Can I change my mortgage to buy to let?

February 8, 2024

71
Yes, you can change your residential mortgage to a buy to let mortgage, either by obtaining consent from your current lender (Consent to Let) for a temporary change or by refinancing your property with a new buy to let mortgage. This process involves meeting specific lender criteria, which may include having sufficient equity in the property, demonstrating that expected rental income will cover the mortgage payments by a certain percentage, and potentially facing different interest rates and fees.

Key Considerations

Lender’s Permission:

You must obtain permission from your current mortgage lender to switch your mortgage type or to let out your property. Some lenders may allow you to move to a buy-to-let mortgage, while others might offer a “consent to let” on your current mortgage for a short period.

Buy-to-Let Mortgage Criteria:

Switching to a BTL mortgage involves meeting specific criteria, which can include a higher equity requirement, a minimum income threshold (outside of rental income), and an assessment of the potential rental income from the property.

Interest Rates and Fees:

BTL mortgages often have higher interest rates and fees compared to residential mortgages. You’ll need to assess the financial implications, including any application fees, higher monthly payments, and possibly an early repayment charge on your current mortgage.

Tax Implications:

Renting out your property can have tax implications, including income tax on rental income and potential changes in your capital gains tax liability when you sell the property. It’s crucial to consider these and possibly consult a tax advisor.

Insurance:

You’ll need to switch your home insurance to a landlord insurance policy, which covers additional risks associated with renting out a property.

Steps to Change Your Mortgage to Buy-to-Let

Contact Your Lender:

The first step is to discuss your intentions with your current lender. They will outline your options, which could include converting your mortgage or obtaining consent to let.

Consider Financial Advice:

Given the complexity and financial implications, consider seeking advice from a financial advisor or a mortgage broker who specialises in buy-to-let properties. They can help you navigate the process, compare mortgage products, and understand the financial and tax implications.

Application Process:

If you decide to proceed with converting to a BTL mortgage, you’ll need to go through an application process, similar to applying for a new mortgage. This will involve affordability checks, property valuation, and assessment of the rental market for your property.

Review and Approval:

Your lender will review your application against their lending criteria for BTL mortgages. If approved, you’ll receive an offer outlining the terms of your new mortgage, which you’ll need to accept to proceed.

Legal and Regulatory Considerations:

Ensure you comply with all legal and regulatory requirements for landlords, which can include safety checks, energy performance certificates, and possibly obtaining a license to let the property, depending on your local council’s requirements. Changing your mortgage to a buy-to-let arrangement can be a viable option if you’re looking to rent out your home, but it’s important to carefully consider the financial, legal, and tax implications. Professional advice can be invaluable in making an informed decision that aligns with your financial goals and circumstances.

Answered by:

Alison Gibson

Ascot Mortgage Expert

Last Updated:

19.02.2024

Answered by:

Alison Gibson

Ascot Mortgage Expert

Last Updated:

19.02.2024

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