Converting Residential Mortgage to Buy to Let Guide

Estimated reading time 7 minutes

If you are thinking of changing your residential mortgage to a buy to let mortgage the first thing you should do is contact your mortgage lender to ask if it is possible. Please make sure you notify them before renting out your property otherwise you will be breaking the law by committing property fraud. When you speak with your mortgage lender about the switch do ask if there are any fees to be paid as well as what conditions will need to be fulfilled in order to make the switch as you will have to weigh up all the pros and cons before making the decision to do so.

Remember as the homeowner once your house or flat becomes a rental property you will be required to move out and move into alternative accommodation.

Why change a residential mortgage to a buy to let mortgage?

  1. Investment Opportunity: If you see an opportunity to generate rental income from your property and want to build a property portfolio then switching your residential mortgage into a buy-to-let one would be an optimal solution.
  • Relocation: If you need to move to a new area for work or for personal reasons, and you are unsure how long you are going to move away for then renting the property out rather than selling your house could prove be a good alternative as it would allow you to maintain a home base with the option to return in the future if your plans change.
  • Preserving Family Assets:  You may decide as the property market is not strong and you are not in a rush nor have a strong desire sell your house now, that the time isn’t right to sell your property. Instead, you may prefer to rent it out and either sell it when the market has rebounded or to pass it on to your children or other family members later.
  • Emotional Connection to the Property: If you have a strong emotional attachment due to fond memories, personal history, or for sentimental reasons; you may prefer to rent out the house or flat instead of selling. By renting out your family home as opposed to selling it you will be able to maintain ownership which might otherwise have been too emotionally challenging.
  • Financial Circumstances: If you’re worried about the affordability of your mortgage, renting out your property can allow you to explore more budget friendly alternatives. It will provide you with the opportunity to move to areas where the cost of living is not so high, potentially downsize and ultimately rent more affordable accommodation that significantly reduces your living expenses whilst still maintaining ownership of your property.
  • Capital Appreciation: If you believe that the mortgaged house value will increase over time, you may decide want to hold onto it to benefit from potential appreciation and either buy a second home and or move into rented accommodation.

How to convert your residential mortgage to buy to let

Switching from a residential mortgage to a buy-to-let mortgage involves several essential steps to ensure a smooth transition. Here’s a step-by-step guide to the process:

  • Check Your Mortgage Terms: Review the terms and conditions of your current residential mortgage to ensure there are no restrictions on converting your property into a buy-to-let. Some residential mortgages may have clauses that prevent you from renting out the property without incurring penalties. Remember if you switch mortgages before the fixed-rate period or deal period of your buy-to-let mortgage expires, you may be subject to early repayment charges or exit fees.
  • Assess Financial Viability: Determine whether converting your property to a buy-to-let is financially viable. Consider factors such as rental income potential, expected expenses (mortgage, insurance, maintenance), and potential void periods when the property might be vacant.
  • Contact Your Lender: Get in touch with your current mortgage lender to inform them of your intention to switch to a buy-to-let mortgage.
  • Property Valuation: Your lender may require a property valuation to assess the property’s current market value.
  • Buy-to-Let Mortgage Application: Submit an application for the buy-to-let mortgage.
  • Consider Tax Implications: Understand the tax implications of becoming a landlord. Rental income is taxable, and there are specific tax rules related to buy-to-let properties. It is advisable to consult with a tax advisor to ensure tax regulations are complied to.
  • Landlord Insurance: Obtain landlord insurance coverage for the property. Standard residential insurance may not provide adequate protection for rental properties.
  • Inform Insurance Providers: Inform your existing residential insurance provider that the property will become a buy-to-let. If you fail to inform your insurers you may be exposed to potential risks as the insurance may be invalid.
  • Review Tenancy Agreement: If you don’t have tenants yet, prepare a suitable tenancy agreement that aligns with buy-to-let regulations and provides both you and your tenants with clear terms and responsibilities.
  • Comply with Regulations: Familiarise yourself with the legal responsibilities and regulations for landlords in your area. These include ensuring certain safety standards are adhered to, deposit protection is in place, selective licensing has been approved as well tenant rights.
  • Management Decision: Decide whether you will manage the property yourself or employ a letting agent to handle tenant requests, maintenance issues, and rent collection.

Gaffsy saysIt is essential to shop around, compare deals and approach numerous lenders when switching to a buy-to-let mortgage. Each lender may have different interest rates, loan terms, and criteria for buy-to-let mortgages. By approaching other providers, you can potentially find more competitive rates and terms that better suit your needs.

Can you switch from a buy to let mortgage to a residential mortgage?

Yes, it is possible to switch from a buy-to-let mortgage to a residential mortgage, but

it may be subject to certain conditions and criteria set by lenders. They will need to assess your financial circumstances and do an affordability check in order to determine your eligibility for a residential mortgage. They will consider your income, credit history, and any outstanding debts to ensure you can comfortably meet the mortgage payments. They are also likely to require a new valuation of the property, determining the current market value before approving the switch to a residential mortgage.

Be aware if you switch mortgages before the fixed-rate period or deal period of your buy to let mortgage expires, you may be subject to early repayment charges or exit fees. You might be facing Stamp Duty charges when changing the use of a property from a buy to let to residential home. It is therefore advisable to check with a professional beforehand so that you can budget accordingly. 

When you switch from a buy to let mortgage to a residential mortgage the lender will require you to move into the property and occupy it. If you move into your buy to let property without notifying them it can be seen as a breach of contract and some cases lenders may demand immediate full repayment of the mortgage.

Alternatively sell your house to Gaffsy

If you have approached your mortgage lender and decided that there are too many hoops to jump through, conditions to meet and fees to pay when switching from a residential mortgage to buy to let mortgage then it is time to contact Gaffsy.

Similarly, if you have concluded a landlords obligations and legal responsibilities are too much for you to take on and that staying on top of incoming legislation from the renters reform bill is not for you, then get in touch with our experienced team today.

We can buy any house, flat or property for cash and as a professional cash house buyer we don’t need funding as we have the funds available to by your home directly, making the process as easy as 1,2,3

  1. Contact us for a free cash offer
  2. Agree our offer (zero fees and legal costs covered)
  3. Complete on your house sale, receive the full cash amount offered

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