Let to Buy Mortgage

Get in touch for a free, no-obligation chat about how we might be able to help you.
1 Step 1
keyboard_arrow_leftPrevious
Nextkeyboard_arrow_right

What Are Let To Buy Mortgages?

What is a Let to Buy mortgage?

If you’re planning to move house, but don’t want to let go of your original home, you can use a Let to Buy mortgage. This enables you to let out your current home to tenants, whilst taking an additional loan for your new property.

A Let to Buy mortgage involves having two simultaneous mortgages in place. Whilst ordinarily you will take both mortgages with the same lender, it is possible to borrow from two separate lenders if this results in a better deal.

When Would You Consider a Let to Buy mortgage?

You don’t want to part with your current home
Perhaps your home has sentimental value, or you would like to give it to your children when they are old enough.

You need to relocate quickly
If you need to move quickly due to life issues, such as a new job offer or to care for ailing relatives, you might not have time or struggle to sell your home. A Let to Buy Mortgage can help you to fund this type of move without losing your original home.

When you have significant equity in your current home
Let to Buy is only an option if you have enough equity in your current property, as it will be difficult to obtain a mortgage offer without it. If you do have significant equity in your current home, however, a Let to Buy Mortgage can provide a stable source of additional income.

What are the criteria for becoming a Let to Buy Landlord?

In order to become a landlord using a Let to Buy Mortgage, there are fairly strict lending criteria that you will need to meet. Whilst these will vary slightly between lenders, they usually include:

  • As most applicants release equity from their existing home for a deposit, you will need to have enough equity to cover 25% of the cost of your new home, as a maximum of 75% Loan to Value will be offered.
  • Most lenders only accept applications from those between twenty-five and seventy-five years old.
  • To determine whether the mortgage is a viable long-term investment, the lender will want to be confident that the rental yield (income) from your existing property is around 125% of your new mortgage payments. You will usually be asked to provide proof of this, which will need to be obtained from a letting agent registered with the Association of Residential Letting Agents (ARLA).
  • You will need to meet affordability criteria, which usually requires a minimum salary of £25,000, a strong credit rating, and that the lenders are satisfied that you can afford the mortgage repayments.
  • Most lenders won’t consider a Let to Buy Mortgage where there is no onward Mortgage in place. You also cannot use the expected rental yield to borrow a higher loan for the onward purchase.


Whilst the deposit is ordinarily paid through equity release, you’ll still need the other funds necessary to purchase a new home available, such as arrangement fees and stamp duty

Tax implications and advantages of becoming a Let to Buy Landlord

There are a number of tax implications and some advantages involved with letting out your home, we recommend that you seek tax advice around the following prior to deciding whether Let to Buy is a financially beneficial option to you.

Rental income is taxable and has to be declared to HMRC

If you own more than one property, an extra 3% stamp duty is required on each additional property

Capital gains tax will be payable on your rental property when you sell it on
It is possible to gain from capital growth if your property increases in value, however, all gains will be taxable

How Can a Mortgage Broker help you secure the right Let to Buy mortgage?

It’s important to realise that, whilst they are similar in principle, there are differences between Let to Buy and Buy to Let mortgage products. In order to establish whether a Let to Buy mortgage will work for you, or if it’s an option at all, speak to a Mortgage Adviser for detailed advice.

Mortgage brokers are able to ensure that you find the most suitable mortgage for your circumstances from a broad spectrum of high street and independent lenders. When considering a Let to Buy Mortgage it’s also very important to seek tax advice.

Why Use The Mortgage Broker (London) Ltd?

At The Mortgage Broker (London) Ltd, it’s our vision to become the UK’s most trusted and respected mortgage broker. The only way for us to achieve this is by providing straightforward and transparent advice to every one of our clients.

From your first call to your last, we put customer service first before all else so you can be confident in getting expert mortgage advice.

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

We offer FREE no-obligation advice with no hidden costs. Payment is only taken when we proceed with the application. Therefore if we don’t complete any business, the customer never pays a penny.

In a perfect world, it would be easy to sell your home when you want to with no hassle or challenges involved. The reality however, is that the process can be quite daunting. You might not sell at the asking price, or market conditions may not favour you. 

