Switching to a Buy to Let mortgage: how it works and your options
If you’re thinking about renting out your home, you may be wondering if switching to a Buy to Let mortgage is possible. This guide explains your options, including consent to let, changing your residential mortgage to Buy to Let mortgage and 'let to buy', along with the costs, requirements and risks to consider.
What does switching to a Buy to Let mortgage mean?
Switching to a Buy to Let mortgage means replacing your residential mortgage with a Buy to Let deal so you can legally rent out your property.
Alternatively, you may be able to get consent to let from your lender, which allows you to rent out your home without switching mortgages, usually on a temporary basis.
KEY INFORMATION
Your options for switching to a Buy to Let mortgage
Consent to let:This doesn’t involve switching to a Buy to Let mortgage, it’s simply the lender giving you permission to let out your property. You’ll stay on your current mortgage, although your lender may introduce some new terms and conditions and your interest rate may increase.
Remortgaging onto a Buy to Let mortgage: This means switching your residential mortgage to a Buy to Let mortgage. You will have to take out a new mortgage, meet the lending criteria and pay any mortgage fees too.
Let to Buy:This involves letting out your current property on a Buy to Let mortgage and simultaneously buying a new property to live in with a standard mortgage.
In most cases, switching to a Buy to Let mortgage is the best option for long-term renting, while consent may suit short-term situations.
Can I switch my residential mortgage to a Buy to Let mortgage?
Whether you need consent to let, a Buy to Let mortgage or a Let to Buy mortgage depends on whether you’re renting out your home temporarily or becoming a landlord for the longer term. The table below compares the three options to help you decide which could be most suitable.
Your option
What it means
Best for
Key pros
Key cons
Consent to let
Your lender gives you permission to rent out your home while staying on your current residential mortgage
Short-term letting
Quick and can be inexpensive
Temporary approval
Buy to Let mortgage
You remortgage from a residential mortgage to a Buy to Let deal
Long-term letting
Designed for renting, no time limits
Fees and stricter criteria
Let to buy
You switch your current mortgage to Buy to Let and take out a new residential mortgage on a new home
Moving home while keeping your current property
Keep your property and generate rental income
Must qualify for and manage two mortgages
The right option for you will depend on your circumstances. If you’re unsure which is right for you, speaking to a mortgage adviser can help you understand the costs, eligibility requirements and mortgage options available.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Please note some branches of Mortgage Advice Bureau may charge a fee for mortgage advice if you go direct. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed. So make sure you use this site, this form or phone number for fee-free advice.
What is consent to let and when should you use it?
Consent to let is where you get permission from your lender to let out your home, usually for a maximum of 12 months. In some cases, lenders may extend this, but terms and costs can change. This may suit you if you’re planning to move back into the property at some point, such as if you’re going to be working away for a period because of your job. However, lenders do not have to agree to give consent to let and may impose a higher rate or fee.
Whether the lender agrees to give you consent to let depends on the lender’s criteria and your individual situation.
Some common reasons why consent to let might be refused include:
You want to rent out the property for too long a period.
The lender believes you had always planned to let your property and that you applied for a residential mortgage to secure a better mortgage deal.
You have a history of mortgage arrears.
If your lender doesn’t agree to grant consent to let, then your other option is switching to a Buy to Let mortgage. Read on for more on this.
How much does consent to let cost?
Your lender may charge you an admin fee, often around £75, for the consent to let, although this varies by lender.
However, lenders may also increase your interest rate, which would make your monthly payments more expensive.
Do you need consent to let to rent out your home?
If you want to rent out a property with an existing residential mortgage on it, you need to obtain consent to let from your lender or remortgage onto a Buy to Let mortgage. If you don’t, you risk breaching your mortgage terms.
Changing your mortgage to Buy to Let
If your lender doesn’t grant consent to let, or it’s not suitable for your situation, your other option to investigate is switching to a Buy to Let mortgage.
This will involve ending your current mortgage deal (and paying any necessary fees to do so such as an early repayment charge) and remortgaging onto a new Buy to Let mortgage.
This process is often referred to as converting your mortgage to Buy to Let or changing a residential mortgage to Buy to Let.
For example, this is a popular option with couples wanting to move in together, but each have their own property. In this case, you could both move into one of the properties and rent the other one out using a Buy to Let mortgage. In this circumstance, it’s worth reading our guide Becoming an accidental landlord.
Bear in mind that unlike most residential mortgages, which are typically on a capital repayment basis, most Buy to Let mortgages are interest-only.
This means you’ll only pay the interest on the loan each month, rather than repaying the capital. This means lower monthly mortgage payments, however, at the end of the mortgage term, the full loan amount will need to be repaid. Read more in our guide Interest-only mortgages explained.
