Let to Buy Mortgage
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Let-to-Buy Mortgage
Lee Sutton explains Let-to-Buy mortgages and when these can be a helpful option.
What is a Let-to-Buy mortgage, and how does it work?
A Let-to-Buy mortgage can be used in a situation where you’ve decided to rent your current property out to tenants and buy a new home to live in.
It could be that you can’t sell your property and need to rent it out. It could be that you are looking to keep the property as an investment – a Let-to-Buy mortgage allows you to move on and buy another property.
They work the same as a conventional mortgage – it’s a loan using your property as security. You make the repayments each month, as you would on any other residential or Buy-to-Let mortgage.
The only difference is that you’re letting your property out to buy another home. It’s a good solution for clients in certain circumstances, but it doesn’t necessarily suit everybody.
What’s the difference between Let-to-Buy and Buy-to-Let?
There’s not a huge difference – they’re both loans where you’re renting your property out to tenants. Both come with the option to have the mortgage on an interest-only or capital repayment basis, and you can get either of them on a fixed or tracker rate.
The main difference is lenders’ criteria and how they assess the mortgage. Let-to-Buy allows the existing owner to rent their property out without selling, whereas with Buy-to-Let, you are purchasing a property with the sole intention of renting it out. That affects how lenders underwrite the mortgage.
Who is a Let-to-Buy mortgage for?
Anybody who wants to buy a new home before they’ve sold their current property – and is happy to rent their existing house out to tenants.
A common scenario is a couple who want to move in together, where either or both of them already own a home. They might want to combine their resources and buy a bigger property, but they can’t sell one of the properties. Let-to-Buy can act as a chain breaker – allowing them to get their dream home together.
Or, perhaps someone wants to start a property investment portfolio or is thinking about retirement. They’ve got a property that’s a good rental prospect, so they want to keep hold of it.
There are different reasons to do it, but Let-to-Buy is geared for anybody who wants to rent their property out, for commercial or emotional reasons.
What criteria do I need to meet for a Let-to-Buy mortgage?
To start with, you need to own a property and be a UK-resident. Typically, you need to be 21 or older, although some lenders are okay with 18. Many lenders will allow the mortgage to go past 75 or 80, and one or two don’t have an upper age limit.
The size of the loan is based on the rental yield the property will receive, which we touched on in previous podcasts on Buy-to-Let.
Because there’s no track record of the property being rented out, and you might not have any experience of being a landlord, some lenders might deem it a slightly riskier transaction. They’ll want to do a bit of due diligence and check you have an income in the background of, for example, £25,000 a year.
This really just comes down to a lender’s specific criteria. As with most mortgages, a good credit score will always help, too.
How much deposit do I need for a Let-to-Buy mortgage, and how much can I borrow?
As with standard buy-to-let, you normally need a deposit worth 25% of the property value. The amount you can borrow is then generally dictated by the rental yield.
Each lender has their own calculation around how much rent the property needs to receive. To throw another curveball, it also depends on which tax bracket you’re in.
Someone paying the 40% rate of tax would need to get a 145% rental yield, whereas a standard rate taxpayer needs less at 125%. Theoretically, then, a lower-rate taxpayer will be able to borrow more.
What are the pros and cons of Let-to-Buy?
The upside is that you’re able to move to a new home without having to sell yours. You might do it for emotional reasons – people buy properties with their hearts, not their heads.
You might find somewhere you want to buy, but you haven’t sold your home – creating instant stress. It’s an option to break the chain and move faster.
The downside is that by not selling your main residence, you will incur additional stamp duty. Have a chat with your solicitor before you go down this route to make sure you don’t suddenly have a huge tax bill. It could impact whether you can make the purchase or not.
We would always look into what you can raise on the Let-to-Buy property and what you need for the purchase. Looking at all the numbers is key to make sure it’s a sensible plan.
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How does a Let-to-Buy mortgage affect affordability?
You’re potentially going to have some additional income from that property, which could help with affordability on the new mortgage. If you can get confirmation from a letting agent indicating what you could gain in rental income, some lenders allow you to use that towards your borrowing.
More generally, lenders check that the rent will cover the old mortgage and then ignore it. Your borrowing is then just based on your current income.
You might be planning to build a property portfolio to act as your pension – this can be the first step on that journey. I do know a landlord who’s done this a couple of times: buying a main residence, moving on and renting out the original. He’s been clever in achieving that.
What are the implications of becoming a landlord?
Obviously, it’s a big step to take on two mortgages. Also, becoming a landlord has the benefit of creating additional income, but it comes with risks. If there are no tenants in the property, you’ve got to pay two mortgages, which is something to consider seriously.
The tenant might not look after the property or may not stay long. You’ll need to find new tenants, maintain the property and manage the general upkeep. You’ve also got the additional complexity of having to do an annual tax return.
But, by keeping the property, you’ve got the rental income plus the possibility of capital growth, depending on what house prices do.
A big topic at the moment is the Renters’ Rights Act [at the time of recording in February 2026]. I don’t want to go deeply into it, but that’s something that landlords really do need to be aware of. There are also requirements for properties to meet certain standards on energy performance.
Prospective landlords need to do their homework. Have a chat with a mortgage advisor, and get legal and tax advice.
