Changing A Mortgage To Buy To Let
There can be various reasons for changing a mortgage to buy let. Typically life takes a turn for better or worse and you find yourself needing to move location. Thankfully lenders often take a pragmatic approach to the situation and if there are sound reasons for needing to make the switch to a buy to let then it should be no problem as long as the mortgage application is handled well.
What factors do lenders take into account?
Each situation is unique but more often than not a mortgage underwriter will be considering the following:
- What type of mortgage is already in place?
- Who currently lives at the property?
- Where will everyone live once the property is let?
- What is the underlying reason behind the need to switch to a buy to let?
- Is the property suitable for letting?
- Is the applicant in a strong enough position to manage a buy to let property?
How do I change my Mortgage to a Buy To Let?
If you don’t plan to purchase another property to live in at the same time as moving out of your home (for example moving into rented accommodation, lodgings provided by an employer or with family/friends) then you may have a slightly harder time convincing a lender to help you.
For example a lender may restrict how much they will lend you based on your income rather than the rental the property is expected to bring in. This is to protect themselves from a fairly uncommon scenario known as a ‘backdoor’ residential mortgage whereby a person raises more money than they should have been able to by using buy to let mortgage products but then moves into the property themselves (or never moves out).
Due to this it is especially important to have a good relationship with the lender during the application process to ensure they have the full picture and feel your request comes from genuine intentions.
On the other hand if you will be purchasing a new property to move into then you can perform something called a let to buy. A let buy describes a situation whereby a property is flipped from being a residential home to a buy to let in order to allow for a new residential home to be bought and lived in.
This has become a common request as people are less willing to sell their valuable property assets or have found it harder to sell them due to market conditions. You can check out our full let to buy guide for greater detail and try our let to buy mortgage calculator to work out if it could be a solution for you.
How many buy to let mortgages can I have?
For the average buy to let landlord multiple mortgages is commonplace and lenders often have no issue with this as long as each property is fully self sufficient i.e the rental income full covers any existing mortgage payments with an additional amount on top as a stress test.
For example, if you wanted wanted to borrow £100,000 on a buy to let mortgage then rental income must cover the mortgage payments by at least 125% at a nominal interest rate of 6%. The calculation is usually conducted on the basis of having an interest only mortgage.
This works out to be a monthly payment of £500 meaning the rental income would need to be £625 to be acceptable to the lender. This kind of calculation is often applied to all mortgages that you hold to assess the healthiness of the existing portfolio as well as the new buy to let mortgage application. Every lender has their own rule book which is why it is so important to take advice when dealing with multiple mortgages.
The more mortgages a landlord has in place, the harder each new application typically becomes as banks will see this as a riskier loan. Many standard retail banks will be unhappy to help once you move past 3-5 total mortgages so you will need to consider approaching specialist buy to let lenders.
Specialist buy to let mortgage providers have a much better understanding of the buy to let market place and therefore often feel more comfortable lending larger sums or lending to people who have larger portfolios of property.
For landlords with large portfolios it can be possible to obtain a mortgage stretching across all the properties. The downside is that these lenders can often be more expensive than the average offer on the high street.
Do I need to tell my existing lender?
We are often asked this and the answer is always yes. If you have a standard residential mortgage in place then you are obligated to inform your mortgage provider if you wish to let the property. This usually results in one of two outcomes.
Either the lender will offer some form of buy to let mortgage to switch to or they will ask that you switch your mortgage to a buy to let using another lender.
If you are changing a mortgage to buy to let then you need to think ahead and begin to consider yourself as a landlord. Contact some local letting agents who can give you an idea of how much rental income you could achieve as well what type of tenants to expect and even how you should try to furnish your property. If you are looking for more details you can read our full guide to buy to let.
The simplest solution is to get in touch with us and we can arrange your switch to a buy to let mortgage whilst finding you the best mortgage deal for the situation.