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What is a Let to Buy Mortgage?

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The Financial Conduct Authority does not regulate some types of buy to let or commercial mortgages.

The simple way of explaining this, is that a let to buy purchase and mortgage is where you will rent out your current home to tenants, buying a new home for yourself to live in.

For this to be achieved, you will be remortgaging your home from a residential mortgage, which is what will currently be in place, so that you can switch it onto a let to buy mortgage.

On top of this, you will be taking out a new mortgage on the home you are going to be purchasing and moving into.

Both mortgages will be working consecutively, as you need the funds that are to be released from your remortgage on the first property, so that you can put down a deposit on your new home.

This doesn’t mean that you will be sticking with the same mortgage lender, you will just be having a mortgage that relies on the other reaching completion.

*Note, remortgaging a residential property into a let to buy is not the same as a buy to let remortgage.

What is the difference between let to buy mortgage and buy to let mortgage?

As you may be able to guess from the names sounding quite familiar, a let to buy mortgage is actually a type of buy to let mortgage.

A buy to let means is where you take out a mortgage on a property, purely with the purpose of letting (renting) out a property, which in turn allows you to generate an additional income.

The difference with a let to buy mortgage compared to buy to let, is that it generally happens with “accidental” landlords. This is where you maybe started your journey with no plans to become a landlord, later changing your plans.

Instead of going through all the stress involved in selling your home and purchasing a new buy to let, often homeowners will instead choose to rent out that home, using the income generated to pay off their newly acquired residential mortgage.

Stamp Duty Charges

You should always make sure you are prepared for the costs of a mortgage, and the same applies for a let to buy mortgage. Stamp Duty isn’t factored in for everyone, so it is always important to look at this in advance.

As a fast & friendly mortgage broker, one of our dedicated mortgage advisors will make sure that you are aware of all the costs involved in your mortgage process, including things like Stamp Duty, during your free mortgage appointment.


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How to get a let to buy mortgage?

In order for you to obtain a let to buy mortgage, you must match up with the appropriate lending criteria. Your mortgage advisor will be able to review your case during your free mortgage appointment, so they can make sure this is the right path for you.

The qualifying criteria for a let to buy mortgage includes, meeting the requirements on affordability for your new home, having at least a 10% deposit for a new home, as well as a 25% deposit to put down on the buy to let (this can be equity released when you remortgaged).

You will also need to ensure that the projected rental income can cover 125% of your buy to let mortgage repayments. A good credit score is certainly recommended, though it may be possible to obtain a let to buy mortgage if you have bad credit.

Can I get a let to buy mortgage with bad credit?

Because of how this type of mortgage works and the fact it is linked to a residential and buy to let aspect of owning a property, the criteria for a let to buy mortgage can sometimes be a little stricter.

Whilst being the owner of a low credit score, having a CCJ or default in your name and a history of late payments, to name but a few, can hinder your chances of obtaining a mortgage, we do have access to specialist mortgage lenders who may be able to help.

To learn more about mortgages and bad credit, please feel free to read the following articles;

The Positives and Negatives of a Let to Buy Mortgage

As discussed further above, rather than going through the stresses of selling your current home and then finding a new home to live in, this type of process can reduce your stress levels.

Additionally, it is another way for you to earn enough income to pay for its own mortgage, plus extra profit that you can enjoy in any way you’d like.

The downsides to this, is that you will be responsible for two properties, with one of those being occupied by a tenant or even maybe a family, of whom you are now also responsible for. This in itself can be quite stressful for some people.

Whilst it will serve to earn you more income, a let to buy mortgage may have higher interest rates than a residential mortgage would have and there aren’t as many lenders who offer let to buy mortgage deals (though we still have plenty on panel who may be able to help).

On the flip side, whilst these interest rates will be higher than residential mortgage rates, a let to buy mortgage may have much more competitive interest rates and fees than you would be getting from a buy to let mortgage, which could be a big plus.

You’ll also need to think about how much the property is worth. If both properties go up in value, you could increase your gains and maybe even make decent profit if you look to sell in the future. This also means, however, if the values drop, you could be at a loss.

So, is a let to buy mortgage right for me?

There are various pros and cons when taking out a let to buy mortgage, but it all depends on what you are looking to achieve. There may be other options that are worth exploring.

Alternatives to a Let to Buy Mortgage

If a let to buy mortgage doesn’t quite seem right, you may be able to benefit from moving into temporary or rental accommodation, and simply taking out a regular buy to let mortgage.

This can potentially be a costly endeavour, however, and you may not match up with a lenders buy to let mortgage criteria.

Another option could be consent to let, wherein a mortgage lender allows you to rent out your residential property for a length of time, giving you time to move into your new home first.

Although this sounds relatively straightforward, this depends on your mortgage lender and you may find getting a new mortgage on a new home to be quite difficult if you have a consent to let currently going on.

Finally, a good alternative may just be to sell your current home and move into rental accommodation for a duration, until you have found a property and are ready to move in.

Getting out of the rental cycle can be difficult, though it may help you get into a better position for your next mortgage, especially with you not being tied to any potential property chains.

Speak with an Expert Mortgage Broker

As trusted and experienced providers of an open & honest mortgage advice service, we have helped lots of customers over the years to remortgage their residential properties into a let to buy property with a let to buy mortgage.

Our dedicated team of mortgage advisors are able to search 1000s of let to buy mortgage deals, finding the most appropriate one for your situation and what you are looking to achieve.

Book your free mortgage appointment online and benefit from speaking with an expert in the field, who can help get the ball rolling with your let to buy mortgage.

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About the Author

Malcolm Davidson

Managing Director of UK Moneyman LTD

Malcolm is one of the UK’s most well-known and respected Mortgage Advisors. He is passionate about providing a 5* customer experience and he has also trained and mentored dozens of fellow Advisors in a career that is now in its third decade.

In addition to his day to day duties as Managing Director, Malcolm still gives out mortgage advice and feels lucky that his job is also very much his hobby.

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