Let-to-buy Mortgages

What is a let-to-buy mortgage?

A let to buy arrangement involves two separate mortgages completed at the same time. Firstly, you remortgage your current home onto a buy to let mortgage, which allows you to rent it out and, if needed, release equity to use as a deposit for your next purchase. Second, you take out a new residential mortgage for the home you are moving into. This differs from a standard buy to let because you already own the property being let out—you are switching its mortgage to a buy to let product and often withdrawing equity as part of the process. In future, when you remortgage this rented property again, it will generally be treated just like any other buy to let mortgage.

What are the usual lending criteria for a let‑to‑buy mortgage?

Lending criteria vary between lenders, but most follow a similar set of requirements:

• Sufficient rental coverage: The expected rental income must exceed the monthly mortgage repayments. Most lenders require the rent to cover around 145% of the mortgage payment, based on a stress tested interest rate.

• Loan to Value limits: Lenders typically allow a maximum Loan to Value (LTV) of 75%, though some may go up to 80%. This is particularly important to consider if you plan to release equity from your current property.

• Affordability checks: You must pass the lender’s standard affordability assessment. This usually includes demonstrating a good credit rating and sufficient income to support the new residential mortgage.

Let-to-buy as a financial planning tool

Let to buy mortgages offer a refined and strategically effective way to unlock the value held within your current property. For homeowners who have benefited from rising property prices in recent years, they provide a seamless route to releasing equity and using it to support the purchase of a new home - enabling greater flexibility and opportunity without the need for a large upfront deposit.

What are the best rates available for let-to-buy mortgages?

These are typically bespoke products, shaped around your individual circumstances and objectives, and can vary significantly depending on the lender and the type of property involved. To ensure you secure the most suitable solution, it’s advisable to speak with a specialist consultant who can provide tailored guidance based on your specific requirements.

Key considerations:

It is important to remember that you are buying a second property and as such will be liable for the additional property surcharge in Stamp Duty Land Tax, which depending on the property’s value could mean you need to factor in a significant amount of money to your purchase. However, if you sell your original property within three years of purchasing the second, you can claim the difference between what you paid and the normal home mover rates back.*

If you only need to let your current property for a short period—for example, if you are relocating temporarily for work or waiting to sell your home—you may not need to switch to a full buy to let mortgage. Some lenders may offer temporary consent to let, which can be a more suitable short term solution, as buy to let mortgages are generally intended for longer term arrangements.

A let to buy mortgage involves multiple moving parts, and attempting to manage the process yourself can mean dealing with two or even three different lenders. This often creates complications around timings and completion, among other challenges. As one of the more complex mortgage transactions, it is best handled with the support of an experienced advisor.

To discuss a let to buy mortgage, please complete the form to be connected with the appropriate Private Finance representative.

Your property may be repossessed if you do not keep up repayments on your mortgage.

Mortgage and protection services are referred to Private Finance Ltd, who provide independent mortgage advice and arrange tailored mortgage solutions for clients. Private Finance offers an initial discussion (without charge), during which they will outline their services and associated fees.

Private Finance is a trading style of Private Finance Ltd, 29 Lincoln’s Inn Fields, London, WC2A 3EG. Registered in England, no. 3855776. Private Finance Limited is authorised and regulated by the Financial Conduct Authority (FCA registration number 310566). Please note that the Financial Conduct Authority does not regulate commercial finance or some forms of buy to let mortgages.

*Stamp Duty Land Tax (SDLT) additional property surcharge refund: Eligibility to reclaim the 3% higher rates surcharge applies only where the property purchased is intended as your main residence and your previous main residence is subsequently sold within three years of that purchase. Any claim must be submitted to HMRC within 12 months of the sale of your previous main residence or within 12 months of the filing date of the original SDLT return, whichever is later. Refunds are subject to HMRC rules and verification. This information is provided as general guidance only and does not constitute tax advice. You should seek advice tailored to your circumstances.