SWITCHING TO A BUY TO LET MORTGAGE
David Barr
April 12th 2021
Share this post
Start your property portfolio today!
Are you planning on becoming a landlord, if you own a property that you currently have a mortgage on, you might be wondering if you can switch it to a buy-to-let property.
You might be wondering whether this is something that is actually possible, well you might be surprised to know that it’s actually a very common thing.
We’ve gone into detail on exactly why you might want to switch your residential mortgage for a buy to let one, if you need to do so, how you do it and more!
There are several reasons that people might opt to change their residential mortgage to a buy to let one. It allows for an alternative option to selling your house if you plan on moving away, here are a few of the other reasons people often switch their mortgage to a buy to let:
- Moving into a different property with a new partner
- Moving abroad or across the country for work or other reasons
- Planning on travelling
- If you’re going to be away from your home for a significant period of time
- Have existing funds to purchase a new house and let out their current one
It’s a very common question, one which we see a lot from accidental landlords. To answer the question, you can, but only if you own the property outright if you have a lender with a typical residential mortgage then you aren’t able to rent the property out and as we’re going to touch on later, it’s a pretty dangerous game to not tell your lender.
You might be thinking, but how would you get caught doing this? Lenders are now pretty sophisticated at catching people. If the tenant is getting mail or returns mail to yourself that has been sent to the property in your name, might even trigger an investigation.
It’s a pretty dangerous game not telling your lender if you plan on renting the property out. If you neglect to inform your lender and change the mortgage, the lender can demand that you repay the whole of your mortgage instantly, which obviously most people would be unable to do.
It can be considered as a breach of your terms and conditions within the mortgage and can lead you to have a black mark on your credit file, which can make it very difficult to acquire any lending in the future.
So, just to sum it up, tell your mortgage company!
Often you can simply have a conversation with your current lender and discuss what your options are in terms of porting your mortgage to a buy to let. There are occasions however that your lender might not let you do this or have a package available if this is the case then you should be able to re-mortgage.
There are certain requirements with a buy to let mortgage that lenders typically assess that are slightly different to your standard residential mortgage. The mortgage provider will use a LTV calculation and cap the lending at around 75% LTV with the requirements that the income from the rental achieves at least 145% of the monthly interest. They will then do a stress test for an interest-only mortgage at a rate of 5%, to ensure you meet their affordability criteria.
There quite like ordinary mortgages, but they have a few key distinct differences which can make them seem like a more expensive type of mortgage to have.
Here are the key differences:
- Your fees will be higher than a standard residential mortgage.
- On buy to let mortgages the banks also offer higher interest.
- Your minimum deposit will be much larger than a standard residential property. A residential mortgage typically requires a 10% deposit, however, a BTL mortgage can vary between 20-40% depending on the provider.
- BTL mortgages tend to be interest-only, meaning you just pay off the interest and not the capital.
Start your property portfolio today!
Are you planning on becoming a landlord, if you own a property that you currently have a mortgage on, you might be wondering if you can switch it to a buy-to-let property.
You might be wondering whether this is something that is actually possible, well you might be surprised to know that it’s actually a very common thing.
We’ve gone into detail on exactly why you might want to switch your residential mortgage for a buy to let one, if you need to do so, how you do it and more!
There are several reasons that people might opt to change their residential mortgage to a buy to let one. It allows for an alternative option to selling your house if you plan on moving away, here are a few of the other reasons people often switch their mortgage to a buy to let:
- Moving into a different property with a new partner
- Moving abroad or across the country for work or other reasons
- Planning on travelling
- If you’re going to be away from your home for a significant period of time
- Have existing funds to purchase a new house and let out their current one
It’s a very common question, one which we see a lot from accidental landlords. To answer the question, you can, but only if you own the property outright if you have a lender with a typical residential mortgage then you aren’t able to rent the property out and as we’re going to touch on later, it’s a pretty dangerous game to not tell your lender.
You might be thinking, but how would you get caught doing this? Lenders are now pretty sophisticated at catching people. If the tenant is getting mail or returns mail to yourself that has been sent to the property in your name, might even trigger an investigation.
It’s a pretty dangerous game not telling your lender if you plan on renting the property out. If you neglect to inform your lender and change the mortgage, the lender can demand that you repay the whole of your mortgage instantly, which obviously most people would be unable to do.
It can be considered as a breach of your terms and conditions within the mortgage and can lead you to have a black mark on your credit file, which can make it very difficult to acquire any lending in the future.
So, just to sum it up, tell your mortgage company!
Often you can simply have a conversation with your current lender and discuss what your options are in terms of porting your mortgage to a buy to let. There are occasions however that your lender might not let you do this or have a package available if this is the case then you should be able to re-mortgage.
There are certain requirements with a buy to let mortgage that lenders typically assess that are slightly different to your standard residential mortgage. The mortgage provider will use a LTV calculation and cap the lending at around 75% LTV with the requirements that the income from the rental achieves at least 145% of the monthly interest. They will then do a stress test for an interest-only mortgage at a rate of 5%, to ensure you meet their affordability criteria.
There quite like ordinary mortgages, but they have a few key distinct differences which can make them seem like a more expensive type of mortgage to have.
Here are the key differences:
- Your fees will be higher than a standard residential mortgage.
- On buy to let mortgages the banks also offer higher interest.
- Your minimum deposit will be much larger than a standard residential property. A residential mortgage typically requires a 10% deposit, however, a BTL mortgage can vary between 20-40% depending on the provider.
- BTL mortgages tend to be interest-only, meaning you just pay off the interest and not the capital.
Large discounts on property
Completely transparent
Tailored investment opportunities
We’ll handle everything for you
Looking for hassle free property?
We’ve got you! Whatever your motivations as a landlord or property owner are, we can help source and match property with you.
When the foundations of your company are built upon industry knowledge and experience, you can’t help but be a self-confident company.
Here at The Property Sourcing Company, we are led by a roster of industry experts who have over 50 years of combined experience in doing BMV property deals, as well as packaging them up for investors.
Quality sits at the heart of our team, who go the extra mile to tailor our service to you. We pride ourselves in our ability to source you a wide variety of high-yield property investments.
Get in touch and we’ll establish what type of property you’re searching for, before talking you through our current investment opportunities. We’ll also keep you posted as we acquire new deals.
When you buy your investment property through us and we’ll take care of solicitors, surveys – everything – all to ensure you have a stress-free property purchase. It’s just one of the ways we make investment work for you.
Why invest with us?
Simply put, we’ll get you the best possible deal. Our sister company, The Property Buying Company, have been in the property buying industry for years & we have access to all their stock which is at a price point that is ready for investors to buy and make a great return on.
No middlemen, no stress & no hassle. We make investing in property and growing your portfolio as easy as it possibly can be.
