Let-to-Buy Mortgage Agreements

If you want to rent out your existing home while releasing equity and arranging a new mortgage for another residential property, a let-to-buy mortgage may be the right option. In this guide, we outline how let-to-buy mortgages work, how lenders review applications, the eligibility requirements, and where to look for competitive rates in the UK.

What is let-to-buy?

A let-to-buy mortgage arrangement allows you to switch your current residential property onto a buy-to-let mortgage while also taking out a new residential mortgage on the home you intend to move into. Rather than selling your existing property, you retain it as a rental investment.

This differs from a standard buy-to-let purchase because you already own the property that will be rented out, and you are applying for two connected mortgages at the same time — one residential mortgage and one buy-to-let mortgage.

How does it work?

Let-to-buy works by releasing equity from your current home through a remortgage or refinance, moving it onto a buy-to-let mortgage, and then using that equity as the deposit for your new residential property purchase. Lenders usually assess each mortgage on its own merits.

The buy-to-let mortgage is generally reviewed using projected rental income and stress test calculations, while the new residential mortgage is assessed against your personal affordability. Both mortgage applications need to be approved before the let-to-buy arrangement can proceed.

As two mortgages are involved, the timing, lender criteria, buy-to-let investment considerations, and affordability calculations all need to align for the arrangement to work smoothly.

Eligibility criteria

Let-to-buy mortgage eligibility criteria vary between lenders, but the main areas they usually consider include:

Property equity: Most lenders expect you to have at least 20% to 25% equity in your current home after it is refinanced onto a buy-to-let mortgage. You also need to factor in whether part of that equity will be used as a deposit for the new residential property.

Rental income and stress testing: The anticipated rental income from the property being converted to a BTL must usually meet the lender’s rental coverage rules, often between 125% and 145% of the mortgage payment at a stressed interest rate.

Personal affordability: Lenders review your income, existing credit commitments, and household spending to make sure you can afford the new residential mortgage.

Deposit: Equity released from your existing property is often used as the deposit, but you must still satisfy the residential loan-to-value (LTV) limits for the new mortgage.

Credit history: A strong credit record can widen your choice of lenders and help you access more competitive rates. Even so, borrowers with bad credit may still have options through specialist bad credit lenders.

Property type and location: Both the current property being let and the new residential property must meet lender requirements for property type and location. For example, non-standard construction properties can significantly limit the number of lenders available.

As lenders apply different stress tests and affordability models, speaking to a broker before applying can improve your chances of being accepted for a let-to-buy mortgage.

How to get a let-to-buy mortgage

Securing a let-to-buy mortgage usually begins with checking the current value of your property, reviewing your outstanding mortgage balance, and obtaining realistic rental estimates. This gives you a clearer idea of how much equity could be released and used as a deposit for your new home.

As two mortgage applications need to be managed together, choosing the right lender is an important part of the process. An experienced broker can structure both applications properly, make sure the rental figures satisfy stress-testing rules, and coordinate completion dates to help prevent delays.

To explore your let-to-buy mortgage options and compare lenders, speaking with a specialist broker is often the simplest route. For a free initial discussion with an expert advisor, you can get started below:

Are the rates higher for let-to-buy?

Let-to-buy mortgage rates are not automatically higher unless there are other underlying factors involved. However, you will normally be arranging a buy-to-let mortgage, which can carry slightly higher rates than a standard residential mortgage, alongside a new residential mortgage.

The rates available to you will depend on the LTV for both properties, your credit profile, the lender you apply with, and whether you meet the criteria for mainstream or specialist products. Higher levels of equity, which effectively means larger deposits and lower LTVs, together with strong rental coverage, will usually help you access the most competitive let-to-buy rates.

Available UK mortgage lenders

Here are a few examples of mainstream UK lenders that may be able to offer both buy-to-let and residential mortgages for let-to-buy applications:

Virgin Money: For the residential side, Virgin Money’s standard residential criteria and LTV limits will apply. One advantage of a Virgin let-to-buy mortgage is that simultaneous completion is not required when both mortgages are arranged with them.

The Mortgage Works: The Mortgage Works offers a maximum let-to-buy LTV of 80%. You must use the same solicitor for both the new property purchase and the remortgage onto the BTL product, and you must have lived in your current residential property for at least six months.

Barclays: Barclays may consider let-to-buy applications, although it will usually apply strict criteria to both the residential and BTL elements. For instance, you may need a larger deposit than some specialist lenders would require, and the affordability checks may also be more demanding.

To make a realistic comparison between lenders using accurate calculations and current rates, the simplest way to review the full range of options is to speak with an experienced mortgage broker.

Frequently Asked Questions