Can I change my mortgage to Buy to Let?
It’s very common for homeowners to change their mortgage to a Buy to Let after having lived in the property for a few years. In this guide, we’ll walk you through all you need to know about switching your residential mortgage to a Buy to Let. However, keep in mind that making this type of switch is a big decision and not something to rush into. To make an informed decision and understand what options are open to you, it’s always worth speaking to a mortgage advisor, like one of our award-winning experts.
Can I change my mortgage to a Buy to Let?
Yes, it is possible to change your mortgage to a Buy to Let. It is very common for homeowners to want to switch their residential mortgage to a Buy to Let set up. This could be because you want to buy a new home, move locations or move in with a partner, all while keeping your old home at the same time. Or you may want to switch your mortgage to a Buy to Let to start your own rented property portfolio.
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How to change mortgage to Buy to Let?
To change your mortgage, your current mortgage lender will first carry out a detailed mortgage affordability assessment. This is to ensure you are reliable with borrowing money, and can afford to make the repayments if they granted you a loan.
However, these will be slightly different to the assessment you went through when you bought your home originally. Instead of your max borrowing potential being based on your income, for a Buy to Let mortgage a lender will look at the projected rental income that the property could generate.
Typically, the monthly rent will need to be 125% of the mortgage repayments in order for you to change your mortgage to a Buy to Let - you might hear this referred to as the Interest Coverage Ratio.
However, lenders will want to ensure that if the property is empty at any point, you will be financially able to cover the rent. If your lender declines, you could remortgage onto a Buy to Let mortgage with a new lender. However, this could result in you having to pay an Early Repayment Charge (ERC) for leaving your current deal early.
If you want to change your residential mortgage to a Buy to Let, then purchase a new home for you to live in, then you will need a Let to Buy mortgage. This allows you to buy a new property to live in, and rent out your old one to tenants.
If you’re thinking about renting out your old home because you are struggling to find a buyer to purchase your home, it could be worth considering a Consent to Let instead. This is a 6-12 month agreement secured from your lender that allows you to rent out a room or your entire property in the short term. In this way, you can get the benefit of renting out your property while you wait for the market to improve, without having to switch to a Buy to Let set up.
If you want to switch to a Buy to Let property to allow you to travel, or move to a new location where you intend to rent, you will need to ensure your mortgage affordability is sufficient. Rent is often more expensive that mortgage payments, and lenders typically approve Buy to Let loans for borrowers who already have a residential mortgage,
For these reasons, a lender may be reluctant to approve your Buy to Let mortgage application if you’re going to be renting another property. Or they will want to ensure you can cover your rent and your Buy to Let loan repayments, so that if the property is empty for an extended period you won’t default on your loan.
This is why a lender may ask what income you earn, even though your personal income isn’t used to work out what loan you can borrow with a standard Buy to Let mortgage.
Do you need to stay with your current provider?
No, when changing to a Buy to Let mortgage, you do not need to stay with your current provider. There are thousands of mortgage products on the market, so it’s worth shopping around to see what you could be offered from different providers before making the switch.
At Tembo, we’re specialists at helping newbie landlords and home buyers find the best deal for them from over 20,000 mortgage products and over 100 lenders. To get started, create a free Tembo plan for a personalised recommendation.
How do I find out what I could be offered for a Buy to Let?
Each mortgage lender has a different range of Buy to Let products, and their own eligibility and affordability criteria that you need to meet. This can make it difficult to know which lenders are likely to accept your application, or which Buy to Let mortgage is the best deal for you. An experienced mortgage broker can help you find the best option for you, based on your individual circumstances.
Can you switch from buy to let to residential mortgage?
It is possible for you to switch your Buy to Let mortgage to a residential mortgage, for example if you want to temporarily or permanently move into the property. You will need to approach your current lender to see if this is something they would allow, and be able to pass their residential mortgage affordability criteria. However some lenders can be more complicated than others. Having an experienced mortgage broker on your side can help you make the switch, or find alternatives if your current lender won't approve the change.