Yes, it is possible to switch from a buy-to-let mortgage to a residential mortgage – it’s even required by law if you have decided to live in a property you’ve been renting out.
How to Change Buy-to-Let Mortgage to Residential
To switch a buy-to-let mortgage to a residential one, you’ll need to contact your current lender and see if they can transfer you onto a new product. Otherwise, you’ll need to remortgage with a new lender.
Whether you remortgage with the same lender or a new one will be subject to you meeting your existing lender’s current residential affordability criteria as well as their current product offering. The simplest way to do this is to approach your existing lender to see if they will grant permission, however if they can’t/won’t allow this, then our mortgage advisers can look at alternative lenders to help you.
Considerations When Converting Buy-to-Let to Residential Mortgage
There are some important considerations to keep in mind when switching from a buy-to-let to a residential mortgage:
- Lender policies – not all lenders may allow you to switch from a buy-to-let mortgage to a residential mortgage. Some lenders may have specific policies or restrictions regarding this type of switch. It’s essential to check with your current lender or shop around with other lenders to find out their policies on switching mortgage types
- Eligibility criteria – lenders typically have eligibility criteria that borrowers must meet to qualify for a residential mortgage. This may include factors such as your income, credit history, employment status, and the property’s suitability for residential use. Make sure you meet the lender’s criteria before applying for a residential mortgage
- Financial assessment – when switching from a buy-to-let mortgage to a residential mortgage, lenders will assess your financial situation to ensure you can afford the residential mortgage payments. This may involve providing documentation of your income, assets, and financial obligations
- Mortgage payments – most buy-to-let mortgages are interest-only, meaning you only make interest payments each month and repay the mortgage balance at the end of the mortgage term. Conversely, most residential mortgages are repayment, meaning you make repayments towards the mortgage balance as well as interest payments each month. This means that, you’ll likely find your monthly payments to be more expensive on the residential mortgage than they were on the buy-to-let
- Property use – residential mortgages are intended for owner-occupied properties, so the property must be suitable for residential use. If the property was previously rented out as a buy-to-let investment, you may need to provide evidence that you intend to live in the property as your primary residence
- Property valuation – the lender may require a new valuation of the property to determine its current market value and suitability for a residential mortgage. The valuation may also help determine the maximum loan amount and interest rate for the residential mortgage
- Legal and administrative processes – switching from a buy-to-let mortgage to a residential mortgage involves legal and administrative processes, including updating legal documents, transferring the mortgage loan, and potentially paying any applicable fees or charges. It’s essential to follow the required procedures and seek professional advice from solicitors or conveyancers to ensure that the switch is conducted properly
- Early repayment charges – if your buy-to-let mortgage has an early repayment charge (ERC), you may need to consider the cost of paying off this charge when switching to a residential mortgage. Some lenders may waive or reduce ERCs in certain circumstances, so it’s worth checking with your lender
- Tax – you’ll no longer pay Income Tax on the property as you won’t be generating rental income. Instead, you’ll pay Council Tax. You may also need to pay Capital Gains Tax if you sell the property later on, as it wasn’t always your main residence
Get Advice Before Changing Your Buy-to-Let to a Residence
Before switching from a buy-to-let mortgage to a residential mortgage, carefully consider your reasons for making the switch, assess your financial situation, and explore the options available to you. Consulting with one of our experienced mortgage advisors who can help you make an informed decision and navigate the process effectively.
If you’d like to discuss your options in more detail, then please contact one of our consultants on 023 8235 2300 and they’ll be able to give you a clearer idea of how we can assist you.
