Can I change my mortgage to Buy to Let?

Can I change my residential mortgage to a Buy to Let?

Yes, it is possible to change your residential 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. Whatever the reason, it can be very simple to switch from a residential mortgage to a Buy to Let. You could go to your current lender and ask for a mortgage change, but this may see you missing out on better Buy to Let deals available on the market.

Keep reading to find out what other options are there.

How to change my mortgage to a 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 agree to grant 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 (as with a standard residential mortgage), 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. 

Can I rent out my house and buy another?

If you want to change your residential mortgage to a Buy to Let, AND 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.

So, 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. 

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 who's on your side can help you make the switch, or find alternatives if your current lender won't approve the change.

Am I eligible for a Buy to Let mortgage?

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.

Generally, if you're planning to switch to a Buy to a Let mortgage from your existing mortgage plan, its a good idea if you can meet the following requirements:

1. Being over the age of 18
2. Owning your existing property outright or have an existing residential mortgage that you wish to switch
3. Ensuring that the rental income from the property must usually cover at least 125-145% of the mortgage payments
4. Having a good credit history
5. Having steady employment and/or a reliable income source (as some lenders may have a minimum income requirement to qualify)
6. Ensuring that the property you wish to let out is compliant with regulatory requirements

What happens if I don't tell my mortgage company I'm letting my property?

If your mortgage contract says you cannot let out the property, and you let out the property anyway, you will be in breach of your contract. As such, they can demand you pay certain fees, like an Early Repayment Charge and other costs, or the immediate and full repayment of the mortgage. They could also issue a County Court Judgment (CCJ) against you for possession. Not only will this mean having to move out of your house, a CCJ can negatively impact your credit rating, making it difficult to borrow money or get credit in the future.