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Let to buy mortgages explained

Let to Buy mortgages are for homeowners who want to hang onto their current property and rent it out so they can buy and move into another property. Although they sound similar, there are differences between them and Buy to Let mortgages. Let’s take a quick look at Let to Buy vs. Buy to Let: A Buy to Let mortgage is for landlords looking to buy a property with the purpose of renting it out, whilst Let to Buy is for homeowners who want to rent out their existing property so they can buy a new one to live in.

Let to Buy can be a good option for those who are finding it difficult to sell their home, or those who don’t want the pressure of having to sell in order to move on. It may also be a great solution for those who don’t want to sell their home - for example, if you want to move elsewhere for a while but eventually plan on moving back into their existing property, or if you decide to move in with your significant other but want to retain your property rather than selling it.

Homeowners using Let to Buy will need two mortgages: one for the property they want to rent out, and another one for the home they’re going to buy to live in. If you’re considering a Let to Buy mortgage, remember that there are additional Stamp Duty charges to pay when you buy a second home, so you’ll need to factor in these costs when thinking about how much you can afford to spend. Take a look at our Stamp Duty calculator to find out how much you’ll need to pay.

There’s a relatively small number of Let to Buy mortgages on the market, so interest rates may be higher than for other types of mortgages. Because there are lots of moving parts with this type of mortgage, it’s best to get Let to Buy mortgage advice from a fee free, advisor like L&C.

Let to buy mortgage process

Once you’ve decided that you want to rent out your current property in order to buy a new one, it’s a good idea to get in touch with a mortgage broker like L&C to discuss your next steps. Not all lenders are willing to lend on a Let to Buy basis, and some only offer deals directly to brokers, so we can help you to find a mortgage that you may not be able to find on the high street.

Let to buy mortgage eligibility criteria

As with other types of mortgages, eligibility criteria vary between lenders. However, most will require a significant Let to Buy mortgage deposit, usually of around 25% of the value of your property. The best Let to Buy mortgage rates are available to those with a higher deposit, so it’s worth putting a significant amount of money aside if you think you’d like to take on this type of mortgage in the future.

Additionally, most mortgage providers will want to see evidence that you’re buying another property, and your existing home can’t already be listed for sale.

Some Buy to Let mortgage lenders also have strict age restrictions, meaning they won’t offer this type of mortgage to those over or under a certain age. This usually applies to those under 25 or over 75 years old.

Mortgage providers will also want to know that your monthly rental income will be enough to cover your mortgage payments on the property you’re renting out. In some cases, they may require that your rental income is significantly higher than your mortgage - sometimes as high as 125% of your monthly mortgage payments - as lending against rental properties is inherently riskier than residential ones.

The other eligibility criteria looked at by lenders are the same as for other types of mortgages, and can include things like your affordability, any debts you have, your income and credit history. The Let to Buy rates available to you will depend on multiple factors, but L&C can help you to determine what options are best for your circumstances.

Finding the let to buy mortgage deal

As there are fewer mortgages of this type on the market, they can be difficult to secure, so there are a few things you can do to increase your chances of being offered a good Buy to Let mortgage deal.

Most mortgage lenders will have a minimum income requirement for this type of mortgage (usually £25,000), so you should look at your finances to understand whether this is the right option for you. As well as this, you’ll need to have a clean credit history so you should ensure your finances are in the best possible health. You can check your credit report with one of the credit reference agencies like Equifax, Experian or Transunion, each of which will provide you with a detailed report. Be sure to check this carefully for errors, as even small discrepancies can impact your ability to qualify for a mortgage.

Because lenders will want to know that your rental income covers the cost of your mortgage payments, ensure you do thorough research into the local rental market before applying for your mortgage to get a good idea of how much you’ll be able to charge your tenants, and what your total income will be. Remember to take into account the hidden costs of being a landlord. It’s a good idea to speak to multiple local letting agents to get a thorough picture of the rental market, as this will be taken into account as part of your affordability assessment.

L&C can help you through this complex process with our expert mortgage advice - just get in touch today to find out more.

Let to buy mortgage repayment plan

You’ll repay your Let to Buy mortgage in the same way as you would any other mortgage, making monthly payments for the duration of your mortgage term. When you reach the end of the initial deal, you’ll usually be automatically switched to your lender’s standard variable rate which may be higher than the rate you’d been paying previously.

Most lenders will allow you to make overpayments, typically of around 10% of your balance each year, in order to pay off your mortgage faster, but note that if you exceed the limit you could be subject to Early Repayment Charges, which can be costly.

Apply for a let to buy mortgage with L&C

If you want to rent out your home and buy a new property to live in, as an expert Let to Buy mortgage broker, L&C can help to find the best deal for you. We’ll compare Let to Buy mortgages across the market and we can also help you to access exclusive deals that aren’t available on the high street.

We offer free, expert Let to Buy mortgage advice - and because this type of mortgage can be more complicated than a standard residential mortgage, our advisers will be on hand to provide you with any advice you might need.

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Apply for a let to buy mortgage with L&C

If you want to rent out your home and buy a new property to live in, L&C can help find the best Let to Buy mortgage for you.

We can compare all the Let to Buy mortgages you’re eligible for and, because this type of mortgage can be more complicated than a standard residential mortgage, our experts are on hand to provide you with any advice you might need. We can also help you access semi-exclusive Let to Buy deals that aren’t available on the high street, so get in touch today and see what we can do for you.

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Frequently asked questions

Who offers Let to Buy mortgages?

A relatively small number of lenders offer Let to Buy mortgages, and many of the deals they provide are only available through mortgage brokers. Get in touch today and we can talk you through all the Let to Buy mortgage deals that you might be eligible for. We’ll compare deals from across the market and our service won’t cost you a penny.

Are Let to Buy mortgages based on income?

Lenders will look at your income when you take out a Let to Buy mortgage, but you’ll also need to meet eligibility criteria. These can vary from lender to lender, but you’ll usually need a large deposit or equity of at least 25%, a monthly rental income of at least 125% of the mortgage interest, and a good credit rating to qualify.

How much can I borrow on a Let to Buy mortgage?

The most you can usually borrow on a Let to Buy mortgage is 75% of the value of the property you plan to let out.

How easy is it to get a Let to Buy mortgage?

Getting a Let to Buy mortgage can be trickier than getting a standard mortgage, as you’ll need to be able to prove to lenders that you can cover mortgage costs for two properties if there are any periods when your rental property is without tenants. At L&C, we can advise you on which deals you’re most likely to be accepted for.

How much deposit do you need for a Let to Buy?

Typically, you’ll need to have equity in your current property of at least 25% of its value to get a Let to Buy mortgage on it. Remember that you’ll also need a deposit for the mortgage on the home you’re moving into. It’s recommended that this should be at least 10% of the total value of the property, but a bigger deposit is more likely to get you a better deal. L&C can scour the market for you to help you find the most suitable mortgage for your circumstances - just get in touch today.