Are you struggling to sell your home but still want to move? Or perhaps you see the potential in keeping your current property as an investment while stepping up the ladder? Let to Buy could be the solution you’re looking for.
What is Let to Buy?
Let to Buy is a specialist mortgage arrangement that allows you to rent out your existing home and buy a new one to live in. Unlike a standard Buy to Let (where you purchase a property specifically to rent out), Let to Buy is about keeping your current home as a rental investment while moving into a new residence. This means you’ll have two mortgages at the same time: a Buy to Let mortgage on your current property and a residential mortgage on your new home.
This approach is especially useful if you can’t sell your current home due to market conditions, want to move quickly and avoid a property chain, are moving in with a partner but want to keep your original property, or plan to return to your current home in the future.
How does Let to Buy work?
To start, you’ll need to convert your existing residential mortgage to a Buy to Let mortgage. This is essential, as renting out your home on a standard residential mortgage is usually a breach of your lender’s terms and conditions. Many Let to Buy mortgages also allow you to release equity from your current home, which can be used as a deposit for your new property.
Once this is in place, you’ll arrange a standard residential mortgage for your new home. Most lenders need you to leave 25% of the equity in your current property, the rent will need to pass the lender’s assessment to justify the mortgage amount you need, and you’ll need to provide the details of the property you want to buy.
Challenges of using Let to Buy
Let to Buy can be a fantastic way to become a landlord and move home, but it’s not without its challenges. Managing two mortgages means you’ll be responsible for two sets of payments, so it’s vital to ensure your finances are robust. There’s also an additional stamp duty surcharge for buying a second property, although you may be eligible for a refund if you sell your original home within a set timeframe.
Rental income uncertainty is another consideration; your lender will want to see that your rental income comfortably covers the mortgage, but void periods (when the empty property is empty) or unreliable tenants can impact your cash flow. Becoming a landlord also means complying with a significant number of regulations, from gas safety certificates to deposit protection schemes, as well as managing repairs, maintenance, and tenant relationships. Finally, if property prices fall, you could be exposed to negative equity on two properties.
First Time Landlord?
If Let to Buy makes you a landlord for the first time, there are a few essentials to keep in mind. Staying on top of paperwork is important for tax and legal compliance, and many first-time landlords find it helpful to use a letting agent, especially if they’re not local or want a more hands-off approach. Above all, understanding your legal obligations—from safety certificates to insurance—will help you avoid costly mistakes and keep your tenants safe.
How we can help
Let to Buy is a complex process with lots of moving parts. Our expert mortgage advisers can source the best Let to Buy and residential mortgage deals, including products only available through brokers. We coordinate both transactions, helping you complete your Buy to Let and new residential mortgage simultaneously.
Thinking about Let to Buy?
Call us on 08000 38 37 36 or book an appointment today for expert, whole-of-market advice and make your next move with confidence.
