Let-to-buy mortgages

Let-to-buy mortgages can help you simultaneously buy your next house and let out your former home - but there are plenty of risks to consider first.

Did you know...?

  • Let-to-buy involves taking two mortgages with the same lender - a buy-to-let mortgage on your current property and a residential mortgage on your next home
  • Since April 1, 2016, you have to pay an extra 3% stamp duty on a second property and this is only refunded if you sell your previous home within three years
  • You’ll also need substantial equity in your home to allow you to raise a deposit for your next purchase and you’ll have to meet the criteria of both the buy-to-let and residential mortgages

If you need to move - perhaps for a new job - but you're struggling to sell your home, let-to-buy mortgage products can offer a solution.

Let-to-buy actually involves having two mortgages - a residential mortgage on a property you're moving to and a buy-to-let mortgage on your previous home so you can rent it out.

That's where the name comes from: you let out your previous home so that you can buy your next one.

However, there are lots of factors to take into account before opting to go the let-to-buy route and since changes to stamp duty on second homes in April 2016, let-to-buy has become more costly.

Who might want a let-to-buy mortgage?

Let-to-buy products are for anyone who can't, or doesn't want to, sell their previous home before buying the next one.

This might be because you're working elsewhere for a few years and plan to move back eventually, or simply because you're finding it difficult to sell your home quickly enough.

If the value of your property has fallen since you bought it, it could help you to avoid making a loss as you can let it out in the hope its value will go up in the future.

How does let-to-buy work?

With a let-to-buy mortgage, you'll actually be applying for two mortgages with the same lender - a buy-to-let one for your current property and a residential product for the one you want to move to.

With a let-to-buy deal, the lender allows you to raise a deposit for your next property by taking out extra borrowing without taking your current mortgage into account as a commitment.

However, the projected rental income will have to cover the repayments once it's remortgaged as a buy-to-let property and you'll still need to have enough equity left in your property to meet your lender's minimum buy-to-let loan to value (LTV) ratio.

For example, if your home is worth £200,000 and you still have £100,000 to pay on the mortgage, you might want to borrow some of your equity for a deposit on your next home.

A let-to-buy lender with a minimum buy-to-let LTV of 75% might let you borrow £50,000 from the property as a deposit to purchase your next home and convert your previous home to buy-to-let.

Stamp duty and let-to-buy mortgages

On 1 April, 2016, changes to stamp duty on second properties made let-to-buy deals far less attractive for home movers.

That's because rules came in charging an additional 3% stamp duty on additional properties, meaning an extra bill of £6,000 on a £200,000 house.

If you sell your previous home within three years, the government would refund the extra 3% you paid, but that's probably cold comfort to the average let-to-buy home mover.

If you're already taking out equity from your home to fund a deposit for your next move, the additional 3% could make a big dent in your moving funds, even if you plan to sell the old property in a year or two and recover the 3% from the government.

Advantages of let-to-buy

If you want to convert your home to buy to let and move to a new home at the same time, let-to-buy smooths out some of the potential mortgage issues.How to be a landlord

For example, due to lenders' criteria for both types of loan, it can be difficult to organise a buy-to-let mortgage for the property you're currently living in, while simultaneously arranging a residential mortgage for your next home.

Let-to-buy can also take the pressure off to sell quickly and make a loss in the process.

Also, as the outcome will be owning two properties, you'll increase your gains if property prices rise in the future.

Disadvantages of let-to-buy

Owning two properties is a double-edged sword - if house values fall, you'll suffer steeper losses.

Let-to-buy rates might not be as low as residential mortgage rates, although they may be competitive compared with buy-to-let rates.

However, as relatively few lenders offer let-to-buy deals, you'll have fewer deals to choose from, which could mean they're more costly.

You'll also be paying two mortgages, so if you don't manage to let out your previous property quickly, that could seriously stretch your finances.

As mentioned already, buying a second property could give you a distinctly costly stamp duty bill, with the additional 3% only being refunded if you sell the let-out property within three years.

Alternatives to let-to-buy

Although a let-to-buy mortgage might seem a convenient way to get moving in a slow market, there are plenty of risks and implications so it's important to consider the alternatives.

Buy-to-let mortgage

You could simply move out, perhaps into rented accommodation, before securing a buy-to-let mortgage on your previous home.

However, this can be complex and costly and you might not meet lenders' buy-to-let criteria.

Consent to let

Some lenders will grant you consent to let on your residential mortgage, allowing you to move and let out your home for a relatively short length of time.

However, it might be harder to get a second residential mortgage to buy another home for yourself while you have consent to let.


If you really need to move for work or other reasons, consider whether you might be better off simply selling up and going into rented accommodation for a while.

Although you might not get the full value you'd hoped for when selling you home, it'll put you in the advantageous position of being a chain-free buyer on your next home, which could help you to drive a better bargain.

By Derri Dunn