We’ve helped hundreds of customers move from their buy-to-let mortgage to a residential mortgage. Here’s what you can expect from the process.
If you own a property on a buy-to-let mortgage and you’ve decided you want to live in it, you’ll need to switch to a residential mortgage. It might sound strange, we know. After all, if it’s yours, it’s yours – right?
Sadly not. Living in your buy-to-let property without letting your lender know could breach your mortgage terms and cause you serious issues.
The process to switching is relatively simple, but there may be differences in affordability and eligibility criteria, and in some cases, you might need to find a new deal.
Let’s take a look at how it works.
Can you change from a buy-to-let mortgage to a residential mortgage?
Yes – and there are plenty of reasons for wanting to do so. It may be that your plans were always to live there eventually – perhaps to downsize or because you’re coming home after a period abroad. Maybe you have children or family members who would like to live there, or you’d like to live there yourself after a separation.
Whatever your reason for wanting to change your buy-to-let mortgage to a residential one, it’s a perfectly reasonable and common thing to do. But BTLs and residential mortgages are regulated differently, so you must switch so that your lender is aware of the change of circumstances.
What happens if I live in my buy-to-let without switching the mortgage?
If you don’t switch mortgages before moving into your buy-to-let, it can be considered a breach of contract. You must inform your lender of the change, or they could demand you repay your mortgage in full – immediately.
If you’re unsure, speak to a mortgage advisor – they can help you avoid any costly mistakes.
How do I change from a buy-to-let mortgage to a residential mortgage?
There are a couple of ways to do it. The easiest way to switch would be to remortgage with your existing lender, if they’ll let you. If they don’t, you’ll need to look elsewhere and find a new deal with a new lender.
A mortgage broker can search the market to find a deal that suits you, hopefully as much as your original mortgage did, so you don’t notice too much of a difference.
What will change when I swap my buy-to-let to a residential mortgage?
The biggest differences between your buy-to-let mortgage and your residential mortgage are in the eligibility criteria and affordability calculations.
- Affordability: BTL affordability is mainly based on the viability of the investment based on the rental income it’ll yield. With a residential mortgage, it’s your income and spending habits that’ll be assessed to determine whether you can meet the repayments.
- Income: Where your income comes from is important to the lender. If it comes from multiple sources (like bonuses, commissions, overtime, etc) or you’re self-employed, you might need a specialist lender who is familiar with more complex incomes and will offer you more favourable terms.
- Deposit: Buy-to-lets are deemed higher risk than residential mortgages. This means that with the right lender, you might be able to get a higher loan-to-value (LTV) and use a smaller deposit for your residential mortgage.
- Credit history: It’s important for a residential mortgage that your credit history is in good shape before you switch. But if it isn’t, don’t panic. There are specialist lenders out there who offer bad credit mortgages.
- Proof of address: If you’ve been living elsewhere or even abroad, you’ll need to find proof of your address for your most recent home. You might find that lenders prefer you to have had a bank account open or an active credit history in the UK during the time you spent abroad. And you might also need to provide proof that you plan to live in the buy-to-let property.
The Mortgage Hut can help you switch
If you’re considering moving into your buy-to-let property and switching mortgages, contact our team of experts. We’ve helped with hundreds of switches for all sorts of reasons, and we’ll make sure to find the best option for you. We’ll also advise on whether it’s best for you to remortgage or if you’ll find a better deal with a new lender.
With vast experience in switching mortgages and a network of hundreds of mortgage lenders, we can find you a deal that works.
FAQs
Can I raise equity when switching to a residential mortgage?
Possibly. Some lenders will let you switch to a higher LTV for a residential mortgage, allowing you to release equity and access some of the funds you had tied up in the home. This may be useful for things like home improvements, consolidating debt, or building an extension.
What happens if you’re caught living in your buy-to-let property?
As this would be in breach of your mortgage contract, your lender could demand that you pay off the remaining mortgage immediately. If you can’t do that, they could repossess it. If you’re considering living in your buy-to-let property yourself, it’s crucial that you do it the right way and switch to a residential mortgage. If you’re unsure, speak to a specialist mortgage broker – they’ll tell you what to expect.
Are there early repayment charges for switching a buy-to-let to a residential?
If your buy-to-let has early repayment charges (ERCs), you may have to pay them when switching to a residential mortgage, so it’s important to factor this additional cost into the process. Some lenders might waive or reduce them, so be sure to check with your lender.
