A Let to Buy mortgage is a financial arrangement that allows a homeowner to rent out their existing property while purchasing a new residential home to live in. It is often considered by individuals who want to move house but prefer not to sell their current property immediately, instead using it as a potential rental asset https://smartcitymortgages.co.uk/blog/let-to-buy-mortgage-guide-how-it-works-criteria-costs-and-risks-2026/ . The structure is designed to separate the borrowing on the existing home from the mortgage on the new home, which can create flexibility but also introduces additional financial responsibilities. What is a Let to Buy mortgage? It refers to a process where the current residential mortgage is converted into a buy-to-let mortgage, while a new residential mortgage is taken out for a different property. This allows the homeowner to retain ownership of the original property and generate rental income from it, subject to lender approval. How does a Let to Buy mortgage work? In practice, the lender will usually require the existing mortgage to be changed to a buy-to-let product, often based on expected rental income. At the same time, the borrower applies for a new mortgage on their next home as a standard residential loan. Both applications are assessed separately, and affordability is reviewed in detail for both commitments. Who is Let to Buy suitable for? This option is typically suitable for individuals who are moving to a new home but are not ready or willing to sell their current property. It may also be relevant for those who expect property values to increase or want to generate long-term rental income. However, it requires financial stability and the ability to manage two mortgage arrangements simultaneously. Let to Buy vs Buy to Let: what’s the difference? Let to Buy involves moving out of an existing home and renting it out, while purchasing a new main residence. Buy to Let, in contrast, is when an individual purchases a property specifically for rental purposes from the outset without previously living in it. What are the lending criteria for Let to Buy mortgages is a key consideration. Lenders typically assess income stability, credit history, existing debt obligations, and the expected rental value of the property. A strong credit profile and consistent income are usually required to proceed. How much equity or deposit do you need? Most lenders expect sufficient equity in the existing property, often around 25 percent or more, although this can vary. For the new residential mortgage, a standard deposit requirement applies, commonly starting from 5 to 20 percent depending on the lender and risk profile. How do lenders assess rental income? Lenders usually calculate expected rental income using a stress test, where the rent must cover a percentage above the mortgage payment, often around 125 to 145 percent. This ensures the rental property remains viable even if interest rates increase. What are the disadvantages and risks of Let to Buy? The main risks include managing two mortgage payments, potential void rental periods, maintenance costs, and tax implications on rental income. There is also the risk that property values may decrease, affecting overall equity. Additional fees such as arrangement, valuation, and legal costs can also increase initial expenses.