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Let-to-Buy Mortgage | Complete Guide

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You need a let-to-buy mortgage if you want to rent out your existing home, buy a new property to live in and have mortgages on both.

People typically use let-to-buy mortgages when they want to move house but haven’t got a buyer for their existing home, so they rent it out instead.

Sometimes let-to-buy mortgages are used by couples who each own their own property and who want to live together. One person converts their mortgage to let-to-buy, lets the home to tenants and then moves into their partner’s property.

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How do let-to-buy mortgages work?

Let-to-buy mortgages are used when you want to rent out a property you currently have a residential mortgage on and buy a new property elsewhere.

If you have enough equity in your home, you remortgage from a residential mortgage to let-to-buy, and release some cash to put down a deposit on a new home.

The mortgage on your existing property will be covered by the rental income, and you’ll need to pay your new mortgage as normal from your income.

The two mortgages might be with the same lender, or from different lenders.

How is let-to-buy different from buy-to-let?

A let-to-buy mortgage is aimed at ‘accidental’ or amateur landlords, rather than professional landlords. This type of mortgage is used by borrowers who want to let a property they currently live in and move elsewhere.

Buy-to-let mortgages are used when someone buys a property for the sole purpose of letting it to tenants.

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Why might someone take out a let-to-buy mortgage?

You might take out a let-to-buy mortgage if you own your home and you want to:

  • move to a bigger home, keeping your current property as an investment
  • move to a new property and are struggling to sell your home
  • buy or move in with your partner while keeping ownership of your property
  • live elsewhere for a few years, then move back to your current home

Why do you need a let-to-buy mortgage?

If you have a residential mortgage, the mortgage terms will mean you need to live in the property yourself. To let it out to tenants, you will need to either obtain ‘consent to let’ from your mortgage lender or convert your mortgage to let-to-buy or buy-to-let.

If you move out and let the property to tenants without doing any of these things, you’ll be breaking the terms of your mortgage agreement.

What is the lending criteria for let-to-buy mortgages?

Lending criteria for let-to-buy mortgages will vary depending on the lender, but criteria will typically include:

  • you must have owned and lived in the property for at least six months
  • maximum loan-to-value (LTV) of 75%
  • an age limit of 70
  • a simultaneous onward purchase of a new residential property
  • you must move out (to the new property) when the mortgage completes
  • evidence that you plan to let, not sell, your current home
  • proof of the achievable rental income on your home (most lenders require rent to cover 125 to 145% of monthly mortgage repayments)

Do you have to pay stamp duty on a let-to-buy?

Yes, you have to pay stamp duty if you buy a new property and remortgage to let-to-buy on your existing mortgage. In fact, you’ll have to pay the 3% stamp duty surcharge as you’ll be buying a second home.

However, if you sell your first home within 36 months of completing on the purchase, you can get the stamp duty refunded by HMRC.

You can use our stamp duty calculator to find out how much stamp duty you’ll need to pay.

Can I live in my let-to-buy property?

No, you can’t live in a property you own which has a let-to-buy mortgage. Once the mortgage completes, you’ll need to move out and let the property to tenants.

Should I get a let-to-buy mortgage?

A let-to-buy mortgage can be useful in certain situations. However, it will usually mean having two mortgages and you need to be sure you can afford to pay both.

Being a landlord comes with a lot of responsibilities. You could struggle to pay your let-to-buy mortgage if you have a void period or your tenant stops paying rent.

To get the best idea of your mortgage options and what mortgage suits you speak to a mortgage adviser. Our preferred mortgage adviser offers a free mortgage in principle that you could get instantly.

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Whatever mortgage you’re getting always remember that your property may be repossessed if you do not keep up repayments on your mortgage.

Last Updated: February 21st, 2023

Phil Spencer

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