What are the requirements for switching to a Buy to Let mortgage?
Buy to Let mortgages have different eligibility criteria to standard residential mortgages. These include:
Equity in your home: You’ll usually need at least 25% equity in your property to be able to switch to a Buy to Let mortgage. You can use our equity calculator to work this out. Some lenders will accept a smaller deposit, although this amount may be higher such as if you have a history of bad credit. Read more in our guide on Buy to Let deposits.
Rental income: The amount you can borrow on Buy To Let mortgages is based on how much rent the property can generate versus the cost of the mortgage. Typically, lenders will want your expected rental income to meet at least 125%-145% of the monthly interest payments. Lenders assess this using a measure known as the Interest Coverage Ratio (ICR), which compares expected rental income with the mortgage payments. To estimate this, you can use our Buy to Let mortgage calculator.
Minimum income: Buy To Let mortgages may also require you to have a minimum salary, typically £20,000-£25,000.
High mortgage fees: Arrangement fees on Buy To Let mortgages can be higher than for residential mortgages. These are sometimes calculated as a percentage of the amount you borrow, rather than a flat fee.
Type of property: Switching to a Buy to Let mortgage may be more difficult for some types of property, such as if you’re planning to turn your home into an HMO.
Landlord experience: You may find it harder to switch to a Buy to Let mortgage if you’re a new landlord, especially if you’re also a first time buyer. But this will depend on the lender and it’s important to get expert mortgage advice so that you’re informed about all your options.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Please note some branches of Mortgage Advice Bureau may charge a fee for mortgage advice if you go direct. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed. So make sure you use this site, this form or phone number for fee-free advice.
How to switch to a Buy to Let mortgage (step-by-step)
Here are the steps of how to switch to a Buy to Let mortgage:
Speak to your lender. You must get permission from your lender to let out your property, failing to do so will usually violate your mortgage terms. They may offer consent to let or they may require you to switch to a Buy to Let mortgage.
Check fees to leave your current deal: If you need to switch to a Buy to Let mortgage, you need to check whether you’ll pay any fees such as an early repayment charge to leave your current deal. These can be substantial so it’s important to check this at an early stage.
Research your mortgage options: Next, it’s time to shop around. Buy to Let mortgages can come with much higher fees than residential mortgages and Buy to Let mortgage rates can vary significantly between lenders too. Using a fee-free mortgage broker can be helpful to find the right mortgage deal for you.
Gather your documents: Before applying for a Buy to Let mortgage, pull together the documents you’ll need to provide to avoid delays further down the line, these typically include a mortgage statement for your existing property or properties and proof of rental income (usually a report from an ARLA-regulated agent). You should also investigate the legal responsibilities that come with being a landlord so that you’re fully prepared. Find out more in our guide Buy to Let Mortgages explained.
Apply for your mortgage: Found the right Buy to Let mortgage and ready to proceed? Now it’s time to make your application. If you’re using a mortgage broker, they’ll do much of the work for you.
How long does it take to switch from a residential mortgage to a Buy to Let mortgage?
If you’re applying for consent to let, your lender may grant you this in a matter of days.
If you’re applying for a Buy to Let mortgage, the process can take several weeks, or even longer depending on the circumstances as it will involve a full mortgage application.
How much does it cost to switch to a Buy to Let mortgage?
The cost of switching from a residential mortgage to a Buy to Let mortgage (also called a Buy to Let remortgage) can vary depending on your lender, the terms of your current deal and the new Buy to Let mortgage you take out.
Here are the potential costs you may need to pay:
Early repayment charge
You may need to pay an early repayment charge to your existing lender if you remortgage while you’re still within a fixed or discounted rate period. These are usually calculated as a percentage of the outstanding mortgage balance, so they can be significant.
Make sure you check whether an ERC applies and how much it would cost. You should also check whether an exit fee is payable. Read more in our guide Early repayment charges and how to avoid them
Arrangement Fee
There are a number of mortgage fees you may need to pay for taking out a new mortgage deal too. Lenders typically charge arrangement fees to take out Buy to Let mortgages. These may be charged as a set fee or as a percentage of the loan.
Valuation Fee
When switching to a Buy to Let mortgage, the lender will usually require a mortgage valuation of the property. Some lenders offer free valuations as part of their mortgage deals, while others charge a fee, which can range from £200 – £1,000 depending on the property’s value and location.
Legal fees
When you remortgage, you’ll need a conveyancer to handle the legal side. Some lenders offer free legal services as part of their mortgage deal, however, with other lenders you’ll need to pay this.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Please note some branches of Mortgage Advice Bureau may charge a fee for mortgage advice if you go direct. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed. So make sure you use this site, this form or phone number for fee-free advice.
What are the tax implications of switching to a Buy to Let mortgage?
