Can You Change Your Mortgage to a Buy to Let Mortgage in South London? 

If you’re keen to let your property for the first time, it’s likely you’ll need to switch to a buy to let mortgage. 

While you may be familiar with the typical process of paying back the lender on your home, this looks significantly different when you transition to letting property. You need to be prepared for different affordability criteria, unfamiliar payment structures and a higher upfront cost. 

Thankfully, we’re here to help potential landlords in south east London let their properties for the first time. So, keep reading for more detail on the process of switching your mortgage to buy to let, as well as answers to common questions. 

What is different about a buy-to-let mortgage?  

Buy to let mortgages are different in several ways from residential mortgages. They are designed with letting in mind, and you are not personally allowed to live in a property which is under a buy to let mortgage.  

Most landlords will need this type of mortgage if they want to let their property and fulfil the conditions of their lender. It is worth mentioning that these are typically more expensive than residential mortgages, are based on rental yield (as well as personal income), and are often interest only. 

Do I need a buy to let mortgage to let property?  

Usually, yes. It is sometimes possible to let out your property under a ‘consent to let’ agreement with your mortgage lender while still using a residential mortgage. However, this is not always allowed, and when it is, it’s often done for the short term rather than as a lasting agreement. 

In nearly all other circumstances, landlords will require a buy to let mortgage to rent their home to tenants on an ongoing basis. 

What affordability criteria will I need to meet?  

Affordability is notoriously tougher for buy to let mortgages than your standard, fixed-rate residential product. Lenders will require at least a 25% deposit (though sometimes as  high as 40%), and you will have to evidence that the rental yields will deliver enough to cover (typically)125% of the monthly mortgage payment. Your personal income will also be considered as well as your credit history, though this is not as essential as when applying for a residential mortgage. 

How to change your mortgage to buy-to-let  

 If you are letting your property for the first time and intend to switch to a buy to let mortgage, there is a process you should follow to ensure that everything is done correctly. 

1. Discuss approach with letting agent and mortgage advisor  

First, you should discuss your intentions with your letting agent and mortgage advisor. Both these people should be able to give you sound advice about how to set up your investment, which lenders to choose, and what kind of mortgage to go for.  

The letting agent can also make you aware of associated costs you will need to consider as a landlord which you might not otherwise have considered – such as compliance certificates (e.g. EPC) and budgeting for void periods. 

2. Check Your Current Mortgage Terms  

Your residential mortgage will have certain terms and conditions within it, explaining any early repayment costs, early exit rules and any other restrictions. You will need to pay careful attention to any hidden costs. You might be able to switch to a buy to let mortgage at a reduced cost if you choose to use the same provider, but it is always best to check with your lender. 

3. Inform Your Current Lender  

Once you have decided how to proceed, contact your lender about your intention to switch. This can be done by your mortgage advisor if you have handed this process over to them. They can tell you if there are any specific steps you need to take before switching, as well as how the process works.  

4. Review Buy-to-Let Mortgage Requirements  

Next, you should review buy to let requirements with your mortgage advisor. often, they can find off-market deals which may not be accessible to you, so it is well worth seeing what they have to offer. You will need to check that you can meet the affordability criteria, such as deposit amount, projected rental income, interest rate and any personal income requirements.  

Make sure you select something that is well within your means, especially if you are letting property for the first time, and aren’t familiar with the sector. 

5. Apply for a Buy-to-Let Mortgage  

Either you or your mortgage broker can make the formal application for the mortgage. They will likely ask for you to provide the necessary evidence, such as bank statements, proof of employment, indications of the rental potential of the property and the details of your existing mortgage. 

6. Property Valuation for buy-to-let  

The lender will conduct a buy to let valuation on the property to ensure that it meets the expected rental yields, and therefore fits appropriately with the deposit amount and interest rates. This will enable them to approve (or revise) your mortgage offer. 

7. Legal Work (Conveyancing)  

You will usually need a solicitor to handle the legal aspects of the switch, for example, updating the mortgage deed. Some lenders will actually provide this service themselves, making the transfer as easy as possible. 

8. Switch Mortgage & Let the Property  

Once you remortgage to a buy to let product, you are now in a position to let your property, you are compliant with the various rules for landlords. Now it’s time to get everything else in order with the help of your letting agent – from acquiring any property licences to getting your safety certificates in order. 

Landlord questions about buy-to-let mortgages  

Is a buy to let mortgage more expensive?  

Yes, usually. While they tend to be interest only, they require a larger mortgage deposit and charge a higher interest rate than residential mortgages. 

What insurance do I need for a buy-to-let mortgage? 

Technically, you don’t need any kind of landlord insurance. However, it is a very, very good idea. You should look into buildings and content insurance for buy to let property, as well as consider guaranteed rent insurance if you are worried that tenants might default on payment.  

Can a first-time buyer get buy to let mortgage?  

Yes, first time buyers can get a buy-to-let mortgage, though it is more challenging. The main difficulties are having the funds and a sufficient credit rating. Lenders are likely to be more suspicious and wary of lending to someone who has not owned a property before. 

Can I rent out a property without telling my mortgage provider?  

You shouldn’t. While it is not illegal, if it is discovered, they may call in the loan, forcing you to repay the mortgage amount in full immediately or sue you for a breach of contract. It’s a very, very bad idea. 

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

No, not usually. You can’t live in your buy to let property, partly because the lender’s basis for the loan amount is the rental yield of the property. On a more arbitrary level, most contracts simply prohibit this across the board, meaning that living in the property would be in breach of their terms and conditions. 

Feel confident about switching to a buy to let mortgage? 

It can be tricky taking that first step towards letting your property, especially when switching from a residential property which you are more comfortable with. Our letting agents in Rotherhithe, New Cross, Canary Wharf, Southwark -and beyond – are here to help. Get in touch today for advice on letting your property for the first time, ensuring you make a well informed decision.