages.
Landlord and running costs
Insurance, repairs, management and periods without tenants all form part of the wider costs of owning and running a buy-to-let and can reduce the rental income you keep.
What let-to-buy can look like
Suppose your current home is worth £300,000 and the mortgage balance is £180,000. That leaves £120,000 of equity before lender checks.
Example
Amount
Current property value
£300,000
Existing mortgage
£180,000
Equity before lender checks
£120,000
The lender still decides how much equity you can release. It also checks whether the expected rent supports the resulting mortgage. The residential mortgage must then fit your deposit, income and wider commitments.
Figures are illustrative only. Actual borrowing, repayments, rent, tax, fees and lender criteria depend on the properties, mortgages and your circumstances.
When let-to-buy may not fit
The rent is too low
It may not support the buy-to-let mortgage or leave enough room for running costs.
There is not enough usable equity
You may not have enough for the next deposit and moving costs.
Keeping the rental property stretches the new mortgage
It may reduce how much you can borrow for your next home.
Being a landlord does not suit your plans
A long-term investment means taking on tenant, maintenance and rental-market risk.
How Muttuo Mortgages can help
Let-to-buy involves a rental mortgage and a residential mortgage. We can review both sides before you commit to keeping your current home.
Review whether the expected rent supports the mortgage on your current property
Compare mortgage options from more than 100 lenders
Check how equity, deposit and the new residential mortgage fit together
Talk through both mortgages
Explore whether renting out your current home and buying somewhere new could work together.
Your property may be repossessed if you do not keep up with your mortgage repayments.
The Financial Conduct Authority does not regulate some buy-to-let mortgages.
Your let-to-buy mortgage questions answered
Can I rent out my current home and buy another?
It may be possible if the expected rent, usable equity, deposit and residential affordability all fit the lenders’ criteria.
Do I need permission from my current lender?
Yes. Your current mortgage may not allow renting without permission. Depending on your plans, you may need consent to let or a suitable buy-to-let mortgage.
Can first-time landlords use let-to-buy?
Some lenders consider first-time landlords. The expected rent, equity, property and affordability of the new home can all affect lender choice.
When can let-to-buy be a good idea?
It can suit people who want to keep their existing home as a long-term investment, but it is not right for everyone. Compare the rental return, costs, extra borrowing and responsibilities before deciding.
How do let-to-buy mortgage rates work?
The property you keep may use buy-to-let pricing, while the new home uses residential mortgage rates. The rates depend on the lenders, loan-to-value, properties and your circumstances.
