Let-to-buy is when you rent out your existing home and buy a new one to live in.
Essentially, it involves having two mortgages at the same time. You convert your existing mortgage to a buy-to-let mortgage so you can let out your current home, and then take out a standard residential mortgage on the home you’re buying.
Let-to-buy could also be suitable for homeowners in the following situations:
- You’re in a hurry to move to a new home and can’t wait to sell your current property.
- You have struggled to sell your home due to market conditions.
- You want to buy a property with a partner but maintain ownership of your current home.
- You’re moving elsewhere for a few years but plan on moving back to your home in the future.
Let-to-buy mortgage lending criteria
When switching to a buy-to-let mortgage, your eligibility will be based on how much rental income you can bring in from the property you’re letting out, rather than how much money you earn.
Specialist let-to-buy mortgages are on offer from a handful of providers, and you’ll generally be required to meet the following criteria:
- Borrowing limit of 75%-80% of the value of your current home: if you want to release equity when remortgaging you’ll need to factor this in to your calculations.
- Proof that you’ll bring in higher rent than your mortgage repayments: most lenders require rent to cover around 145% of monthly repayments.
- Proof that you’re buying a new home at the same time as switching your mortgage: they’ll usually request a copy of your mortgage offer for your new home.
- Same solicitor for both transactions: this isn’t always required but is by some lenders.
- Maximum age: 70 or 75, usually.
It is highly recommended that you use a mortgage broker for this process, as there can be various complexities involved.
Think carefully about securing other debts against your home. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it