One option that you could strongly consider is to rent out your current property and then take out a let to buy mortgage to help you purchase your new home. 

What is Let To Buy?

Let to Buy mortgages are loans that homeowners can take to purchase an additional property when they aren’t ready to sell their current homes. This mortgage allows you to let your existing home to tenants while living in your new one. The income accrued through the rent allows you to pay off your current mortgage and potentially some of your new mortgage. 

When Would You Consider a Let to Buy Mortgage? 

Some people would prefer to purchase another home in addition to what they currently have. 

This has caused this type of homeownership plan to grow quite popular in recent years, so much so that as of June 2019, 234,000 let to buy loans were taken out. However, many people tend to opt for this mortgage plan for various other reasons. 

Taking out a let to buy mortgage is more suitable when your property is not selling as quickly as you would like. Or, perhaps there has been a decrease in property values, and you would prefer to sell when these values increase. If you have adequate equity in your current home, it could be possible to re-mortgage and free up funds to use as a deposit on your new home. 

A let to buy mortgage will also be suitable for you if you and your partner plan to move in together. If both of you own your properties, you can decide to move into one and rent the other out under a let to buy mortgage. 

It can also be useful when you want to keep your current property as an investment for future benefits. There might be many other reasons why you would let your property out, instead of selling it. Whatever the case may be, a let to buy mortgage could be the right solution. Speak with your Mortgage Broker for specialist to help you navigate your options.  

Let to Buy Mortgages/Criteria – Becoming a Landlord with LTB Mortgage 

Like all other lending products, there are usually criteria that you need to meet to improve your chances of getting an approval. These requirements differ from lender to lender however, there are some set standards that you will most likely find across the board. It is recommended that you fulfill the following criteria:

  • Minimum age requirement is 25 years
  • Maximum age requirement is between 70 to 75 years
  • Good credit scores
  • Net allowable and disposable income
  • Equity of about 25%
  • A monthly rental payment that totals approximately 125% of interest off the mortgage
  • Pass an affordability assessment

How Can a Mortgage Broker Help You Secure the Right Let to Buy Mortgage? 

The process of securing a let to buy mortgage is not always straightforward, so you will most likely benefit  from additional help. Because there are two mortgages involved (maybe with two different lenders), it would be more beneficial than trying to do everything by yourself.

A broker that specialises in let to buy mortgages can better understand and assess your property situation to help you find the best solution. They can also consult with lenders and underwriters if you have any issues that could lower your chances of getting a loan. They might also help you gain access to better deals. 

Buy to Let and Tax Implications and Advantages 

When you successfully let out your home to tenants, they start to pay rent. Now that you are a landlord, any money you collect in the form of rent is taxable. Therefore, when you are filing your tax returns, you will need to disclose any rental income you receive. Like your other taxed source of income, you will be charged based on your income tax band.

Let to buy mortgages can be very beneficial to homeowners. For example, if you can secure funding to purchase an extra home, you can diversify your income streams. You will also be able to build equity for two properties, which can be valuable assets and investments when paid off. 

If you do not want to sell your home for whatever reasons, a let to buy option is excellent for you. It’s also good if you intend on moving back into your home after some time. 

Conclusion

A let to buy mortgage is a smart choice for people who want to purchase new homes yet keep their own homes for various reasons. It can also be a worthwhile option if you are having a hard time selling your home. 

If you are not in a hurry to sell, you can wait to see what property market conditions are like at a later date. However, if you have decided to move forward with your choice, ensure that you speak with a broker so you understand all the considerations. 

Why Use The Mortgage Broker (London) Ltd? 

At The Mortgage Broker (London) Ltd, it’s our vision to become the UK’s most trusted and respected mortgage broker. The only way for us to achieve this is by providing straightforward and transparent advice to each and every one of our clients. 

From your first call to your last, we put customer service first before all else so you can be confident in getting expert mortgage advice.

There is no guarantee that it will be possible to arrange continuous letting of the property, nor that rental income will be sufficient to meet the cost of the mortgage.

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

There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances. The fee is up to 2% maximum of the loan amount, but a typical fee of £395-00 is payable on offer.

Let to Buy Mortgage

Call us FREE on 08000 320 316

Or if you prefer, just fill in this simple form and one of our experts will get back to you as soon as possible.