Switching To a Buy-To-Let Mortgage
Generally the options are to get consent or to remortgage. It's important to get this right to ensure you don't face any trouble with your mortgage lender. Expert advice from an advisor has already been taken by over 1000 customers just like you, which is why we dedicate 4 experts from our team to support this type of situation.
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Author: Pete Mugleston
CeMAP Mortgage Advisor, MD
Reviewed by: Sheridan Repton
Bad Credit and BTL Specialist
Quick Summary
There are 2 ways to let out your current residential property:
- Get Consent-to-Let from your current lender, or
- Remortgage away to a new lender, onto a buy-to-let specific mortgage.
‘Consent to let’ is a handy short-term fix if you need to rent out your home, but it’s often not a long-term solution, and most lenders put a time limit on how long you can rent it out before forcing you to switch to a BTL deal or to remortgage elsewhere.
As / when you’re remortgaging, lenders will need the Loan-To-Value (LTV) to meet their requirements (often needs to be 75-80% max), and will check that the rental income is sufficient and that you meet their affordability criteria for BTLs.
Just watch out for any early repayment charges (ERCs) on your current mortgage – if you are tied in right now then it might be costly, and better advised to try and stick with your current lender and get temporary consent to let.
Our team of BTL experts can help you with either a consent or to get a new BTL, so just reach out!
In this article:
Yes, it’s possible to change your residential mortgage to buy-to-let. Still, it involves remortgaging onto a new product either with a new lender or your current lender, assessing financial eligibility, obtaining a property valuation, and meeting specific buy-to-let mortgage criteria.
There are various reasons you may decide to start renting out your home, but the main ones are buying a new house, moving to a new area, relocating abroad, or moving into another property with a partner.
Here are the key criteria lenders will look at when they assess your application:
- Rental income must meet the stress test
- Consent (keep current mortgage) vs full BTL remortgage
- ERCs and admin fees
The following are some of the key questions you should consider before applying:
- Is the property currently mortgaged as residential?
- Current valuation and mortgage amount
- Are you looking to borrow more from the equity in that property at the same time?
- Have you asked your lender for consent to let, or are you planning to remortgage?
- Do you have an expected rental valuation?
- Are you aware of any early repayment charges?
No. If you intend to move back into your property at some point in the future, you may be better off requesting ‘consent to let’ from your lender. This is when your lender gives permission for you to rent out a room in your home or the entire property for a short period of time, typically for 6-12 months.
Your lender may charge you an admin fee for this, and they could alter your interest rate. However, some lenders will do it for no additional charge and will keep the terms of your original deal the same.
Some regulated buy-to-let mortgages may have a slightly higher interest rate than commercial ones. If you’re looking at getting a regulated buy-to-let, it’s worth speaking to a broker to get an idea of the rates you could get.
You can use our calculator below to calculate your mortgage repayments after you switch to buy-to-let.
Buy-to-Let Mortgage Calculator
Our buy-to-let mortgage calculator can show you how much your mortgage could cost you each month and overall. Simply enter the rental property value, deposit, anticipated monthly rent, interest rate, mortgage term and our calculator will do the rest.
Interest only:
Capital and repayment:
Loan to Value ratio (LTV):
Most lenders won't offer buy-to-let mortgages over a LTV of 80%.
Interest Cover Ratio (ICR):
Most lenders require rental income to be at least 125%-145% of the interest repayments for a buy-to-let mortgage.
Get started with a specialist buy-to-let broker to find out how much they could help you save on your monthly mortgage repayments.
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Do you have to stay with your current mortgage provider?
No, you don’t. As with all remortgages, it’s worth looking into your current lender’s deals. However, you shouldn’t accept one straightaway. Your broker will shop around and see what buy-to-let deals other lenders offer; otherwise, you could end up overpaying. Some lenders specialise in buy-to-let, so you could get a better deal elsewhere.
Just remember, if you exit your current deal before the end of the mortgage term, you may have to pay early repayment fees, which can run into thousands of pounds. So, you need to weigh up whether it’s worth switching early.
An experienced broker is best placed to help you with this. They can review your circumstances and advise you on the right course of action.
What’s involved?
Before a lender agrees to switch your mortgage, they’ll carry out an in-depth affordability assessment to ensure you’re a reliable borrower and can afford your buy-to-let mortgage.
This will be different to the affordability checks carried out when you applied for your residential mortgage as they’ll be based on projected rental income rather than purely on your earnings.
Some lenders charge a higher income cover calculation depending on whether you are a lower- or higher-rate taxpayer.
Most lenders require your future rental income to be at least 125% of the mortgage payments before they’d be willing to let you switch to buy-to-let. This isn’t an exact science, though, as every lender has its own way of doing the calculations. You’re best speaking with one of the buy-to-let experts we work with on this.
Your lender will also carry out a thorough eligibility assessment (see below for more details).
Kevin's Story
Our broker got in touch really quickly
Our broker got in touch really quickly. They understood the situation and what we needed to get both mortgages over the line, and kept me up to date with the options available. They quickly set up a deal with another lender for the buy to let and that went through easily, meaning we didn’t lose any time or sleep in the process!
