There are many reasons why you might want to move house. Perhaps you want to downsize or you’ve always wanted to live by the coast. Maybe you’re moving to be closer to family or friends. You might need to relocate for a new job. Whatever the reason, it can be incredibly frustrating if you find yourself struggling to sell your current house.
If you want to move but can’t sell your house, a let-to-buy mortgage might give you the freedom to move sooner than you think. It can help you keep your existing property, rent it out, release some of the equity, and take out a new mortgage on your next property.
With over 20 years of helping homeowners move when their sale stalls, Simmonds Mortgage Services has guided many clients through the let-to-buy process successfully. If you’re stuck in a property chain, struggling to sell at the right price, or worried about missing out on your next home, our blog will help you understand if a let-to-buy mortgage is the right choice.
Need more help figuring it out? Book a meeting with us today, and let’s chat about mortgages.
Why a let-to-buy mortgage might allow you to move house from your existing property
You’ve probably heard of a buy-to-let mortgage, which is the type of mortgage landlords take when they buy a property specifically to rent it out. A buy-to-let (BTL) is designed so that the monthly income covers the mortgage repayments.
A let-to-buy mortgage works slightly differently. Instead of buying a new investment property, you take a buy-to-let style loan on your existing property, and then use the equity as a deposit for the new residential property you want to move to.
If you want to move but can’t find a buyer, this can be a useful option. If you have enough equity in your current home, a let-to-buy mortgage can release funds for the deposit, fees and onward purchase, letting you progress even if your existing house hasn’t sold.
Some lenders offer specific let-to-buy mortgage products, while others simply treat it as a standard buy-to-let arrangement.
Let’s look at an example to make this clearer.
Please note: These figures are simplified for illustration and exclude tax considerations.
- You bought your current property (Property A) 10 years ago for £150,000 with a 10% deposit.
- Your mortgage balance is now £85,000.
- The property is currently valued at £250,000.
You’ve found your dream home (Property B) for £330,000, and you can access up to 85% through a new residential mortgage. You also want to cover moving costs and Stamp Duty.
A let-to-buy mortgage on Property A could:
- Repay the existing £85,000 mortgage
- Release £45,000 as a deposit
- Cover £10,000 in fees
This creates a new mortgage of £140,000 on Property A, which would be covered by rental income.
You would then take out a new residential mortgage of £285,000 on Property B (£330,000 purchase price minus the £45,000 deposit).
What circumstances might be appropriate for a let-to-buy?
A let-to-buy mortgage can be helpful in a range of personal circumstances, especially when market conditions make it difficult to sell quickly or find a buyer at the right price.
Some common reasons include:
- You and your partner both already own a property, and you want to buy one together
- You’re moving away temporarily, but want to keep your existing property to live in in the future
- You need to move quickly and can’t sell your property fast enough
- You’d like to build a property portfolio while still moving to a new property
Some lenders allow a let-to-buy arrangement without purchasing a new property. This is beneficial if you want to move in with family or into rented accommodation. These products are less common, but still possible with the right advice from experienced mortgage brokers.
We’ve supported hundreds of happy customers. Just take a look at how we helped our clients move house with a let-to-buy mortgage. Here’s what they said:
“Couldn’t be happier with the service that we received from Daniel Temperley. He completed two mortgage applications for us simultaneously with excellent communication at all times.”
What affordability checks are done for let-to-buy mortgages?
Because the let-to-buy mortgage is secured against your existing home, lenders assess whether the expected rental income can cover the monthly repayments on that property.
Most lenders require rental income to be 125%–145% of the monthly mortgage payment. This rental stress test helps lenders check that the mortgage remains affordable even if rates rise.
Don’t forget to factor in an additional Stamp Duty surcharge of 5% for purchasing a second property!
What are the general lending criteria?
