Let to Buy

 

In a nutshell it’s the method you can use to move house, whilst keeping your current home as an 

investment to rent out. 

 

Rather than sell your house and buy your next one, you would remortgage your current home switching 

your mortgage from a residential mortgage onto a Buy to Let mortgage, freeing you up to buy your next 

residential home. This would allow you to buy your next home and keep your current home as an 

investment. There are many benefits to doing this, such as 

 

Having multiple residential mortgages or a 2nd mortgage on your credit file will reduce your affordability. 

This is because you are responsible for paying both mortgages and also the running costs associated 

with running 2 homes e.g. council tax and utilities. But if one of the mortgages is a BTL mortgage for a 

property that you rent out, lenders know that the rent you receive will cover the payments on that 

mortgage and the bills associated with that property are the responsibility of your tenant. With this in 

mind all of your affordability can be used for your onward purchase as you wouldn’t be responsible for 

any other mortgages, allowing you to buy a more expensive home. 

 

The surplus rent you receive from the property you have now let out can be used towards paying your 

new residential mortgage, therefore reducing your own outgoings. If you were to opt for an interest only 

mortgage the cashflow from that property will be much greater, providing you with much more income. 

 

As data shows property is a sound investment over time, beating inflation year on year whilst providing 

steady cashflow through surplus rent. So besides owning your new residential property you now own 

another property which will continue to increase in value over time and provide you with an income. You 

could hold the property for the long term to enjoy the cashflow with an interest only mortgage or pay off 

the mortgage with a repayment mortgage and sell the property in the future. 

 

If your current property has enough equity in, you can release equity to cover your deposit, moving costs, 

legal costs and stamp duty. All of which helps to reduce your moving costs. You can remortgage your 

current home to a maximum of 80% of the property value, any money over and above your current 

mortgage value can be used for the costs above. 

 

For example: 

If your home is valued at £100,000 and you have £50,000 left to pay on your current residential 

mrotgage you would remortgage up to a maximum of £80,000 (80% of the house value). 

 

You would repay the £50,000 you currently owe to your current lender 

 

The additional £30,000 can be used towards your moving cost 

 

If you onward purchase price is £200,000, your costs could look like this: 

 

£20,000 deposit (10%) 

£7,500 stamp duty 

£2,000 legal costs 

£500 mortgage broker fee 

 

You have moved home without using any of your own money, only the equity in your current home. 

 

There are a few things to consider when doing this: 

 

You will pay additional rate stamp duty on your onward purchase as this is classed as an additional 

property. You should consult your solicitor when doing this, but for a rough guide you can use a stamp 

duty calculator online. 

 

The property you rent out will need to pass the rental stress test. The mortgage amount you can achieve 

must pass lenders stress tests. In simple terms the amount you can borrow is determined by the amount 

of rent you receive and your personal income and tax circumstances. 

 

Both your remortgage and onward purchase will need to complete simultaneously. This is so that the 

money released from your home that’s being used as your deposit moving forward, can be transferred on 

completion to the vendor of the property you are buying. 

 

You should use the same solicitor to handle the remortgage and the purchase. This will make the 

remortgage and purchase simpler if its being handled by the same person.