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Let to Buy mortgages can help you buy your next house when you haven’t got a buyer for your existing home. We look at the pros and cons, whether it’s right for you and steps you need to take.
In an ideal world, you’d sell your property at asking price with no drama and then find your dream home and move in. Sadly, the world of property is far from ideal and you may well find that perfect property to move into long before you get a buyer for your home. One option when this happens is to let your current property out to tenants and take out a new “Let to Buy” mortgage to buy your next home.
Let to Buy involves renting out your current home and buying a new one to live in. You’ll switch your current mortgage to a Let to Buy mortgage and take out a new mortgage on the property you’re buying. This approach allows you to keep your original property as an investment, with the aim of earning rental income and benefiting from any increase in property value.
Let to Buy is also a popular option with couples wanting to move in together, but each have their own property. In this case, you could both move into one of the properties and rent the other one out using a Let to Buy mortgage.
Not sure whether to sell up or rent out? Read our guide on when letting a property makes sense
With Let to Buy you’ll essentially have two mortgages. You’ll need a Let to Buy mortgage for your current property and a standard residential mortgage for the property you want to buy.
With Let to Buy you’ll be able to release equity from your property by borrowing at a higher LTV. For example, if your home is worth £200,000 and your mortgage is currently £130,000 you can borrow £150,000 and use that extra £20,000 as a deposit on the new property.
You’ll then take out a standard residential mortgage with the same lender. Get free mortgage advice about your Let to Buy options
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Unlike Buy to Let mortgages which are taken out by people specifically looking for a property to let out (or to re-mortgage one they currently let out), Let to Buy mortgages are used when you live in a property and want to move elsewhere.
Lending criteria for let to buy mortgages will differ depending on which lender you’re with but most lenders will:
Furthermore, your current property can’t be listed for sale or be sold subject to contract.
Since buy to let rules have changed, lenders now require landlords to be able to achieve a higher rent in relation to their mortgage repayments. You’ll need to find out how much rent you’ll be able to achieve on the property to ensure you can meet this.
After getting an idea of your likely rental income, speak to a letting agent. It’s worth telling the agent you are considering appointing them to manage the property and get them to give you an estimate on what they would set rent as. You should get quotes from at least three agents in order to get a good idea of what rent should be.
Find out more about becoming an accidental landlord and what you need to be aware of with our helpful guide as well as our ultimate guide to renting out your home which outlines the responsibilities to be aware of and the best way to find a tenant.
Let to Buy can help to ease the pressure when you’re in a property chain. If you need to sell your property with a mortgage so that you can buy your next home it can be extremely stressful. Let to buy removes some of that stress by taking the time pressure off.
Yes, you have to pay stamp duty when you Let to Buy. As you’ll be buying a second property, you’ll have to pay the stamp duty surcharge (3% on top of the Stamp Duty band). To calculate exactly how much stamp duty you will need to pay, use our free stamp duty calculator. Although if you sell your first home within 36 months of completing on the purchase, HMRC will make a full refund.
If you need to move quickly and you’re struggling to sell your property one other option is to seek consent to let for your current property and move into rental accommodation. If you have a residential mortgage you are not able to rent out the property without the lender’s permission. While the obvious option is to remortgage onto a buy to let mortgage, it’s also possible to keep your residential mortgage but receive consent to let from your lender.
However, lenders do not have to agree to give consent to let and may impose a higher rate or fee.
Not all lenders are happy to lend on a Let to Buy basis, and of those that will, most will only deal with brokers, not direct with customers. It’s worth speaking to a mortgage broker regardless as this is a more complex situation than a standard mortgage application.
Buy to Let mortgages are taken out by people who want to buy a property to rent out (or to re-mortgage one they currently let out). However, Let to Buy mortgages are used by people who want to let out their current home and buy another property.
Yes. When you buy a second property you’ll be hit by the stamp duty surcharge, this is 3% on top of the Stamp Duty band. You can calculate how much stamp duty you’ll need to pay with our free stamp duty calculator. However, if you sell your first home within 36 months of completing on your new property, HMRC will refund the surcharge amount you paid.
With Let to Buy mortgages, you’ll have two mortgages. You’ll get a Let to Buy mortgage for your existing property and take out a standard residential mortgage with the same lender for the property you want to buy. If you’re not sure whether to sell up or rent out, read our guide on when letting a property makes sense.
You’ll usually need at least a 25% deposit for your Let to Buy mortgage but you’ll also need to put down a deposit on the property you’ll planning to buy. To find out how much rental income you may get for your property, try free online rent calculator.
HomeOwners Alliance Ltd is registered in England, company number 07861605. Information provided on HomeOwners Alliance is not intended as a recommendation or financial advice.
Mortgage service provided by London & Country Mortgages (L&C), Unit 26 (2.06), Newark Works, 2 Foundry Lane, Bath BA2 3GZ, authorised and regulated by the Financial Conduct Authority (FRN: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage.
HomeOwners Alliance Ltd is an Introducer Appointed Representative (IAR) of Seopa Ltd, for home insurance, authorised and regulated by the Financial Conduct Authority (FCA FRN: 313860).
HomeOwners Alliance Ltd is an Introducer Appointed Representative (IAR) of LifeSearch Limited, an Appointed Representative of LifeSearch Partners Ltd, authorised and regulated by the Financial Conduct Authority. (FRN: 656479).
Independent Financial Adviser service is provided by Unbiased, who match you to a fully regulated, independent financial adviser, with no charge to you for the referral.
Bridging Loan and specialist lending service provided by Chartwell Funding Limited, registered office 5 Badminton Court, Station Road, Yate, Bristol, BS37 5HZ, authorised and regulated by the Financial Conduct Authority (FRN: 458223). Your property may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it.