Let-to-buy lending criteria varies between mortgage lenders, but here’s what you can generally expect:
- Maximum 75% loan-to-value (LTV) on the let-to-buy property
- Some lenders will accept older borrowers, often with a maximum age limit of 80
- A good credit score is normally required, but some lenders will consider a less-than-perfect score
- You’ll usually need to demonstrate strong personal affordability on the new residential mortgage
- Lenders may want evidence of property maintenance plans and realistic rental expectations
Can I get a let-to-buy mortgage from any lender?
Not always. Before you jump in too soon, your current lender may not be able to help, and other lenders often require specific conditions. A let-to-buy is considered a specialist mortgage product, so it helps to have an experienced independent mortgage broker like Simmonds Mortgage Services who can search the whole market and give you the best chance of finding a lender who meets your needs.
Should I get a buy-to-let mortgage instead?
Sometimes the challenge is knowing whether you actually need a let-to-buy mortgage, or whether a buy-to-let mortgage would work better for your plans. (And try not to get them both confused!)
Both options involve renting out a property, but they’re designed for very different situations. To help you see the difference at a glance, here’s why you might choose each option:
| Buy-to-let mortgage | Let-to-buy mortgage |
|---|---|
| You want to buy a property specifically as an investment. | You want to move home but are struggling to sell your current property. |
| You don’t need to release equity from your existing home. | You want to release equity from your current property to use as a deposit. |
| You plan to keep your existing home as your main residence. | You want to buy a new residential home while keeping your current one. |
| You want to build a long-term investment portfolio. | You’re stuck in a property chain or need to move quickly. |
Realised it’s actually a buy-to-let mortgage you’re after? You might benefit from our how to get a buy-to-let mortgage guide as well.
Start your let-to-buy journey with Simmonds Mortgage Services today
If you want to move home but selling is proving a challenge, Simmonds Mortgage Services can help you explore your let-to-buy options. We’ll lay out your choices clearly, compare multiple lenders, and help you understand the costs involved so you can decide what’s best for you.
Call us today on 01184 693 037 or book your meeting to speak to a mortgage broker.
Frequently asked questions about getting a let-to-buy mortgage
Do I need consent to let before switching to a let-to-buy mortgage?
If you’re still tied into your current residential mortgage, you’ll need to get consent before you can rent out the property. This is known as consent to let. Some lenders allow temporary consent to let before switching to a full let-to-buy product, while others prefer you to move straight onto a new let-to-buy mortgage deal.
What if I can’t rent my current home immediately?
Most lenders expect your property to be rentable from day one. But as with all things in life, this might not work out (for example, you could face delays if you’re completing property maintenance or waiting for a tenant). It’s usually manageable as long as you can cover the mortgage repayments in the short term, but having a plan and notifying a letting agent early can strengthen your application.
Will I have to pay Stamp Duty Land Tax on a let-to-buy mortgage?
Yes. When you buy a second property, you’ll normally have to pay the additional 5% Stamp Duty surcharge. You may be able to claim this back if you sell your original property within specific HMRC timeframes. We’ll help you factor this into your overall budget when planning for two properties.
View the most up-to-date SDLT rates to calculate how much Stamp Duty you’ll have to pay.
Can you get a let-to-buy mortgage with bad credit?
Specialist mortgages like let-to-buy already have strict criteria, and bad credit can make it even more challenging. But don’t let it put you off trying. If your credit history isn’t looking its best, reach out to us for advice. We’ll see what options you have and help you find the best, most financially-sensible way forward.
Can I put my let-to-buy property into an SPV limited company?
Some people are considering using a Special Purpose Vehicle (SPV) setup for their rental property to take advantage of potential tax benefits. This means if you already own your home in your name (which most people do), you can create a limited company to hold the property. But you would need to sell the property to the company, which involves the usual costs and taxes of buying and selling.
Because of the additional work and costs involved, this setup usually works better for couples and individuals who want to start a rental portfolio or create a more tax-efficient plan for the future.