How to switch to a buy-to-let mortgage
If you want to ensure you’re getting the best possible deal, contact us, and we’ll match you with a specialist buy-to-let broker.
Your broker will be able to guide you through each stage of the application, including:
- Forecasting your rental income. This is key to securing a buy-to-let mortgage as it shows lenders you’re able to cover the repayments. If your projections don’t meet the eligibility criteria, your broker may be able to suggest ways to leverage other assets or income.
- Looking at the best options. This might be speaking to your existing lender in the first instance about a consent to let or an internal switch, but will likely include shopping around specialist buy-to-let lenders to get the best rates and terms for you.
- Preparing your application. The paperwork involved in a mortgage switch can feel overwhelming, but your broker will be on hand to help you fill out the forms and gather the right documentation so that your application can be processed as quickly as possible.
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Which lenders allow you to switch from residential to buy to let?
The vast majority of lenders will consider your application to switch but whether they’ll accept your request or not will depend on their specific eligibility criteria.
It’s important to remember that just because you qualified for a residential mortgage with your lender doesn’t guarantee you’ll be accepted for a buy-to-let mortgage.
Lenders tend to consider buy-to-let mortgages higher risk because of income shortfalls that can occur if you have trouble renting out your property or if your tenants fail to pay their rent. Therefore, their eligibility assessments can be tougher.
Eligibility criteria
Each lender will have its own set of eligibility requirements.
However, in general, this is what lenders will be looking at…
Loan-to-value ratio
The term loan-to-value ratio or (LTV) is normally used for deposits when buying a house, but when switching mortgages, the deposit will be the equity in your home. This can be a stumbling block when switching from a residential to a buy-to-let mortgage, as some people have LTVs as high as 95% when buying a home to live in, but the typical maximum LTV for a buy-to-let is 75%.
This means you’ll need at least 25% of your home’s current value as equity to be eligible to switch.
Projected rental income
Affordability assessments for buy-to-let mortgages are based on the income you can earn in rent rather than your income. Most lenders look for projected rental income between 125% and 145% as proof that you can afford the mortgage repayments.
How long you’ve owned your property
You’ll struggle to switch to a buy-to-let mortgage if you’ve had the residential mortgage on your property for less than six months.
Where you plan to live next
If you plan to rent out your property and move into rented accommodation, this could be a red flag for some lenders. Buy-to-let mortgages are typically only given to people who have at least one residential mortgage.
Also, rental payments can be higher than mortgage payments, so lenders may be concerned there’s a chance you wouldn’t be able to meet your buy-to-let repayments, especially if your tenant was late paying their rent.
Your experience as a landlord
Not all lenders require landlord experience, but if you’ve rented out properties in the past, they’ll view you as lower risk and perhaps offer you more competitive rates.
Your credit history
You won’t necessarily have your application rejected if you have marks on your credit report. However, having a good track record of paying back loans could improve your chances and open you up to more competitive deals. Buy-to-let mortgages are still available to borrowers with bad credit.
Head to our credit reports hub to find out how to check your credit history for free.
Related Articles
Can you use a let-to-buy agreement to switch?
Potentially, this is when you switch the mortgage on an existing property to a buy-to-let mortgage while at the same time releasing equity that you can put towards a deposit to buy a new home.
With a let-to-buy arrangement, you have two mortgages: a buy-to-let mortgage on your initial property and a standard residential mortgage on your new property.
This is a popular option for people who are switching to buy-to-let and hoping to take out a new mortgage on another residential property.
How Online Mortgage Advisor can help you find the right broker
Switching to a buy-to-let mortgage isn’t always a straightforward process, and if you choose the wrong deal, it could cost you a lot of money.
That’s why you should always seek advice from an experienced mortgage advisor who specialises in helping people switch from residential to buy-to-let.
Our expert advisors can review your situation and advise you on the best course of action.
Give us a call on 0330 818 7026 or simply make an enquiry, and we’ll do the rest.
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FAQs
If you rent out your property without obtaining consent from your lender or switching to a buy-to-let mortgage, you’ll be in breach of the contract between yourself and the lender, and you could be forced to repay your mortgage straightaway in full.
You may also find obtaining finance in the future more difficult.
No, you can only rent it out to tenants. Living in it would breach your contract and could result in the lender calling in the entire debt. If you plan to live in the property and only rent out a part of it, then talk to your lender about whether a consent to let might be more appropriate.
Yes, this is recommended. Standard home insurance will not cover you against the risks associated with letting a property to residential tenants. Specialist landlord insurance policies are available for these scenarios, and your broker can advise you on which one to choose.
Most lenders won’t consider giving consent to let until you’ve had your mortgage and been living in your house for at least six months. Immediately buying a home and then wanting to change your mortgage will raise flags with your lender unless you have a very good reason.
You’ll need to go directly to your lender to apply for consent to let. Some lenders offer this option online or via a banking app. If the process goes smoothly, it can happen in as little as two weeks.
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Pete Mugleston
CeMAP Mortgage Advisor, MD
Pete, a CeMAP-qualified mortgage advisor and an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete successfully went the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained and his love of helping people reach their goals led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.
Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for Online Mortgage Advisor of course!
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