Let to Buy: Keeping Your Current Home and Buying Your Next One

Most people who come to us about let to buy start from the same place. They have found somewhere they want to move to, they have equity in their current home, and something makes them reluctant to sell it. Sometimes that is the interest rate they are sitting on. Sometimes the chain has collapsed. Quite often it is simply that the house has been a good investment and letting it out feels smarter than cashing it in.

At Drummonds Finance Group we arrange let to buy cases regularly, for clients in Oxfordshire and across the UK. This guide explains how the arrangement works, how lenders assess both halves of it, what it costs, and when consent to let would serve you better.

What let to buy actually means

You remortgage your existing home onto a buy-to-let mortgage, keep it and rent it out. At the same time, you take a new residential mortgage on the property you are moving into. Both happen together, usually completing on the same day.

The point of doing it this way, rather than simply asking your current lender for permission to let, is that a buy-to-let remortgage lets you release equity from the existing property. That released cash typically becomes the deposit on your new home. Without it, most people would not have the funds to buy while still owning.

So let to buy solves two problems in one move. It keeps the property, and it funds the purchase.

Let to buy or consent to let

These get confused constantly and they are genuinely different things.

Consent to let is permission from your existing lender to rent out your home while keeping your current residential mortgage. It is usually quicker, sometimes carries a fee or a rate increase, and is often granted for a fixed period rather than indefinitely. Crucially, it does not release any money. We have covered how it works in detail in can I rent out my house on a residential mortgage.

Let to buy involves a full remortgage onto a buy-to-let product, which takes longer and costs more up front, but releases capital and puts the property on a proper long-term letting footing.

The rule of thumb we use is this. If you have enough deposit for the new place without touching the equity in the old one, and you only expect to let for a year or two, consent to let is usually the better answer. If you need the equity, or you intend to keep the property as a rental for the long haul, let to buy is the right structure.

There is also a third option people forget, which is porting your existing mortgage to the new property and selling the old one. Worth ruling in or out before you commit to anything.

How lenders assess the buy-to-let side

The existing property is assessed as a rental, which means the affordability test changes completely. Instead of looking at your salary, the lender looks at the rent the property will achieve against the mortgage payment.

This is the rental stress test, and it is the part that catches people out. Lenders want the projected rent to cover the mortgage interest by a margin, typically calculated at a notional rate that is higher than the rate you will actually pay. Higher rate taxpayers usually face a stiffer test than basic rate taxpayers.

If the rent does not stretch far enough, you have a few options. Borrowing less against the property is the simplest, though that reduces the deposit you can release. Some lenders allow top slicing, where surplus personal income is used to bridge the gap. A five-year fixed rate often passes a more generous stress test than a two-year, which is why so many let to buy cases end up on five-year products.

A local letting agent's rental assessment is worth getting early. Your own estimate of what the property will let for is not what the lender will use, and finding out at valuation stage that the figure is lower than you assumed is an unwelcome surprise when you have a purchase running alongside it.

The deposit and the maximum you can release

Most buy-to-let lenders will go to 75% of the property's value, and a smaller number stretch to 80%. So the equity you can release is roughly the difference between 75% of the current value and what you still owe.

A worked example makes it clearer. If the house is worth £400,000 and you owe £180,000, a 75% buy-to-let mortgage of £300,000 would leave £120,000 released, less costs. That £120,000 becomes your deposit on the new purchase, subject to the rental stress test supporting the £300,000 in the first place.

Lenders will want to know where the deposit came from, and equity released from another property is a well-understood source. If any part of the deposit is coming from family instead, the rules are different and we have set them out in gifted deposit rules.

The residential side

The new purchase is assessed as a normal residential mortgage, with one important difference. The lender knows you are keeping a second property with a mortgage on it.

Most will disregard the buy-to-let mortgage payment provided the rent covers it comfortably, which is usually the case if it has passed the stress test. Some are less relaxed and will count part of it against your affordability. A few want to see that the letting is genuinely arranged rather than aspirational.

Your credit profile matters on both applications, and if there is any history behind you it is worth reading how long after a default or CCJ can you get a mortgage before you start.

Costs to budget for

Let to buy is not a cheap manoeuvre and it is better to see the full picture at the outset. You will have arrangement fees on both mortgages, legal costs on both, a valuation on the purchase and usually one on the existing property. Buy-to-let rates sit above residential rates, so the payment on the old house will rise even before you account for the larger balance.

There is also an additional property surcharge on the stamp duty for your new purchase, because you will own two properties on completion. Rates change, so check the current position before you budget, but it is a material sum and it catches people out.

Then there are the ongoing realities of being a landlord. Letting agent fees if you use one, safety certificates, insurance, periods without a tenant, and tax on the rental profit. Speaking to an accountant before you commit is sensible, particularly around how mortgage interest relief works for individual landlords.

Should the property go into a limited company

For some people, holding the rental through a limited company works out better, particularly higher rate taxpayers planning to build a portfolio. It is not automatically the right answer, and moving an existing property into a company counts as a sale, with the tax consequences that implies.

We have compared the two routes properly in limited company versus personal name buy-to-let mortgages, and our limited company buy-to-let page covers the lending side. If this turns into the first of several properties, our portfolio landlord page is worth a look too.

Getting the timing right

The single biggest practical risk in let to buy is co-ordination. Two mortgage offers, two solicitors' files and one completion date. If the buy-to-let remortgage slips, the purchase deposit is not there when it is needed.

Start the buy-to-let side early, ideally before you have an offer accepted on the new place. Use one solicitor firm for both transactions where you can. Get the rental assessment done at the beginning rather than the middle. And check whether your existing mortgage has an early repayment charge, because paying one can wipe out a large part of the benefit.

Frequently asked questions

Can I do let to buy with any lender? No. Not every lender is comfortable with both halves running together, and some residential lenders take a stricter view of the retained buy-to-let commitment than others.

How much equity do I need in my current home? Enough to leave the buy-to-let at around 75% loan to value after you have released your deposit, and enough for the rent to pass the stress test on the remaining balance.

Do both mortgages have to complete on the same day? Usually yes, because the released equity funds the purchase deposit. This is why the co-ordination matters so much.

Will I pay the additional stamp duty surcharge? Yes, on the new purchase, because you will own two properties on completion. Check the current rates before budgeting.

Is let to buy the same as buy to let? No. Buy to let is purchasing a property specifically to rent out. Let to buy is converting your existing home into a rental so you can move on.

Where we come in

Let to buy sits across residential and buy-to-let lending, and the work is mostly in picking lenders whose criteria fit both sides of the move. We arrange these for clients across the UK, from Oxford and Bicester to London and further afield.

If you are weighing up whether to sell or keep, get in touch or call 0330 1330034 and we will run the numbers properly before you commit to anything. Our buy-to-let mortgage advice and moving home pages cover the two halves in more detail.

Important risk warnings

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

Not all Buy to Let Mortgages are regulated by The Financial Conduct Authority