Changing your mortgage to a buy-to-let mortgage: how does it work? 

Many people aspire to buy their own home in the UK, although some may choose to become landlords after purchasing a property.  

There are many reasons to consider becoming a landlord, whether it’s to generate extra income or have properties in multiple locations to open up your options later on.  

There are also many ways to become a landlord, including buying a new property and renting out an existing one, if you don’t plan to live there. 

However, if you want to let out your property and have a mortgage on it, you must have a buy-to-let mortgage – if you don’t, you’ll be breaching your mortgage agreement. This should be avoided, as the lender may charge a penalty, increase your interest rate, or even demand you repay the entire mortgage or repossess your home.   

We explore whether you can change your residential mortgage to a buy-to-let one, how long it takes, the criteria you must meet, and the associated costs. 

Can I change my residential mortgage to a buy-to-let mortgage? 

Yes, you can change your residential mortgage to a buy-to-let one if you meet specific criteria set by the lender, which typically includes your salary, credit score, and the equity in your property. We’ll explore the criteria later in this article.  

It’s worth stressing that buy-to-let mortgages tend to have higher rates than traditional mortgages, so your monthly payments will likely be higher. You’ll also need to have a plan to pay off the capital of the loan at the end of the mortgage term, as most buy-to-let mortgages are interest-only.  

There are many reasons why people seek a buy-to-let mortgage, such as buying a new home with someone else and using an existing property to generate rental income.  

How can I change my residential mortgage to buy-to-let? 

First, it’s important to understand your obligations as a landlord and consider if buy-to-let is right for your circumstances. 

So, it’s worth understanding: 

• Your expected returns – how much do you plan to charge in monthly rent? 

• Are you comfortable taking out an interest-only mortgage and paying back the original loan in full at the end of the mortgage term? 

• The costs of letting out your property. 

• Your tax obligations and how to legally minimise these. 

• Your legal obligations, such as ensuring the property is safe to live in. 

• Your role as a landlord – for example, do you want an estate agent to handle the property on your behalf, or do you want to handle everything yourself? 

• If you’re on a fixed-rate deal, and if you’ll have to pay an early repayment charge when you switch to a buy-to-let mortgage. 

If you’re considering becoming a landlord, talking to a mortgage broker can be helpful as they can find the right buy-to-let mortgage for your needs. Even if you choose to get a buy-to-let mortgage with your current lender, they can help ensure you meet the specific criteria.  

You’ll need to check if you’re on a fixed-rate deal and if you’ll have to pay any early repayment charges when you switch to a buy-to-let mortgage, before speaking to your current lender. 

How much equity do I need in my home to switch to a buy-to-let mortgage? 

You would usually need at least 25% equity in your home to get a buy-to-let mortgage.  

If you don’t have 25% equity, you’ll need to make up the shortfall in cash, unless you can find a mortgage at a higher than 75% loan-to-value, which may be difficult, more expensive, or have more stringent criteria.  

What criteria must I meet to switch from a residential to a buy-to-let mortgage? 

There are many criteria you must meet to switch to a buy-to-let mortgage, including: 

• Equity in your property: As mentioned, you’ll usually need at least 25% equity in your home to get a buy-to-let mortgage. However, some mortgage lenders may require more, depending on whether you have poor credit or if you want to access a more competitive deal. If you’re buying a new property, you may also need a deposit.  

• Affordability: Generally, mortgage lenders want you to be able to earn at least 125% of your monthly mortgage payment. For example, if your mortgage costs £1,000 a month, you’ll need to get at least £1,250 in rent each month. You can use a buy-to-let rent calculator online if you need help calculating the necessary monthly rent.  

• Salary: The mortgage lender may require you to earn a minimum salary, typically between £20,000 and £25,000, although this can vary.  

• A good credit history: It can be more challenging to obtain a buy-to-let mortgage if you have a poor credit history, so it’s worth checking and improving it if possible beforehand. A mortgage broker may be able to help you find the right deal if you have bad credit.  

• The type of property you want to use for buy-to-let: It’ll usually be easier to use a residential property in good condition to let out. However, if you want to make your home a holiday let or a house in multiple occupation (where at least three tenants live there and you share facilities with them), it’ll be more difficult to find a buy-to-let mortgage. 

If this is your first time being a landlord, it may be harder to find a mortgage, as some lenders may be reluctant to offer you one. 

How much does it cost to change a residential mortgage to buy-to-let? 

The cost of changing a residential mortgage to a buy-to-let one can vary. 

Potential costs include:  

• Early repayment charge: This will apply if you remortgage with a new lender while on a fixed-rate or discounted mortgage, and can be expensive. It’s worth calculating this beforehand.  

• Arrangement fee: You’ll usually pay an arrangement fee, which can vary from a few hundred pounds to several thousand pounds, depending on the lender and the mortgage. 

• Valuation fee: A mortgage lender may request a valuation of your home, which may be free or incur a cost of up to £1,000. 

• Legal costs: You may need to pay a solicitor or conveyancer to sort out a remortgage, which may be free of charge, depending on the lender. If you have to pay legal fees, it’s a good idea to get an overview of the costs beforehand.  

You may also have to pay stamp duty if you’re keeping your current property to rent out and buying a new one to live in, or if you plan to buy out a co-owner or change ownership of the property. 

Can I have more than one buy-to-let mortgage? 

There’s no restriction on the number of buy-to-let mortgages you can have, although lenders tend to cap the amount at four.  

If you own many properties, you may want to consider a multi-property buy-to-let mortgage.  

How long does it take to switch from a residential mortgage to a buy-to-let? 

It can take between four and six weeks if you’re changing to a buy-to-let mortgage and remortgaging with a new lender, instead of your existing one.  

The process can take longer, depending on your unique circumstances, and whether you’re opting for a buy-to-let mortgage or consent to let, which we’ll now explore.  

Should I consider using consent to let as an alternative? 

Consent to let can be useful if you’re only planning to rent out your home for a short period of time. This is usually for six to 12 months, but could be up to two years in some cases. 

It’s essentially a written agreement with your lender allowing you to do this, and it’s the only way you can rent out your property with a traditional mortgage. Once the agreed-upon period ends, your mortgage will revert to its normal terms.  

There may be situations where consent to let is more suitable than a buy-to-let mortgage, such as moving in with a partner and renting it out while waiting to sell, relocating temporarily for work, travelling for a short period, or moving in with a relative to provide care.  

Is consent to let guaranteed by the lender? 

No, consent to let is not guaranteed by your lender – there are some situations where it may be refused, such as the period you intend to rent out your home or the expected monthly rental income.  

Other reasons why consent to let may be refused include: 

• You have arrears on your mortgage. 

• You plan to borrow more on your property while it’s being rented out, or you don’t agree to using an assured shorthold tenancy. 

• You don’t agree to rent out your home on a one tenancy agreement. 

There may be other conditions to meet, such as a minimum equity in the property, and you will also need to tell your home insurance provider if you receive consent to let. 

How much does consent to let cost? 

There’s usually an admin fee for consent to let, but the lender can also increase your interest rate, making your monthly mortgage payments more expensive. 

You also need to consider the costs of landlord insurance, tax on rental income, maintenance costs, legal fees, and letting agency fees.  

Get expert mortgage advice 

It can be difficult deciding on whether to rent out your home, whether it’s short-term or long-term. 

Unbiased can match you with a qualified mortgage broker who may be able to help you find the right buy-to-let mortgage tailored to your specific circumstances.