Changing Your Mortgage To Buy to Let

What happens if you rent your property and don’t change your mortgage to a Buy to Let?

This is a big no-no. You’ll be in breach of your contract and it’s technically deemed as mortgage fraud. The consequences of that can be very serious, and could result in criminal proceedings being brought against anyone caught doing it.

What is Consent to Let?

Consent to Let is what you should apply for if you want to rent out your residential property.

This way you are not breaching your contract as you are seeking permission from

your lender to let the property.

You would mainly do this when there’s a period of time left on your current mortgage deal, and coming out of that deal to switch to a Buy to Let would incur an early repayment charge.

Getting Consent to Let will give you time to move out, rent the property, and most importantly keep everything above board with your lender until the end of the fixed rate period. At that point you can hopefully make the switch to a Buy to Let mortgage.

How much deposit do you need for a Buy to Let? How much can I borrow with a Buy to Let mortgage?

You will need a 25% deposit or 25% equity in the property. Some lenders in England will allow a 20% deposit.

How much you can borrow will depend on the rental yield of the property, or if it’s a lender that assesses your income and outgoings for affordability, it will be based on that. The maximum that you can borrow on any property is 75% of its value.

Do I pay stamp duty if I change my mortgage to a Buy to Let?

There’s no stamp duty on remortgaging or changing from a residential mortgage to a Buy to Let, because you’re not technically buying a new property. You already own it, and you will have already paid stamp duty on it when you first purchased it.

How soon can you remortgage to a Buy to Let?

For a full Buy to Let remortgage of a residential property, you’ll need to wait ideally until the end of the fixed rate period, unless you’re prepared to pay the early repayment charge.

You can do it sooner than that, but it will cost you unnecessarily. As we mentioned previously, most lenders allow Consent to Let while you’re waiting out your existing deal.

How can a mortgage broker help with changing your mortgage to a Buy to Let?

Always speak to your mortgage advisor. Don’t be tempted to try to pull the wool over your lender’s eyes by renting out your property without permission. It’s just not worth it when you consider the potential consequences.

A broker will be able to guide you on how to apply for Consent to Let. Ultimately, when the time is right to switch your residential mortgage to a Buy to Let, we’ll ensure you do it the smoothest way possible.

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

The Financial Conduct Authority does not regulate most Buy to Let Mortgages.

How much will I need to borrow?

That’s quite a broad question. It’ll ultimately come down to your individual build costs, which will come from your architect, and also your deposit, or the value of the land that you’ve purchased or inherited.

Typically, the build cost will be quite a bit less than the final valuation of the property. In the long run, this makes self-build projects more cost-effective than purchasing existing properties. You won’t have to borrow as much in the way of a mortgage if you already own the land first.

Do you pay stamp duty on land for a self-build?

If you already own the land, there won’t be any stamp duty to pay – which is one of the main benefits of it, actually.

If you don’t own the land, or you’re seeking borrowing to purchase the land, you only pay the stamp duty on the value of the land, not the value of the property to be built. Either way, you won’t pay stamp duty on the actual build of the property.

Do you pay capital gains tax on a self-build?

Potentially. There’s no capital gains tax payable on any property that is your main residence, whether it’s self-built or not – at least for the period where it was your home.

If the property is not your main residence, then capital gains tax could be payable. Always seek the advice of an accountant or tax specialists for assurances on that.

Do you pay VAT on a self-build?

Similarly to capital gains tax, there could be an exemption on VAT, but again, the property has to be used as your primary place of residence. If it wasn’t your main residence, VAT could be charged.

What if I have bad credit and I want to get a self-build mortgage? How does that work?

On any mortgage, whether self-build or not, having poor credit history could hamper your application. Some lenders will either not lend at all or will offer lower Loan to Value ratios, which means you’ll need a larger deposit, or to wait a while to get your credit file up to the standard needed.

With the limited number of lenders for self-build mortgages already, and particularly in Northern Ireland, it’s advisable to get your credit file in good order before embarking on that self-build journey.

How can a mortgage broker help?

It could be a difficult, complicated process. Using a mortgage broker like ourselves here at Mint Mortgages and Protection could be invaluable for your project.

We could assist you with lenders, interest rates and eligibility criteria to find the mortgage that best suits your project. You have enough on your plate as it is with a self-build project – dealing with builders, architects and local authorities. So having someone like us there to lift a lot of that weight for you is definitely beneficial.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.