If you want to move but keep your current home and let it out, let-to-buy could be the answer. It involves two mortgages and some important considerations. This guide explains let-to-buy: what it is, how it differs from buy-to-let, the stamp duty implications, and who it suits.
What let-to-buy is
Let-to-buy means keeping your current home, letting it out to tenants, and buying a new home to live in. You end up with two properties and two mortgages: a let-to-buy or buy-to-let mortgage on your former home, now rented out, and a residential mortgage on your new home. It is a way to move without selling, often used when someone does not want to, or cannot easily, sell their current home.
How it differs from buy-to-let
Let-to-buy is closely related to buy-to-let but arises from a different situation. Buy-to-let is buying a property specifically to rent out, while let-to-buy is letting out a home you already live in so you can move, as our guide to buy-to-let mortgages explains. The mortgage on your former home becomes a buy-to-let style arrangement, while you take a residential mortgage on the home you move into.
The two mortgages involved
Let-to-buy involves arranging finance on both properties. On your current home, you typically remortgage onto a let-to-buy mortgage, which may release some equity to help fund the deposit on your new home. On the new home, you take a residential mortgage. The lender assesses affordability across the arrangement, including the rental income expected from your former home. Managing two mortgages is a key feature of let-to-buy.
Consent to let as an alternative
If you only want to let your home temporarily, your existing lender might grant consent to let, allowing you to rent it out on your current residential mortgage for a period, as our guide to consent to let explains. This can be simpler than a full let-to-buy remortgage for a short-term let, though it is usually time-limited. For a longer-term arrangement, a let-to-buy or buy-to-let mortgage is generally needed.
Stamp duty on the new home
Because you will own two properties after a let-to-buy move, the purchase of your new home is treated as an additional property and usually attracts the stamp duty surcharge, currently 5% on top of standard rates. However, if your new home replaces your main residence and you later sell the old one within the time limit, you may be able to reclaim the surcharge, as our guide to stamp duty when you move home explains. The rules here matter.
Who it suits
Let-to-buy can suit people who do not want to sell their current home, perhaps because they expect it to rise in value, struggle to sell, or want to become a landlord, while still moving to a new home. It is also used by couples moving in together who keep one home as a rental. It requires being comfortable with the responsibilities and risks of letting, so it is not right for everyone.
The risks and responsibilities
Let-to-buy means becoming a landlord, with all that involves: finding and managing tenants, maintaining the property, meeting legal responsibilities, and coping with periods without rent. You also have two mortgages to pay, so a void period or problem tenant can stretch your finances. Understanding these responsibilities and risks, and being confident you can manage two properties, is essential before choosing let-to-buy over simply selling.
How the deposit on the new home works
In a let-to-buy move, the deposit for your new home often comes from remortgaging your current home to release some of its equity, while keeping it as a rental. The let-to-buy mortgage on your former home is usually arranged so the rental income covers it, and the released equity funds the new home's deposit. This way, you can move without selling, using your existing property's value to help buy the next.
Rental cover and affordability
Lenders assessing a let-to-buy arrangement look at whether the expected rent covers the mortgage on your former home, often requiring the rent to exceed the mortgage interest by a margin, as with buy-to-let. They also assess your ability to afford the residential mortgage on your new home. Both properties' finances are considered, so it is important the numbers work across the whole arrangement, not just one property.
Tax on rental income
Letting out your former home makes you a landlord, and the rental income is taxable, with rules on what expenses and mortgage interest relief you can claim. The tax treatment of rental income and mortgage interest is an important consideration, and it can affect whether let-to-buy makes financial sense. Because the rules are involved, it is worth taking tax advice, as this guide is general information rather than tax advice.
Your responsibilities as a landlord
As a landlord, you take on legal responsibilities, including safety obligations, deposit protection, and the right paperwork, as well as maintaining the property and dealing with tenants. These responsibilities apply to let-to-buy just as to any letting, as our guide to how buy-to-let mortgages work explains. Being prepared for the duties and effort of being a landlord is essential before choosing let-to-buy over selling your home.
Reclaiming the stamp duty surcharge
Because you will own two homes after a let-to-buy move, you usually pay the additional-property stamp duty surcharge on your new home. However, if the new home replaces your main residence and you sell your former main home within the time limit, you may be able to reclaim the surcharge, as our guide to stamp duty when moving explains. With let-to-buy, though, you are keeping the old home, so the surcharge usually stands.
Is let-to-buy right for you?
Let-to-buy can be a smart way to move without selling and to start building a property portfolio, but it is a bigger commitment than a simple move. You take on two mortgages, the duties and risks of being a landlord, the stamp duty surcharge, and tax on rental income. It suits those who want to keep their home and are comfortable letting it, but for many, simply selling is simpler and less risky. Weigh it carefully, with advice.
If you do go ahead, treat let-to-buy as the start of running a small property business, not just a way to avoid selling. Budget for void periods and maintenance, keep on top of your landlord responsibilities and tax, and make sure the finances work across both properties. Approached seriously, with advice, it can be rewarding; approached casually, two mortgages and a tenanted property can become a strain.
Used well, let-to-buy lets you hold on to a home you believe in while moving on with your life, but it asks more of you than a clean sale, so go in with a clear understanding of the finances, the duties and the risks before you decide.
In short
Let-to-buy means keeping and letting out your current home while buying a new one to live in, leaving you with two mortgages: a let-to-buy or buy-to-let mortgage on the old home and a residential mortgage on the new. Consent to let can suit a temporary let. The new purchase usually attracts the stamp duty surcharge, sometimes reclaimable. It suits those happy to be landlords, but carries real responsibilities and risks.
Where to get help and next steps
Read our guides to buy-to-let mortgages, consent to let, and moving home and your mortgage. This is general information, not mortgage or financial advice.