Moving home does not always mean you have to sell your current property. If you want to buy a new home to live in while keeping your existing property to rent out, a let-to-buy mortgage arrangement may be an option worth exploring.
For some homeowners, keeping their current property could provide an opportunity to generate rental income and retain a property as a longer-term investment. However, arranging a mortgage on a new home while retaining an existing one involves several financial considerations.
You will need to understand what can happen to your current mortgage, whether you can release equity to help fund your next purchase, how lenders assess affordability and what additional costs may apply, including stamp duty.
In this guide, we explain how let-to-buy works, how it differs from consent to let, and the main points to consider before deciding whether it could suit your plans.
What Is a Let-to-Buy Mortgage?
A let-to-buy mortgage arrangement allows you to move into a new home while retaining your existing property and renting it out.
Rather than selling your current home to fund the next purchase, you arrange suitable mortgage finance for the property you intend to let and a residential mortgage for your new main residence.
This typically involves two mortgage arrangements:
- A mortgage for your existing property: Your current residential mortgage may need to be changed to a suitable buy-to-let mortgage, unless your lender agrees to let you rent out the property under your existing arrangement.
- A residential mortgage for your new home: This is the mortgage you use to purchase the property you intend to live in.
The two arrangements need to be considered together because the borrowing on your existing property, the expected rental income and the deposit available for your new home can all affect your plans. Homeowners may consider let-to-buy for several reasons. You might want to keep a property in an area where you expect continued rental demand, retain an asset for the longer term or avoid selling your current home before moving.
However, deciding to rent out a property is not simply a matter of finding a tenant. Your mortgage lender’s permission and the suitability of your mortgage arrangements need to be established before you proceed.
Consent to Let vs. a Full Let-to-Buy Mortgage
If you want to rent out your current home, one of the first questions to consider is whether you can keep your existing residential mortgage or need to change it.
Two possible routes are consent to let and switching to a suitable buy-to-let mortgage as part of a let-to-buy arrangement.
What Is Consent to Let?
Consent to let is permission from your existing mortgage lender to rent out a property that was originally purchased with a residential mortgage.
Some lenders may allow this for a temporary period without requiring you to immediately switch to a buy-to-let mortgage. The terms, fees and conditions vary between lenders, and consent may be time-limited. This could be relevant if you want to rent out your current property while moving into another home. However, consent to let is not automatically available, and you should not assume your existing residential mortgage permits you to rent the property out.
How Is a Full Let-to-Buy Mortgage Different?
A full let-to-buy arrangement generally involves arranging a suitable buy-to-let mortgage for your existing property while taking out a residential mortgage for the new home.
This may be more appropriate if you intend to keep the existing property as a rental for the longer term or if your current lender will not agree to consent to let. The right route depends on your lender’s policy, the expected duration of the letting, the mortgage balance and your wider financial circumstances.
Before making a decision, review your existing mortgage terms and establish what your lender will permit. Comparing the available options can help you understand the potential costs and implications of each route.
How Does a Let-to-Buy Mortgage Work?
Although every case is different, arranging a let-to-buy mortgage usually involves several steps.
1. Review Your Existing Mortgage and Property Value
Start by establishing how much you still owe on your current mortgage and how much your property may be worth. This helps you understand the equity you have in the property and whether changing your existing mortgage could be worth exploring.
You should also check your current mortgage deal, including any early repayment charges or other costs that could apply if you change the arrangement.
2. Explore Consent to Let or a Buy-to-Let Mortgage
Your existing lender may allow you to rent out the property with consent to let, or you may need to explore a suitable buy-to-let mortgage.
The available options depend on the lender’s criteria and your circumstances. It is important to establish this before committing to a purchase or assuming you can rent out your current home.
3. Assess Whether You Can Release Equity
If your current property has equity, you may be able to release some of it through an appropriate mortgage arrangement.
The funds could potentially contribute towards the deposit for your next home. However, releasing equity involves additional borrowing and needs to be assessed alongside your existing mortgage commitments.
4. Work Out the Deposit and Borrowing Needed
Calculate how much you need for the new property, including the deposit, purchase costs and any additional stamp duty that may apply.
Consider how much of this could come from available savings and whether releasing equity from your existing home is a suitable option to explore.
5. Assess Affordability Across Both Properties
You need to consider the financial commitments associated with the existing property as well as the mortgage on your new home.
Lenders may assess your income, outgoings, outstanding borrowing and the expected rental income from the property you plan to let.
6. Complete the Mortgage Applications and Property Transactions
Once the available options and affordability have been assessed, the relevant mortgage applications and property transactions can progress.