Can I get a Let-to-Buy mortgage with bad credit?
Yes, it’s not impossible to get a Let-to-Buy mortgage with bad credit. It really depends on what the credit issues were, the size, and the number and how far in the past they happened. If you’re unsure about your credit record, get a copy of your credit file and have a chat with a mortgage advisor.
Lenders have less appetite for poor credit, especially as Let-to-Buy can be perceived as riskier than Buy-to-Let. That’s because you’re going into it with the intention of buying a property, rather than to create an investment. Many Buy-to-Let landlords already have properties in the background, which makes lenders more comfortable.
Your credit score is based on multiple factors, including how long you’ve been on the voters’ roll, your past credit and how you have managed it. Lenders look at whether any payments have been late or missed.
Minor things shouldn’t be a problem – such as a parking ticket or mobile phone – but if you took out a £25,000 bank loan and didn’t pay it, lenders won’t view that favourably.
Can I get a Let-to-Buy mortgage as a first-time buyer?
Technically, no, because you don’t have a property to let. You would be doing Buy-to-Let.
How does remortgaging a Let-to-Buy work?
Let-to-Buy is essentially remortgaging your residential property to a Buy-to-Let, and the process is pretty much the same. You’d apply for the mortgage, and the lender would do a valuation plus a rental assessment.
They will make sure that the rental figure you’re proposing matches the market, as that’s the figure they use to assess whether the mortgage is affordable.
The other difference is that your new mortgage may not be like-for-like. You might be looking to raise additional funds for a deposit or to cover fees for the purchase. Meanwhile, a standard remortgage or product transfer will often just be like-for-like, where the new mortgage is the same size as the old one.
We talk our clients through the process and what to consider. For example, it’s a good idea to open a new bank account to receive the rent and pay the mortgage, keeping your personal life separate from the rental property. It’s then easier to do your tax return at the end of the year.
We would chat through the pros and the cons around maintenance, management and finding a tenant. That’s nothing to do with the remortgage specifically, but that side is pretty straightforward.
You may want to use your own solicitor, whereas with a standard remortgage, you’d use the legals the lender provides. Your own solicitor can control the transaction and make sure the Buy-to-Let mortgage completes at the same time as the onward residential purchase.
What are the alternatives to Let-to-Buy?
It really depends on the scenario. There isn’t another product like Let-to-Buy – it does what it says on the tin. You let your property out to buy something else.
If you were looking at this on a very short-term basis, where you have seen a property to buy but haven’t sold yours, another scenario would be a bridging loan. It bridges the gap between selling one place and buying another.
If you go down the bridging route, you wouldn’t rent your property out. You would have taken the bridge based on selling the property to repay the loan as quickly as possible. That would open up a whole raft of pros and cons.
Is there anything else we need to know about Let-to-Buy mortgages?
Many people come along wanting to get a Let-to-Buy mortgage. It’s an area where you need to sit down for a good conversation with your mortgage broker, especially one that’s won awards for helping clients in this area.
People think that they can just rent a place out and buy another – but there’s more to it than that. We’ve touched on maintaining the property, having two mortgages to pay and the additional stamp duty. There’s a whole raft of things that people don’t take into account.
I helped a young couple recently where one had a property, and they were looking to buy together. The property he owned wasn’t strong on the rental side – it could wash its own face, but it didn’t allow them to raise enough funds to pay the stamp duty, which they’d been unaware of.
They couldn’t go down the Let-to-Buy route in the end, but instead, we found that Joint Borrower Sole Proprietor would work.
Just sit down with us for a good chat. We like to do a budget planner to show what you can raise, what your costs are going to be and what’s left as a deposit for the purchase.
Key Takeaways:
- Let-to-Buy mortgage is a loan used when you rent out your current residential property to tenants and buy a new home to live in. It is often used as a ‘chain breaker’ to allow you to move faster or to keep your current property as an investment.
- Both Let-to-Buy and Buy-to-Let involve renting a property out, but Let-to-Buy is for an existing owner who wants to rent their home without selling, while Buy-to-Let is for purchasing a property with the sole intention of renting it out. Consequently, first-time buyers cannot get a Let-to-Buy mortgage because they do not already own a property to let.
- You typically need a 25% deposit of the property value, and the amount you can borrow is dictated by the rental yield. A higher rental yield is required for higher-rate taxpayers (145% for 40% taxpayers) than for standard-rate taxpayers (125%).
- The main upside is the ability to move to a new home without selling your existing one. The key downside is incurring additional stamp duty, which should be discussed with a solicitor.
- Taking on a Let-to-Buy means taking on two mortgages and the risks of being a landlord, such as having to cover both payments if there are no tenants, property maintenance, and the added complexity of an annual tax return. Lenders may view it as slightly riskier than Buy-to-Let and may require proof of a background income (e.g., £25,000 a year).
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE SOME FORMS OF BUY-TO-LETS. YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP TO DATE WITH YOUR MORTGAGE REPAYMENTS.
A fee may be payable if we progress your application. Our average fee is around £200 and the maximum you may pay is £995 for Retirement Interest Only mortgages.
Mortgage Style Ltd, trading as Mortgage Style, is an appointed representative of HLPartnership Limited, which is authorised and regulated by the Financial Conduct Authority.