Let to buy – the complete guide

If you already own your home but want to move out and rent it to tenants, the let to buy process might be the answer. It’s a specific type of arrangement that lets you rent out your current property and buy a new one to live in, using two different mortgages rather than one.

Whilst the name is very similar to ‘buy to let’, let to buy is not simply a variation of buy to let, but a distinct process that lacks dedicated products in the same way as, for example, limited company buy to let mortgages.

This guide explains exactly how let to buy works, when it makes sense, what lenders look for, and the trip hazards worth knowing about before you commit.

What is let to buy?

Let to buy is a mortgage arrangement used when a homeowner wants to keep their current property as a rental, rather than sell it, while buying a new property to live in themselves. In practice, this usually means two mortgages happening at (or around) the same time:

• A buy to let mortgage on your existing home, which you move out of and rent out to tenants.
• A residential mortgage on the new property you are moving into.

The term "let to buy" describes the direction of travel: you are letting out your existing property in order to buy a new one, which is distinct from the standard "buy to let” scenario, where you purchase or convert an existing property with the specific intention of renting it out from the outset.

How does let to buy work?

At a basic level, let to buy involves remortgaging your current home from a residential mortgage onto a buy to let mortgage, freeing you up to move out and let it, while arranging a new residential mortgage for the property you are moving into.

The two mortgages are usually arranged to complete around the same time, although the exact order and timing can depend on your circumstances, equity levels, and the lenders involved.

You will not find any specific let to buy products, because the term only refers to the above process which can be arranged with the lender while applying. As such, standard buy to let and residential mortgage products could be applicable for a let to buy scenario, depending on lender criteria.

A typical let to buy scenario

Consider a homeowner who bought a two-bedroom flat some years ago, with a residential mortgage. Their circumstances change; perhaps they are moving in with a partner, relocating for work, or simply need more space. Rather than sell the flat, they decide to keep it as a rental property.

To do this, they would:

1. Remortgage the flat from a residential mortgage onto a buy to let mortgage.
2. Use some of the equity released from that remortgage (if applicable) to help fund the deposit on their new home.
3. Apply for a residential mortgage on the new property they intend to live in.
4. Find a tenant for the flat and, once it is let, generate rental income.

Why do people use let to buy?

There are several common reasons homeowners choose a let to buy arrangement rather than simply selling their existing property:

Relocation or lifestyle change

You may need to move for work, family or lifestyle reasons, but that does not always mean that you want to give up your property, especially if there is a chance of moving back into the area in the future.

As a landlord, you can potentially take possession of your original home if needed, after having let it out. However, the rules around this have changed with the advent of the Renters’ Rights Act. 

In the past, Section 21 (the ‘no-fault’ eviction notice) was a fast and efficient method of reclaiming possession of a property, but this was removed from law. 

*Fortunately, Ground 1 of Section 8 remains at landlords’ disposal and can be used to gain possession of a property, if you can prove that you intend to move back into it. You must give four months’ notice to the tenants in occupation, but you cannot issue this notice during the first 12 months of a tenancy.

*Bear in mind that the law can change all the time, so please take legal advice on the above, which is for information only.

If you are using a let to buy strategy for the first time, these are some of the many considerations that come with being a landlord. It’s worth weighing these factors up before going ahead.

Keeping a foot on the property ladder

Some homeowners are reluctant to sell a property they've built equity in, or one in a location they believe will keep appreciating in value, and prefer to retain it as a long-term investment rather than cash it in.

This is often seen in areas that have seen strong price growth, or that a homeowner expects to keep growing. For example, properties near a planned transport link, regeneration project, or a location that has become increasingly popular. 

Selling in these circumstances can feel like giving up future gains you'd otherwise benefit from simply by holding on.

Generating rental income

Retaining and letting out your former home if you move - and can afford to do so - can generate a useful stream of rental income. Profit after costs may help fund or support your residential mortgage on your new home, provide supplementary income, or act as an investment for the future.