Understanding the tax implications is essential when switching to a Buy to Let mortgage and becoming a landlord because they can significantly affect your overall returns.
Income tax
When you’re a landlord, the rent you receive on your rental properties is treated as taxable income and may be liable to income tax. But you can reduce the tax you have to pay by deducting certain ‘allowable expenses’ such as letting agent fees and property maintenance. You may benefit from independent tax advice to help you with this.
Changes to mortgage interest income tax relief
In the past, landlords were able to offset mortgage interest and Buy To Let mortgage arrangement fees against their income tax bills at up to 45% for the highest earners. However, this tax relief was phased out between 2017-2020 and has been reduced and capped at 20%.
Stamp duty
If you’re planning to let out your current home and buy a new home to live in, you will pay additional Stamp Duty rate on the property you’re buying. This surcharge is 5% on top of standard stamp duty rates.
However, if you sell your previous main home within three years of buying your new home you might be able to apply for a refund of the higher tax rate you paid when you purchased your new home. Read more information in our guide on Second home stamp duty.
Capital gains tax when selling
If your Buy To Let property rises in value by the time you sell it, you may need to pay capital gains tax (CGT) on any gain in its value above your CGT allowance (after any deductions have been taken off).
An independent financial/ tax adviser can give you their unbiased view on whether your sale could be exempt from CGT or how much you will need to pay.
What is a let to buy mortgage and how does it work?
If you’re simultaneously remortgaging your current home onto a Buy to Let mortgage and buying a new home to live in with a standard residential mortgage, this is known as Let to Buy.
What happens if you rent out your home without switching to a Buy to Let mortgage?
If you take out a residential mortgage but then let it out without the lender’s consent, the consequences can be serious, ranging from a penalty fee to your mortgage rates being raised, to demanding you pay back your loan immediately and repossessing your home if you can’t.
Therefore, if you want to rent out your property, it’s vital that you have either consent to let or a Buy to Let mortgage in place.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Please note some branches of Mortgage Advice Bureau may charge a fee for mortgage advice if you go direct. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed. So make sure you use this site, this form or phone number for fee-free advice.
Frequently asked questions
Can I change my mortgage to a Buy to Let mortgage?
It is possible to change a mortgage to a Buy to Let mortgage, depending on your circumstances and providing you meet the lender’s criteria. However, if you want to rent out your home there are three main options: – You can ask your lender for consent to let, which allows you to rent out your home while staying on your existing residential mortgage (although your rate or terms may change). – You can remortgage onto a Buy to Let mortgage, which means taking out a new deal, meeting the lender’s criteria and potentially paying fees. – If you want to rent out your current home and buy another property to live in, you could use a let to buy mortgage, where your existing property is switched to Buy to Let and you take out a new residential mortgage on your next home.
Are Buy to Let mortgages more expensive?
Buy to Let mortgage rates are often more expensive than residential mortgage rates and they often come with higher mortgage fees too. This reflects the fact lenders typically see Buy to Let as riskier.
Do I need to tell my mortgage lender if I let my property?
Yes, you must tell your mortgage lender if you’re planning to let out your property because you could be in breach of your mortgage contract if you don’t.
How soon can you remortgage to a Buy to Let?
Many lenders won’t let you remortgage within the first six months of a mortgage, but you should check the terms of your mortgage deal to be sure. Assuming you’re outside this period, if you’re tied into a fixed deal for say 2, 3 or 5 years, you can typically remortgage within this period but you may have to pay an early repayment charge. Read more in our guide to Remortgaging a Buy to Let.
How much rent do I need for a Buy to Let Mortgage?
Lenders usually require that rental income covers at least 125%-145% of the monthly interest-only mortgage payment. You can use this Buy to Let mortgage cost calculator to get an idea of how much you may be able to borrow on a Buy to Let mortgage, based on the rental income you expect to receive.
HomeOwners Alliance Ltd is registered in England, company number 07861605. Information provided on HomeOwners
Alliance is not intended as a recommendation or financial advice.
HomeOwners Alliance Ltd is an Introducer Appointed Representative of Mortgage Advice Bureau (Derby) Limited which is authorised and regulated by the Financial Conduct Authority.
HomeOwners Alliance Ltd is an Introducer Appointed Representative (IAR) of LifeSearch Limited, an Appointed
Representative of LifeSearch Partners Ltd, authorised and regulated by the Financial Conduct Authority. (FRN:
656479).
Independent Financial Adviser service is provided by Unbiased, who match you to a fully regulated, independent
financial adviser, with no charge to you for the referral.
HomeOwners Alliance Ltd is an Introducer Appointed Representative (IAR) of Fluent Money Limited, which is authorised and regulated by the Financial Conduct Authority. Calls may be monitored/recorded.
