Let to Buy

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Let to Buy Mortgage – could this work for you?

Let to Buy is a less common route to buying a home – but in some circumstances it can be a good approach. If you already own a property and are looking to move, could this be a workable option for you?

What is a Let to Buy Mortgage?

A Let to Buy mortgage enables you to buy a new home without selling your current property, instead, you let it out to tenants. In the end you will own two properties and have two mortgages. 

One is a standard residential mortgage on the new home; the second is a Buy to Let mortgage product on the house you will rent out.

Let to Buy can be a good way to release equity from your existing property and use it as a deposit on the new house. It also means you retain your first property as an investment instead of selling it. To use your equity as a deposit you will usually need to take both mortgages with the same lender. 

Is Let to Buy right for me?

Some scenarios when Let to Buy can be a good option include:

  • To retain your first property as an investment
  • If you are having trouble selling your home
  • Where you have a good level of equity
  • To avoid having a downward property chain

Not only do you need a level of equity, but you will also need some savings to cover stamp duty and the fees and costs of the mortgage.

What are the lending criteria for a Let to Buy Mortgage?

To get a Let to Buy deal you will need to meet two sets of lending criteria – for the residential mortgage and also the Buy to Let product. 

For the residential mortgage, the main focus is affordability – you need to evidence that you have enough income to comfortably afford the repayments on your mortgage. Lenders will check your monthly income and outgoings and look at your credit record. 

For the Buy to Let mortgage you will need a deposit of at least 25%, and meet a minimum rental income from the property. Most lenders look for the rent to cover 125% or more of your monthly interest payments. 

Each lender will have further specific criteria, such as age limits and restrictions on the type of property. We can help you find mortgages that match your own specific situation.

Can I switch my current mortgage to a Buy to Let?

Some lenders will allow you to convert your existing mortgage to a Buy to Let mortgage. This can be a simpler approach, but it doesn’t mean you will get the most competitive mortgage deal. Talking to a broker is a good way to explore all the options, which could include:

  • Switching your current mortgage and getting a second mortgage for your onward purchase
  • Finding a single lender to provide both mortgages
  • Arranging each mortgage separately

We will advise and recommend the options that will give you the most value.

What if I only want to rent out my property for a short period?

If you only anticipate renting for a short time, Let to Buy may not be the most suitable option. Many mortgages involve an early repayment charge – which is a hefty fee that applies if you exit your deal early. 

You could start by seeking ‘consent to let’ from your current lender. If this is not possible, it is often better to take out a flexible Buy to Let mortgage that’s totally separate from your residential mortgage.

If you’re planning to sell your existing home within a short timeframe you could also consider a Bridging Loan.

How much will stamp duty cost?

Because you are buying a second property your stamp duty exposure increases – you will need to pay additional stamp duty at 3%. 

On a £400,000 second property, the stamp duty total is £22,000; meanwhile if you were to sell the first home to buy the second, the duty would only be £10,000.

Are there other drawbacks to Let to Buy mortgages?

While owning two properties is a good investment, you’re twice as exposed for property costs like repairs, maintenance, furnishings and insurance. You’re also paying two mortgages which can be stressful and expensive, especially if you have a gap between tenants. 

Let to Buy reduces the number of potential lenders you can approach, too, so you might not get the most competitive mortgage rates. You will also need to do annual tax returns for your rental property – or hire an accountant to do it for you.

How can Heritage Mortgages help?

Heritage Mortgages are here to help you explore all the options around buying a new property to live in and letting out your current home. We compare the mortgage products that high street and specialist lenders offer to find a suitable approach for your situation. 

We’ll support you to ensure your mortgage payments are affordable and help you with the mortgage application too. For expert mortgage advice, contact us today. Heritage Mortgages is registered in England.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. The Financial Conduct Authority does not regulate most Buy to Let Mortgages.

Emma Louise Williams

I cannot express the quality of service received as a first time buyer from Luke at Heritage Mortgages. No query to big or small, with quick responses alongside an exemplary level of service, Luke secured a great result during the pandemic so I could purchase my beautiful new home. Great market knowledge surrounding self-employed earnings was clearly evident and secured the desired result. Thank you!

Joshua Flint

Annabelle is a top notch Mortgage broker. She took a year of silly questions, being stupid and setbacks from me and she stuck by me and got me my mortgage on my first home. She’s an excellent person who just thoroughly loves her job and wants to see people happy in their homes. Could not recommend anyone higher! Thank you Annabelle.

Chloe Club

Highly recommend Annabelle, she is a fantastic broker, she sorted our remortgage in a flash! My hubby and I were concerned about the process due to him being self employed but Annabelle got us a DIP in no time at all, a mortgage offer within days and I’m happy to say we’ve just completed. We couldn’t be happier with the service we received, it was faultless – thank you! So if you are reading this and like us you are hesitant about speaking to a broker I’d say just do it, Annabelle took away all the stress and got us a great deal. 💕

Why Heritage Mortgages?