How can I change my mortgage and rent my house out?

Posted on 23 July 2007

I currently own a house with a fixed mortgage in london. I have recently bought another flat off plan with a friend which I am intending to live in and rent my own house out. Just wondering what mortgages are available and how I go about changing the mortgages?

Thanks


Hi Louisa,
 
If you are tied in to your current mortgage (which is likely if you are on a fixed rate) you would have to obtain "Permission to let"  from your lender, who has the right to completely refuse you, or to charge an additional amount such as an extra 1% on your interest rate.
 
Alternatively, if you want to pay the Early Repayment Charges and remortgage away from your lender there are thousands of Buy to let remortgages available, but unfortunately you will have to be prepared for your current lender's early repayment charge to be costly.
 
You might be lucky enough to have a portable fixed rate with a lender who will allow you to transfer (port) it to the new flat and add your friend to the mortgage.  Please call your lender as this could save you thousands in charges.
 
As for the Buy-to-let mortgage on the London house:  find out what rental income you would be able to get for it and use that to work out what size new mortgage you can get: you at least need to replace the current debt that you have. I expect that you are hoping to take some equity as well to use as a deposit for the new flat, so it is important that you find a lender with a generous rental cover calculation.  Some now ask that the rent only matches the monthly mortgage payments: they aren't insisting on a safety margin, so these ones are likely to give the largest loan, however their rates may be higher than average so you have to consider your priorities.
 
There are lots of things to take into consideration so you are right to seek advice.  Once you know your expected rental income ask a broker to work out the best deal for you.

Katie

Category: Let-to-buy, Remortgaging

 

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