How to Switch to Buy to Let Mortgage

If you’re thinking about becoming a landlord and buying a property to rent out, you might want to consider a buy-to-rent mortgage. 

But, what is a buy-to-rent mortgage, how does it work, and how to switch to a buy to let mortgage?

Let’s find out.

How to Switch to a Buy To Let Mortgage

 Here’s what you need to do switch to a buy-to-let mortgage.

1. Get a quote for a buy-to-let mortgage: It’s crucial to get quotes from a few different lenders so that you can compare interest rates and fees.

2. Contact your current lender: Talk to your current lender and let them know that you want to switch to a buy to let mortgage. Find out whether there would be any early payment fees and whether you can switch with them.

3. Talk to a professional: You can always talk to a buy-to-let mortgage broker to figure out if you’re getting a good mortgage deal. It’s also a good idea to speak to a rental income forecast to establish if you can afford the mortgage.

4. Sign the new mortgage agreement: Once you pick a lender, they will send you a buy-to-let mortgage agreement to sign. Make sure you read it thoroughly and ask any questions you may have before signing. 

5. Transfer your mortgage: If you’ve picked a new lender, you’ll have to transfer the current mortgage to them, which usually takes about four weeks.  

Buy-to-let mortgages are mortgages that allow borrowers to invest in property with the intention of renting it out to other people rather than living in it. Converting a residential mortgage to a buy to let is not uncommon and can be a great opportunity to increase your income in the long run. 

Unless you already have a separate property where you can move in, you can either buy a new house or move into rented accommodation and switch the existing property mortgage to a buy to let. 

Buying a new home and switching your existing property to a buy to let

If you’re planning on purchasing a new place to live, so you can rent out the old one, you’ll have to get a new residential mortgage. 

The new mortgage will become your main residential mortgage for the new property. You can then switch the old mortgage to a buy to let and rent the existing property. 

Lenders might be less likely to agree to this type of arrangement in cases where the borrowers don’t have a stable and secure income or any rental experience. 

There’s also an option to ask the lender to let out the place under the existing mortgage deal, especially in cases where you can’t transfer your mortgage. If the lender finds this too risky, you would need to remortgage to a buy-to-let deal.

Getting a buy to let mortgage and moving into rented accommodation

Switching to a buy to let and moving into rented accommodation is a less likely option, given that the risk is substantially higher for the lender.

However, some lenders might agree to let you change your residential mortgage to a buy to let in certain circumstances even if you don’t have another property in your name. The lender will ask for proof or projected rental income and will most likely increase the interest rate. 

Changing to a Buy to Let Mortgage: Eligibility Criteria

Ultimately, switching to a buy to let comes down to whether the borrower can meet the eligibility requirements. 

Affordability

The amount you’ll be able to borrow is determined by the rental potential of the property. Most lenders will want to analyse your rental income projection and see if you can make at least 125% of the mortgage payments to accept your application to change your mortgage to a buy-to-let. 

Credit history

Borrowers with bad credit scores can get mortgages, but their chances of being able to switch mortgages are slim. Lenders usually look at the severity of their previous credit issues.

Landlord experience

Lenders are more likely to accept a borrower’s application to convert to a buy-to-let mortgage if they have previous experience as landlords.

Equity required

To change your mortgage to buy to let, you’ll need to retain at least 20% equity in your property. The amount required may be higher for people with bad credit scores.

Property type

Depending on the type of property, the lender can offer you different options and products or refuse your application altogether.

How to Find the Best Mortgage Rates When Switching Buy to Let Mortgage

When swapping a mortgage to buy to let, getting the best possible rate should be at the top of your list.

If you have a good mortgage rate with your existing lender, they might be your best option. 

If the lender rejects your application, you can always reach out to a buy-to-let mortgage broker who can help you find the best deals on the market. You can also do your own research and consult with other professionals and lenders to make sure you don’t miss out on an opportunity.

Bottom Line

A buy-to-let mortgage is one of the many great ways to invest in property and boost your income. To switch to a buy-to-let mortgage, you will have to move out of the property and meet some eligibility criteria. The most important thing is to make sure you can afford it in the long run.