Changing mortgages to buy to let
Published 16th August 2017
Whether you’re moving out into a new property or remortgaging an existing property onto a buy to let mortgage, there’s a few things to keep in mind that will help make sure you get the best deal possible. Many of our visitors ask how to change their mortgage to buy to let, and the answer depends on a few factors:
- The type of mortgage that is currently registered over the property,
- What you’ll be doing with the property (who you’ll rent it to),
- Where you’ll be living going forward,
- And how many other properties you own.
Like with anything financial there’s a right and a wrong way to do things, so getting it right is vital to ensuring you make the most from you’re investments. To establish what works best for you, please fill out an enquiry form or give us a call and an advisor will be in touch.
How to change your mortgage to a buy to let
If you are changing your main residence to buy to let and moving into rented
If you’re moving into rented and don’t own a residential property, some lenders may not be happy with you taking a mortgage on a buy to let basis. It sounds strange, but every lender is different and some are happy with is, others aren’t. This is often because of the risks to the lender if the borrower decides not to repay, but also as because some buy to let lenders are wary of fraud, and that sometimes customers apply for buy to lets with the intention of living in the property themselves, as a way around certain criteria such as proving income and affordability.
If you are changing your main residence to buy to let and buying a new property
Helping customers buy a new property and rent their old one out is becoming a very common enquiry for us. We think this is in part due to poor interest rates for savings in the bank, and the fact many people are now looking for better ways to save money. It may also be because of the drop in house prices and the general consensus that property will begin to increase in value over the next few years, so customers with the capacity to take on 2 mortgages are favouring renting over selling in the short term. There are 2 ways of doing this:
- Let to buy mortgages - This is buying a new property to live in on a new main residential mortgage, and renting out your old property by switching it to a buy to let. You can also raise cash on your current property to fund deposit on the new purchase if enough equity is available. Some lenders allow this type of house move, others don’t. So make sure you’ve searched the market for the best deals from the lenders that accept it. Some lenders have in issue with let to buy arrangements, because it poses a potential risk to their security if there is a gap in tenancy and the borrowers are pressured to pay both mortgages. This risk is heightened if the borrowers are first time landlords with no rental experience, other income or other security.
- Consent to let mortgages - If you have a good mortgage deal at the moment (some of the historical tracker deals are under 1% currently!), then it may be worth looking to ask your current lender permission to let the property out under the current mortgage contract. They are not obliged to accept, but it’s worth considering, especially if you are going into rented, or buying a new property in cash, or you are unable to port your mortgage (see below). If this is declined then you will need to remortgage onto a buy to let deal.
As a consent to let will still technically mean your rental property is on a residential mortgage, it can effect which lenders will offer you the new mortgage for your new purchase. This is because there’s usually a limit to the number of residential mortgages you can have, which is often 1, but some lenders allow 2, some up to 4 and beyond so long as you can prove affordability.
IMPORTANT: Keep in mind portability – This is where you move your mortgage to another property and keep the same rate. If your current mortgage is a good one then it may certainly be worth doing, and any advisor worth their salt would always recommend you keeping your current deal if it cannot be beaten elsewhere.