Let to buy is a property strategy where you convert your existing residential mortgage to a buy-to-let or consent-to-let arrangement, and then take out a new residential mortgage to purchase another home. This allows you to keep your current property as a rental investment while moving to a new home.
The process typically involves two steps. First, you either remortgage your current home onto a buy-to-let product or obtain consent to let from your existing lender (which allows you to let the property while keeping your current mortgage, usually for a limited period). Second, you apply for a new residential mortgage on the property you want to buy.
Let to buy can be useful if you need to move but have not sold your existing home, or if you want to build a property portfolio. However, you will need to meet the affordability criteria for both mortgages simultaneously, and the additional stamp duty surcharge (5%) will apply to your new purchase since you will own two properties at completion.
You own a home worth £280,000 with a £150,000 mortgage. You remortgage to a buy-to-let product and let the property for £1,100 per month. You then buy a new home for £320,000 with a 10% deposit of £32,000, taking out a residential mortgage for £288,000. You pay the additional 5% stamp duty surcharge on the new purchase (£16,000 on a £320,000 property, rather than the standard £5,000).
Key Points
- Keep your existing property as a rental while buying a new home
- Requires converting your current mortgage to buy-to-let or getting consent to let
- You must afford both mortgages simultaneously
- The 5% additional stamp duty surcharge applies on the new purchase
- Can be a way to build a property portfolio while moving home