The existing property and the new home need to be considered together, rather than as two separate decisions. Understanding how the arrangements fit together can help you plan the move more effectively.
Broker Insight: Look at Both Properties Together
One of the most important things to consider with a let-to-buy arrangement is how keeping your current property will affect your plans to buy the next one. It is not just about whether you can rent out your existing home. You also need to understand how the mortgage on that property, any potential rental income and the deposit for your new home fit together.
Before making any commitments, it is worth reviewing your existing mortgage, exploring whether consent to let is an option and understanding the costs involved in keeping the property. Looking at both properties together can help you identify potential challenges early and understand which options may be available for your circumstances.
Can You Keep Your Existing Mortgage?
Possibly, but it depends on your current lender’s rules and the mortgage arrangement you have. A residential mortgage is generally intended for a property you live in. If you plan to move out and rent the property to tenants, you must check whether your lender permits this and what conditions apply.
Your options may include:
- Obtaining consent to let: Your existing lender may permit you to rent out the property temporarily while retaining your current mortgage, subject to its terms.
- Switching to a buy-to-let mortgage: If you intend to rent out the property longer term, or consent to let is not available, a different mortgage arrangement may be required. You can read more in our Buy-to-Let Mortgages guide.
- Reviewing your current deal: Changing your mortgage could involve fees, a different interest rate or early repayment charges, depending on your existing agreement.
It is worth reviewing these options before making an offer on your next home. Understanding the arrangements available for your current property can help you assess the wider cost of moving.
Your existing mortgage is an important part of the decision. Your lender may allow you to rent out your property through consent to let, or you may need to switch to a buy-to-let mortgage. The right option will depend on your lender’s criteria, how long you plan to rent out the property and any costs involved, such as early repayment charges.
If you’re considering changing your current mortgage, read our guide to Should You Remortgage Now? What Rising Mortgage Rates Could Mean to understand some of the factors that may affect your decision.
Can You Release Equity From Your Current Home?
Equity is the difference between your property’s value and the outstanding mortgage secured against it.
For example, if your home is worth £300,000 and you have an outstanding mortgage of £180,000, the difference is £120,000 in equity.
This does not mean you can automatically borrow the full £120,000. The amount that may be available to release depends on the property’s valuation, the outstanding mortgage, the lender’s criteria and your financial circumstances. If releasing equity is possible, the funds could potentially help towards the deposit for your next home.
However, releasing equity means borrowing against your existing property. Increasing the mortgage balance can affect your monthly payments and the overall cost of borrowing, so it is important to understand the implications before proceeding.
What Deposit Do You Need for a Let-to-Buy Mortgage?
When buying a new home, you will generally need to provide a deposit towards the purchase price. The amount required depends on the property, the mortgage product and the lender’s criteria.
If you want to retain your current home, there are several ways you might fund the deposit for your next purchase.
Using Savings
You may be able to use savings to fund some or all of the deposit. You will also need to budget for other purchase costs, such as legal fees, surveys, moving expenses and any stamp duty that applies.
Releasing Equity From Your Existing Property
If your circumstances and lender criteria allow it, releasing equity from your current home may provide funds towards the new deposit. This option needs to be assessed alongside the mortgage on the existing property and the borrowing required for the new home.
Understanding the Deposit Requirements
Deposit requirements vary between mortgage products and lenders. You should establish how much you may need to contribute and how the deposit will be funded before committing to a purchase. Remember to include additional costs in your budget rather than focusing on the deposit alone. The wider financial picture matters when deciding whether keeping your current property is practical.
Can You Afford Two Properties?
Affordability is one of the main considerations when arranging a let-to-buy mortgage. You will need to understand whether your finances can support the new residential mortgage alongside the mortgage and other costs associated with your existing property.
Lenders may assess several factors.
Your Existing and New Mortgage Commitments
Your current mortgage balance and the proposed mortgage on your new home will form part of the overall assessment.
Lenders may also consider your income, regular expenditure, other borrowing and financial commitments. The way these are assessed depends on the lender and the mortgage products involved.
How Rental Income Is Assessed
The expected rental income from your existing property may form part of the assessment for a buy-to-let or let-to-buy mortgage.
Some lenders use an interest cover ratio (ICR) to assess whether the anticipated rent is sufficient in relation to the mortgage interest. They may calculate the interest using a stressed interest rate rather than simply using the rate you expect to pay.
