Changing to a Buy-to-Let Mortgage

Want to change your residential mortgage into a buy-to-let agreement? Read through our guide to find out how to do this.

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Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: December 14, 2021

There are many good reasons why you want to change a residential mortgage to a buy-to-let (BTL) agreement, and here, you’ll learn whether that’s possible for you.

This guide covers everything you need to know, including how to go about this, what criteria you’d have to meet and more.

Can you change a residential mortgage to buy to let?

Yes! Changing a mortgage to buy to let is absolutely doable if you meet the eligibility criteria of the lender you want to switch with. It’s possible to switch with your current mortgage provider, at their discretion, or change mortgage types with a new lender.

If you’re looking to change, there’s a few things you should consider before you go ahead…

Bullet Tick Your interest rate is likely to rise, since BTL mortgage rates are usually higher
Bullet Tick There may be early repayment changes to pay if you’re in a fixed-rate period
Bullet Tick You have to register as a landlord in some parts of the UK before you can let to tenants
Bullet Tick You may need to take out new home insurance policies to cover your landlord needs

One final thing to bear in mind is that there are mortgage brokers who specialise in helping people switch to buy to let. They deal with enquiries like yours every day, and speaking to one of them before you apply could help you save time and money in the long run.

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How to switch to a buy-to-let mortgage

Here are the steps to follow to switch to a buy-to-let mortgage from a residential mortgage…

  1. Speak to your current mortgage lender: Let them know of your intentions and find out whether there will be early repayment charges to pay so you can factor this into the cost. It’s also worth finding out whether you can switch with them, but don’t take them up on an offer yet – it’s important to search the entire market for the best deal first.
  2. Get a rental income forecast: You’ll need to speak to an estate agent, vendor or local letting agent to get a rental income forecast for the property you want to change to buy to let. Your lender will need this to establish whether the mortgage is affordable.
  3. Speak to a buy-to-let mortgage broker: The best way to get the ball rolling on your plans is to speak to a buy-to-let mortgage broker who specialises in helping customers switch from residential mortgages. They have the knowledge, experience and lender contacts to help you get the best BTL deal when you switch.

We offer a free broker-matching service that will pair you with a mortgage advisor who specialises in helping people switch to buy-to-let. Make an enquiry online with us and we’ll set up a free, no-obligation chat between you and your ideal mortgage expert today.

What eligibility criteria you need to meet

Firstly, most mortgage lenders will need you to have had your residential mortgage for at least six months before you can change it to a buy to let. The rest of the criteria you’ll need to meet is no different than it would be if you were applying for a buy-to-let mortgage from scratch.

Here is a quick summary of the requirements…

  • Affordability:
    This will be based on the property’s rental potential. Most lenders will need your rental income forecast to show that it can generate at least 125% of the mortgage payments before they’re willing to let you switch to buy to let.
  • Credit history:
    Bad credit mortgages are available for buy-to-let properties, but if there are new credit problems on your file since you took out your original mortgage, your chances of being able to switch may depend on the age and severity of them.
  • Your landlord experience:
    If you have previous landlord experience, you’ll stand a better chance of being able to change your mortgage to buy to let. There are, however, a smaller number of mortgage lenders who cater for first-time landlords.
  • Deposit requirements:
    You don’t need a deposit in the traditional sense, as the equity you hold in your property will serve as your deposit.
  • Equity required:
    You’ll need to hold at least 20-25% equity in your property to remortgage onto a buy-to-let agreement. The amount could be higher if you have bad credit or other risk factors are present.
  • Property type:
    Certain types of buy-to-let properties can put lenders off and limit the range of products and rates you can access. For example, HMO properties sometimes call for a specialist lender and not all providers lend on high-rise apartments.

These are the main eligibility requirements for switching to an investment mortgage from residential. You can read up on the full criteria in our complete guide to buy-to-let mortgages.

Switching to buy to let with a let-to-buy mortgage

An alternative way to change a residential mortgage to buy-to-let is through a let-to-buy agreement. This is basically a two-pronged deal that allows homeowners to convert their existing mortgage to buy to let and buy another property to live in at the same time.

It’s common for let-to-buy customers to release equity from the property they’re converting to BTL to serve as their deposit on the new home they’re buying.

The eligibility criteria for let to buy is the same as for buy to let, except you’d be applying for two mortgages at the same time and the lender will be keen to see that you can afford both.

Could ‘consent to let’ be an alternative?

A consent-to-let agreement is when your mortgage lender grants you permission to rent out all or part of your home to a tenant on a temporary basis. This is only a viable alternative to buy to let if you have no plans to rent out the property long term and may want to return to it.

If you think consent to let could be the answer, you should contact your lender to see if your mortgage agreement allows it. When your request is approved will be at the lender’s discretion and they may increase your interest rate while the property is being rented out.

Consent to let usually covers short-term periods of around 90 days in a calendar year, while some lenders won’t allow you to rent out your home for more than 30 consecutive days.

Get matched with the right buy-to-let mortgage broker today

The best, quickest and easiest way to switch to a buy-to-let mortgage is by speaking to a mortgage broker who specialises in these arrangements and oversees them every day.

We work with mortgage advisors who are experts in this area. They know buy to let and let to buy inside out and have the knowledge, experience and lender contacts to help you get the best deal when changing your residential mortgage to the one you need.

We offer a free broker-matching service that will quickly assess your needs and circumstances to pair you with the advisor who’s best placed to help you switch. Call 0808 189 0463 or make an enquiry and we’ll set up a free, on-obligation chat between you and them today.

FAQ's

What will happen if I rent out my property without converting to buy-to-let?

Unless you own the property outright, you will at the very least need permission from your lender to rent it out to a tenant. If you plan on doing this for a long period, there’s a good chance you will need to switch to a buy-to-let mortgage to make sure everything is above board.

Renting out your property without your lender’s permission will likely mean you’re in breach of your mortgage agreement, in which case, the lender could call in the entire debt in one go.

Can I live in my buy-to-let property?

No. If your property has a buy-to-let mortgage on it, the home can only be let to tenants and you can’t live there yourself. While doing so isn’t technically illegal, it would almost certainly be a breach of your mortgage agreement and could result in the lender, as a worst case scenario, calling in the entire debt.

What insurance will I need after I’ve switched to buy-to-let?

It’s a good idea to review all of your protection insurance policies if you’re changing your mortgage to buy to let, since standard home insurance won’t cover your needs as a landlord.

There are specialist landlord insurance policies for buy-to-let property owners. While it’s not a legal requirement to have one, it’s a good idea to speak to a broker about the benefits they offer.

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Pete Mugleston

Pete Mugleston

Mortgage Expert

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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