Let to Buy

What is a let-to-buy mortgage?

Let-to-buy mortgages allow you to buy a new home while letting out your current home.  

Rather than a single mortgage, let-to-buy involves you taking two mortgages with the same lender; a buy-to-let mortgage on your existing home and a standard mortgage on your new home. 

You will be pleased to hear that although the market for let-to-buy mortgages is relatively niche, there are specialist providers who are willing to lend on this basis. 

As a whole-of-market mortgage broker, at Teito, we have access to deals not available to the general public, including those who lend for let-to-buy mortgages. 

What are the benefits of a let-to-buy mortgage?

Let-to-buy mortgages can provide a straightforward way to convert your home to a buy-to-let property and move to a new home at the same time.

There are many reasons why you may not be keen to sell your existing home, a few of the more common ones include:

• At some point, you plan on moving back to your home.
• You are struggling to sell your home.
• You are keen to retain your property as an investment.
• The equity in your home has reduced since you bought it.

How does a let-to-buy mortgage work?

You will need to apply for two mortgages with the same lender; a buy-to-let mortgage for your current property and a standard mortgage for your new property. 

A few points to consider:

• You will need to pay an additional 3% stamp duty on a second property - this can be refunded if you sell within three years. 
• You will need to meet the eligibility criteria for both mortgages and have considerable equity in your home. 
• The projected rental income will need to cover the repayments (at least 125%)
• You will need to have enough equity to cover the minimum Loan to Value (LTV) ratio. 

What are the alternatives to let-to-buy mortgages?

Depending on your current lender, they may grant consent to let on your existing residential mortgage, which may permit you to move our and rent your home for a short length of time while you secure a second residential mortgage for your new home. However, you may find that you struggle to meet the eligibility criteria for having two residential mortgages under this arrangement.

How can I get a let-to-buy mortgage?

As you are applying for two mortgages, you'll have to meet the criteria for both.

To qualify, you will need to:

• Meet the affordability requirements for the new mortgage
• Provide a minimum of 10% deposit for the new home
• Have at least 25% deposit for your buy-to-let mortgage, which can come from equity in your existing home. 
• Make sure that the rental income is at least 125% of the mortgage repayment cost.

How much stamp duty will I need to pay?

As with let-to-buy mortgages you will own two properties, you will pay additional stamp duty land tax than if you were simply moving home. 

Stamp duty in England and Northern Ireland (from October 2021)
PURCHASE PRICE	FIRST TIME BUYERS	RATE ON MAIN RESIDENCE	RATE FOR ADDITIONAL PROPERTIES
Up to £300,000	0%
from £300,001 to £500,000	5%
Up to £125,000		Zero	3%
The next £125,000 (the portion from £125,001 to £250,000)		2%	5%
The next £675,000 (the portion from £250,001 to £925,000)		5%	8%
The next £575,000 (the portion from £925,001 to £1.5 million)		10%	11%
The remaining amount (the portion above £1.5 million)		12%	15%

You can claim back the additional stamp duty if you sell your second property within three years and make the claim within twelve months of completion. 

How can I learn more?

As let-to-buy mortgage arrangements can be complex, we would recommend that you use an experienced mortgage broker.

At Teito, we are an independent whole-of-market broker, meaning we have access to deals that are not generally available to the public. Complete our simple online form today to get started and we'll make your let-to-buy mortgage as straightforward as possible.