For example, a lender might require the expected rental income to cover 125% or 145% of the mortgage interest used in its calculation. These are examples of thresholds used by some lenders, not universal requirements. The applicable ratio and calculation depend on the lender’s criteria, the mortgage product and other relevant factors.
This means that having rental income does not automatically mean you will qualify for the borrowing you want. The lender needs to assess the property and your circumstances against its requirements.
Landlord Costs and Other Commitments
Mortgage payments are only one part of the cost of keeping a rental property.
You should also consider expenses such as:
- Property maintenance and repairs.
- Landlord insurance and other relevant property costs.
- Letting agent fees, where applicable.
- Periods when the property is vacant and no rent is received.
- Other financial commitments and regular household expenses.
Allowing for these costs can help you understand whether retaining your current property is financially manageable alongside your new home.
What About Stamp Duty When Buying Another Property?
Stamp duty is an important cost to consider if you plan to buy a new home while keeping your existing property.
In England and Northern Ireland, Stamp Duty Land Tax (SDLT) may be charged at the higher rates for additional residential properties when the relevant conditions apply.
If you still own your current property when you complete the purchase of your new home, the higher rates may apply, even if you intend to rent out the existing property and live in the new one.
There are rules and exceptions, including provisions for replacing a main residence. Whether these apply depends on your circumstances and the details of the transaction.
HMRC explains that the higher rates of Stamp Duty Land Tax (SDLT) generally apply when you buy a residential property for £40,000 or more and, at the end of the day of completion, you own another qualifying residential property without having sold or given away your previous main home. Certain exceptions may apply depending on your circumstances.
Stamp duty can represent a significant upfront cost, so include it in your budget when assessing whether a let-to-buy arrangement is affordable. As the rules and rates can change, check the current HMRC guidance and seek appropriate advice for your circumstances before proceeding.
If you’re planning how to cover this cost, read our guide to Can You Add Stamp Duty to a Mortgage? to understand how stamp duty is paid and what options may be available to help cover it.
What are the Benefits and Risks of Let-to-Buy?
Let-to-buy may provide a route for homeowners who want to move into a new home without selling their existing property. However, it is important to weigh the potential benefits against the financial commitments and responsibilities involved.
Potential Benefits of Let-to-Buy
Keeping your existing property
You may be able to retain ownership of your current home rather than selling it when you move. This could suit homeowners who want to keep the property for personal or longer-term investment reasons.
Potential rental income
Renting out the property may provide an income that contributes towards the costs of owning it. The amount received will depend on the rent achieved and the costs associated with the property.
Retaining a longer-term investment
Some homeowners may prefer to keep their current property as part of their longer-term financial plans rather than sell it when moving.
Moving without necessarily selling first
A let-to-buy arrangement may allow you to purchase a new main residence while retaining the existing property, provided the mortgage arrangements and affordability work for your circumstances.
Important Risks and Considerations
Mortgage costs
Changing your existing mortgage or arranging additional borrowing can involve fees, interest costs and potentially early repayment charges.
Affordability across both properties
You need to understand the financial commitments associated with both properties, including mortgage payments and other household expenses.
Rental voids and property maintenance
You may have periods without tenants while still needing to cover mortgage payments and other property costs. Repairs and maintenance can also affect the financial viability of keeping the property.
Landlord responsibilities
Renting out a property involves legal and practical responsibilities. You should understand the requirements that apply to you as a landlord before proceeding.
Additional stamp duty
The higher rates of Stamp Duty Land Tax may increase the upfront cost of buying your new home, depending on your circumstances.
Changes in interest rates, property values and rental income
Mortgage costs, property values and rental demand can change over time, which may affect the financial outcome of keeping the property.
Rental income, equity available and property value growth are not guaranteed. The amount a lender will release or lend depends on individual circumstances, property value and lender criteria at the time of application.
Is Let-to-Buy Right for You?
A let-to-buy mortgage may be worth exploring if you want to move into a new home but would prefer to retain your current property.
It may be relevant if:
- You want to keep your existing home and rent it out rather than sell it.
- You have equity in your current property that could potentially contribute towards the deposit for your next home.
- Your finances may support the mortgage commitments and costs associated with both properties.
- You have considered the responsibilities and potential costs of becoming a landlord.
However, keeping your current home is not necessarily the right option for everyone. Selling may be more appropriate if the costs of retaining the property are too high, the available equity is insufficient for your plans or the financial commitments would put too much pressure on your budget.
Before making a decision, consider these questions:
- Have I checked whether my current lender will allow me to rent out the property?
- Do I understand the costs of keeping or changing my existing mortgage?
- Have I established how much deposit I need for the new home?