Money generated from rent can also serve a longer-term purpose, beyond covering your monthly costs or contributing to your personal disposable income. Landlords often use surplus rent over time to build up a deposit for a future property purchase. This is covered in our guide about building property portfolios. 

In a let to buy context, this means your original home could go on to fund further property investments down the line.

Starting a property portfolio

For some, let to buy is the first step into buy to let investing. Rather than deliberately buying an investment property from scratch, they transition into the role of a landlord by converting a home they already own, which can be a lower-risk starting point. Having familiarity with the property and local area certainly helps in this regard.

Let to buy vs. buy to let

It's easy to confuse these two terms, but they describe different starting points:

• Buy to let: You purchase a property specifically to rent it out, from day one, and you never intend to live in it yourself.
• Let to buy:You already own and live in a property, and you convert it into a rental as part of the process of buying a new home to live in yourself.

The mortgage product used to let out the property, a buy to let mortgage, is the same regardless of which route brought you there. The distinction is really about your starting position and your motivation, rather than the finance itself.

Let to buy vs. consent to let

Another term that gets confused with let to buy is "consent to let." These are also different things.

Consent to let is where you ask your existing residential mortgage lender for permission to rent out your property, without remortgaging onto a full buy to let product.

This is typically a temporary or short-term arrangement, and lenders will usually only grant it for a limited period, often around 12 months, with special conditions or a fee attached.

Lender criteria for let to buy

Because the let to buy process involves two mortgage applications (a new buy to let mortgage on your former home, plus your residential mortgage for your new home), lenders will assess both sides of the arrangement together, and criteria can be more involved than a standard buy to let or residential application on its own.
As specialist buy to let brokers, we regularly arrange let to buy cases and understand which lenders are comfortable with these more complex transactions.

Rental cover on the buy to let mortgage

As with any buy to let mortgage, the lender will typically want the rental income on the property being let to cover a set percentage of the mortgage payment, commonly in the region of 125%-145%, calculated using a specific ‘stress rate’, which can be higher than the actual interest rate of the mortgage.

This is to ensure that the buy to let mortgage remains affordable for you if your circumstances change in the future.

If projected rent doesn't meet or exceed this threshold, it can limit how much you're able to borrow against the property.

Much can change over the course of a mortgage term. You need to be confident that you can manage both mortgages – and a lender needs to share that confidence.

Deposit and equity requirements

You will need sufficient equity in your existing property to remortgage it onto a buy to let basis, as buy to let mortgages generally require a minimum of 15%-25% equity.

You'll also need a deposit for your new residential purchase, which may come from savings, other income sources, or equity released from the property being converted to a rental.

Existing mortgage lender policies

If you have an existing residential mortgage on the property you plan to let, your current lender may or may not permit a switch to buy to let with them directly, if they do not offer this type of mortgage, or your property/circumstances don’t meet their buy to let criteria.

It may be advantageous to switch a different lender to secure a suitable buy to let product, or a more competitive rate than your existing lender can offer.

This is where we can help. As a specialist buy to let mortgage broker with access to a wide range of lenders, we can guide you through the process and help identify the most suitable and competitive options for your circumstances.

How lenders look at let to buy cases

Not all lenders are comfortable with let to buy scenarios, due to the overlap between them and consumer buy to let (CBTL) cases.

CBTL mortgage products are for ‘accidental landlords’ who rent out property they have previously lived in, had not originally intended to operate a rental business (for all the reasons a let to buy process might be employed, but also including situations where a property is inherited). Similar to regulated residential mortgages, they have rigorous consumer protections in place.

To explain the difference in this terminology, ‘let to buy’ is a process, whereas ‘CBTL’ is about regulation – it is a category of mortgage that the Financial Conduct Authority (FCA) oversee:

Not all lenders offer dedicated CBTL products, so let to buy options can be limited compared to standard buy to let mortgage enquiries.

