Updated: February 21, 2022

How to switch from buy-to-let to a residential mortgage

Looking to change a buy-to-let mortgage to residential? It's easier than you might think! Find out exactly how to convert it in our step-by-step expert guide.

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Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: February 21, 2022

If you own a buy-to-let (BTL) property but you’re thinking of switching to a residential agreement, it can be a good idea to get some information about how much it might cost you and whether or not you can borrow more money on top of your existing loan.

Lots of people request mortgage transfers from BTLs to residentials, sometimes because their BTL property is in a better location and has more space, while for others, a divorce or separation means they need to change the mortgage so they can move quickly.

In this guide we’ve explained;

Can you change your buy-to-let mortgage to residential?

Yes, you can. Not only is it required by law if you’ve decided to live at the property, but residential rates also tend to be more competitive. So, a switch may not just be necessary, it should result in a saving on your monthly repayments.

Not all BTL lenders allow you to switch to a residential mortgage. Trying to research the market by yourself to find out who does and who doesn’t can be quite time consuming if you’re not sure where to look. Also, the best deals aren’t always available directly.

To be sure you’re getting the best possible rate, we recommend speaking to a specialist mortgage advisor who has the experience and access to exclusive deals.

Speak to a mortgage expert today

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How to change a BTL mortgage to residential

If you’re considering switching from a buy-to-let mortgage across to a standard home loan, there’s a few steps you can take to make the process more straightforward.

Step 1. Get your documents ready

Applying for a mortgage usually requires a lot of paperwork so it’s best to get organised early. Sending everything over in one go will speed up the process as the lender will have everything they need.

The usual documents you’ll need are:

  • Proof of identity (passport or driver’s license)
  • Proof of address (bank statement / utility bill)
  • Proof of income ( 3 months payslips if employed / 2-3 years certified accounts if you are looking for a  self-employed mortgage)
  • Last 3 months’ bank statements
  • Proof of equity – You’ll need to ask your current lender for a redemption statement which is the amount required to pay off the loan, including any fees.

For more details, take a look at our mortgage application guide.

Check your credit report

Like when you first applied for a mortgage, the lender will run credit checks to get an idea of your financial history.

It’s a good idea to get a copy of your credit report before you submit anything from all three credit reference agencies Equifax, Experian and TransUnion. Check through your reports for any inaccurate data so that you can correct it before an application.

Speak to a mortgage broker

Once you’ve got your documents together, you’ll need to find a specialist mortgage advisor with experience in transferring a buy-to-let to a residential mortgage. They’ll know the ins and outs of switching mortgages and can calculate all of the variables involved, such as exit fees, to make sure you don’t end up overpaying.

What eligibility criteria do I need to meet?

The reason behind why you want to switch the mortgage can affect the criteria your lender might require you to meet and some banks even require proof that you’ll be living in the property you want to remortgage.

To make matters more complicated, every lender has its own criteria, so finding the right lender for your particular circumstances can be challenging. Here are some of the eligibility criteria you can expect when transferring your buy-to-let to a residential mortgage:

Maximum borrowing power

Principality Building Society has a maximum loan-to-value (LTV) of 95% as long as the borrower is remortgaging to a standard house, flat or maisonette. If the property is a new build, they’ll drop the maximum LTV to 90%. Mortgages with higher LTVs will usually be reserved for borrowers with impeccable credit history, steady income and good affordability.

There are other lenders with products that have lower LTV rates. The Mortgage Lender, a UK based group, will approve a remortgage from a BTL to a residential one for 85% of the properties’ market value.

Usually, though not always, deals with lower LTV rates have better interest rates and that can result in lower monthly mortgage repayments, so while the larger LTV rates might look like the best route to go for, that might not be the case.

Deposit amount

The amount of equity you’ll need in order to transfer your mortgage will vary across lenders.

So, as an example, lender Clydesdale Bank might agree to switch your BTL mortgage to a residential one on the basis that you have 5% equity, meaning they’ll lend you 95% of the properties’ market value if it’s a standard residential house or bungalow, while Norton Home Loans requires 25% equity.

You might have built up equity in the BTL property that you want to remortgage – most lenders, whether BTL or residential, prefer borrowers with larger amounts of equity.

You don’t necessarily need a huge amount of equity behind you to get a residential mortgage but having it helps you access better deals.

Income requirements

Buy-to-let lenders are more interested in the rental income of the subject property when determining how much can be borrowed/ raised against the property. Some BTL lenders also have a minimum income requirement for the applicant, as well as needing to satisfy minimum monthly rent payments. A residential lender will be more interested in your annual earned income.

Some lenders have minimum income requirements too, though this usually only applies to first-time buyers and applicants with previous affordability issues.

That being said, it’s still important to get good advice about income and whether yours will be accepted on a mortgage application. Some lenders like Accord Mortgages don’t accept income from zero-hour contracts, whereas others don’t accept income from furlough or the SEISS grant.

An experienced broker will have certain lenders in mind that match your personal circumstances and be able to advise you on how best to succeed with your type of income.

Get matched with an experienced mortgage broker

We have a network of mortgage brokers, each excelling in their speciality. We can match you with a mortgage broker that specifically deals with switching BTL mortgages to residential ones.

They’ll know if you could save money with a new lender or whether it’s best to stay put with your current one, always keeping exit fees and product transfer fees in mind. Our broker matching service is free and always will be.

Call Online Money Advisor today on 0808 189 0463 or enquire online.

FAQs

Can I raise additional money on the property?

Yes but factors like how much the property is worth and how much equity you own in it will affect how much you can borrow on top of your existing mortgage amount.

There are lots of reasons why you might want to do this, like making home improvements, consolidating debt or building an extension but before you do make the switch, keep in mind that by borrowing more, you might have to commit to a longer repayment plan and your monthly mortgage repayments will go up.

What will happen if I live in my BTL property and don’t switch my mortgage?

Don’t get caught out with the wrong mortgage agreement. If you live in your BTL property, even for one night or a week, your mortgage agreement and any insurance you might have on the property, could be invalidated.  

Ask A Quick Question

We can help! We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in Buy-To-Let mortgages. Ask us a question and we'll get the best expert to help.

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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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