- Could I comfortably manage the mortgage commitments and other costs associated with both properties?
- Have I budgeted for stamp duty and the ongoing responsibilities of being a landlord?
- Have I explored whether selling my current property would be more suitable?
Working through these questions can help you understand what needs to be assessed before you commit to a purchase.
How Everest Mortgages Can Help
If you are considering moving home but want to keep your existing property, understanding the available mortgage options is an important first step.
At Everest Mortgages, we can help you explore the options based on your circumstances, including whether consent to let or a full let-to-buy arrangement may be appropriate for your existing property.
We can also help you consider how the equity in your current home, potential rental income, deposit requirements and affordability may affect your plans to purchase a new home. Every situation is different, and the options available will depend on your circumstances and lender criteria. Understanding the arrangements for both properties can help you make a more informed decision about your next steps.
Thinking about moving home but want to keep your current property? Contact Everest Mortgages to discuss your circumstances and explore whether a let-to-buy arrangement could work for you.
You can also use our mortgage calculator to get an initial estimate of potential monthly repayments as part of your planning.
Frequently Asked Questions About Let-to-Buy Mortgages
Here are some common questions about let-to-buy mortgages, including how they work, eligibility requirements, affordability and the costs to consider when keeping your current home.
What Is a Let-to-Buy Mortgage?
A let-to-buy mortgage arrangement allows you to move into a new home while keeping your existing property and renting it out. It typically involves suitable mortgage finance for the existing property and a residential mortgage for the new home.
Can I Buy a New Home Without Selling My Current Property?
It may be possible. A let-to-buy arrangement could allow you to buy a new main residence while retaining your existing property as a rental. You will need to consider the mortgage arrangements, deposit, affordability and any additional stamp duty that may apply.
Can I Keep My Existing Mortgage and Rent Out My Home?
This depends on your lender. Some lenders may grant consent to let, allowing you to rent out the property under certain conditions. Others may require you to switch to a suitable buy-to-let mortgage. Check your mortgage terms and obtain the necessary permission before renting out the property.
What Is Consent to Let, and How Is It Different From a Let-to-Buy Mortgage?
Consent to let is permission from your existing lender to rent out a property that has a residential mortgage, often for a limited period. A full let-to-buy arrangement generally involves a suitable buy-to-let mortgage for the existing property alongside a residential mortgage for the new home. The right option depends on the lender’s policy and your circumstances.
Can I Use Equity From My Current Home as a Deposit?
Potentially. If your lender approves additional borrowing or another suitable arrangement, you may be able to release some equity from your existing property to help fund the deposit for your next home. The amount available depends on factors including the property’s value, outstanding borrowing and lender criteria.
Do I Need a Deposit for a Let-to-Buy Mortgage?
You will generally need a deposit for the new residential property. The amount required depends on the property, mortgage product and lender criteria. Some homeowners may be able to use released equity towards the deposit, subject to approval.
Can I Get a Let-to-Buy Mortgage if I Already Have a Residential Mortgage?
It may be possible, but you will need to establish whether your current lender will allow you to rent out the property or whether you need a different mortgage arrangement. You will also need to assess affordability for the new residential mortgage and the costs associated with the existing property.
Do I Pay Additional Stamp Duty if I Keep My Current Home?
You may have to pay the higher rates of Stamp Duty Land Tax if you buy another residential property while retaining your current one. The rules depend on your circumstances and the transaction. Check the current HMRC guidance before proceeding.
Can Rental Income Help Me Qualify for a New Mortgage?
Expected rental income may be considered as part of a lender’s assessment, particularly for the mortgage on the property you plan to rent out. Lenders may apply rental cover calculations and other affordability checks. The way rental income is assessed varies between lenders and does not guarantee that a mortgage will be approved.
What Are the Risks of a Let-to-Buy Mortgage?
Potential risks include the cost of arranging or changing mortgages, managing borrowing across two properties, additional stamp duty, periods without rental income, maintenance costs and landlord responsibilities. Changes in interest rates, property values and rental demand can also affect the financial outcome.
Disclaimer
Important information: This article is for general information only and does not constitute mortgage, tax or legal advice. Mortgage availability and lending criteria vary by lender and individual circumstances. Rental income, available equity and property value growth are not guaranteed. Stamp Duty Land Tax rules and rates can change, so check the current HMRC guidance and seek appropriate advice for your circumstances before making a decision.
Everest Mortgage Services is authorised and regulated by the Financial Conduct Authority (FCA). Financial Services Register number: 786425. Your home may be repossessed if you do not keep up repayments on your mortgage.
