Changing Your Mortgage to a Buy to Let

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Changing Your Mortgage to a Buy to Let

There are a few situations where you might decide to let out your current home to tenants. Doing so will mean you need a new type of mortgage – a Buy to Let product rather than a residential mortgage. Some lenders will allow you to change the mortgage type, while others may not, so it’s important to understand the options.

What is a Buy to Let mortgage?

Renting a property out to tenants is seen as a breach to a standard residential mortgage contract. If you’re not living in the property, mortgage lenders see it as a higher risk.

Because of this, you need a Buy to Let mortgage for any property that is let to tenants. These work in largely the same way as a residential mortgage, but there are a few key differences.

Who can get a Buy to Let mortgage?

Buy to Let mortgages are generally available to anyone who already owns a home. The main thing that a lender will look at is whether the planned rental income will cover the mortgage repayments. Usually they will look for rent at 125% of the mortgage cost.

Some lenders will want you to meet a minimum income requirement to make sure you can cover the payments if there is no tenant in place.

How do Buy to Let mortgages work?

The main features of a Buy to Let mortgage are that they tend to require a higher deposit – 25% per cent is the norm – and you can usually expect higher interest rates than a residential mortgage.

Once your mortgage is in place, you make monthly repayments, but of course you are receiving rent from your tenants to cover this cost.

How can I change my mortgage to a Buy to Let?

There are two main options to let out a property that currently has a residential mortgage:

  • Ask your current mortgage lender for a ‘consent to let’
  • Remortgage to a Buy to Let product

Deciding which option is best will depend on the deal you are offered by your current lender – if anything – and what’s available in the marketplace.

A good reason to stay with your current lender is if you face a high Early Repayment Charge for ending your existing mortgage deal. It is also a simpler option if you only plan to rent the property for a short period of time.

I’d like to change my main residence to Buy to Let and buy a new property…

Converting your property to Buy to Let and buying a new home to live in is sometimes called ‘Let to Buy’. There are three main options open to you here:

  • You ask your lender for Consent to Let on your existing home, and take out a separate mortgage for the onward purchase
  • You take out both mortgages with one lender
  • You find separate Buy to Let and residential mortgage products

It can be complicated to explore all the options and compare the costs, so let our mortgage advisors look at the details for you.

I’d like to change my main residence to Buy to Let and move into rental accommodation…

This is a simpler situation where there are two options: ask for consent to let from your lender, or end your current deal and take out a new Buy to Let mortgage.

Switching from a residential mortgage to a Buy to Let is not an option with all lenders, so do explore your options before making a decision.

Do Buy to Let mortgages have to be interest-only or can I carry on making repayments?

Many landlords choose an interest-only mortgage for their Buy to Let as it means that the monthly repayments cost less, so they make more profit from their tenants’ rent.

The downside of interest-only is that you will still need to repay the entire loan at the end of the mortgage term. Interest-only lenders now ask you to evidence how you will settle this debt – via investment returns or selling the property, for example.

But if you would prefer to pay back the debt throughout the mortgage term, capital repayment Buy to Let mortgages are also readily available. It simply means that your mortgage payments will be higher, but at the end of the term you will fully own the property.

How can Pia Financial Solutions help me?

As experienced Mortgage Brokers, we are here to advise and guide you on your options and help you decide how to approach converting your home to a rental property. We have access to hundreds of products across dozens of lenders, and will do all the comparisons to help you make an informed decision.

To find out more about how we can help you, contact us today.

Your property may be repossessed if you do not keep up with your mortgage repayments. The Financial Conduct Authority does not regulate some Buy to Let Mortgages.