However, if you are an experienced landlord and seek a let to buy solution, that can open more doors in terms of suitable lenders. Ultimately, it all depends on each individual lender’s criteria and risk appetite.

After a conversation with our experienced mortgage advisors, we can easily work out which lenders can and cannot handle let to buy cases and find you a great solution for your circumstances and budget.

Costs involved in let to buy

Alongside the deposit and ongoing mortgage payments, let to buy comes with a number of costs worth planning for:

• Remortgage fees on converting your existing property to a buy to let mortgage, including arrangement fees, valuation fees, and potentially legal fees.
• Early Repayment Charges (ERCs), if you are still within a fixed or discounted rate period on your existing residential mortgage when you remortgage.
• Stamp Duty on your new residential purchase, which is likely to include the additional property surcharge, since you will own more than one property once the arrangement completes.
• Letting costs on the property you are converting to a rental, such as safety certificates, any works needed to bring it up to rental standard, and letting agent fees if you choose to use one.
• Broker fees, if applicable, for arranging one or both mortgages.

Tax implications

Let to buy carries several tax considerations that are worth discussing with a qualified tax professional before proceeding, including:

• The Stamp Duty surcharge on additional properties, which applies to most let to buy purchases of a new residential home.
• Income tax on rental income received from the let property[JB1.1], which needs to be declared to HMRC.
• Capital Gains Tax considerations if you eventually sell the newly let property, given it will no longer qualify for the same reliefs as when it was your main residence.
• Inheritance tax considerations, if you plan to leave any of your properties in your will.

A mortgage advisor is not qualified to offer tax advice, so you would have to consult a qualified tax advisor to discuss any of these points.

Risks and things to consider

Let to buy isn't the right solution for everyone, and it's worth weighing up the following before committing:

You become a landlord, with all that entails

Once your existing property is let, you take on the legal responsibilities of a landlord, including safety certificates, deposit protection, ongoing property management, and more.

You can use a letting agent for help with administering and marketing your property but make sure you understand what you and the agent are legally responsible for. 

Two mortgages, twice the risk

For many people, a single mortgage is already a large financial commitment. With a let to buy scenario, you are doubling the risk, since you are responsible for two mortgage commitments rather than one.

The rental income from your former home is intended to cover the monthly buy to let mortgage payment, and often a landlord will take profit as an (additional) monthly income. Depending on the level of profit, it may also cover your residential mortgage, but it is vital to make these calculations in advance.

Is let to buy right for you?

Let to buy is likely to be worth exploring if:

• You want to keep an existing property rather than sell it but need to move for a new home.
• Your existing property has enough equity to support a buy to let remortgage and, if needed, help fund a deposit on your new home.
• The rental income achievable on your existing property will meet a lender's rental cover requirements.
• You are comfortable taking on the responsibilities of a landlord.

It may be less suitable if:

• You need every penny of equity from your existing property to afford your new home outright.
• The property wouldn't achieve rental income sufficient to meet lender affordability requirements.
• You only need to let the property for a short, defined period, in which case consent to let with your existing lender may be simpler.

How Commercial Trust can help

Let to buy involves coordinating two mortgages, often with two different lenders at the same time. Getting this wrong or choosing lenders who aren't set up to work well together on this kind of case, can cause significant delays. Moving out is often stressful enough without all of this on your shoulders.

As a specialist buy to let mortgage broker, we can help you navigate this complex situation strategically and provide regular, transparent communication. Here is what we would do for you:

• Assess whether your existing property meets buy to let rental cover requirements before you commit to the process.
• Identify lenders experienced in handling let to buy cases smoothly, including those who understand how the two applications need to work together.
• Advise on how much equity you may be able to release from your existing property, and how that fits with your new purchase.
• Manage the buy to let side of your application from enquiry through to completion, working alongside your residential mortgage adviser or solicitor as needed.

If you're considering let to buy and want to understand what's realistically achievable based on your circumstances, get in touch with our team today.