Do you have to convert to a buy-to-let mortgage?

[DewClawDisaster]

Our current house has probably about £80K equity and is on a lifetime tracker mortgage. It's a nice family house in a popular catchment and I think it would rent well.

We are possibly/probably moving for DH's work and were thinking of keeping this house on as a rental property - would we need to change the mortgage (and lose the good rate) to a buy to let product?

We also have £50k in an offset savings account, that we could possibly use as a deposit on a new house/mortgage in the new area if the move becomes permanent, thereby leaving the current house/mortgage/equity intact. Would that change things at all?

[specialsubject]

you'll need to speak to your mortgage provider. Not telling them risks breaking the terms of the mortgage, which is mortgage fraud and puts you up for repossession.

don't forget all the other stuff - suitable insurance, maintenance, tenant vetting, deposit, gas safety etc etc etc etc.

and also if you stop living in the house it becomes a capital gains tax liability.

[RestingActress]

Buy to let is a mortgage you take out when you are buying a property to let, so you don't need to worry about it. You will have to seek your mortgage lenders permission as you presumably have a residential mortgage, you may lose your good rate though.

[minniemagoo]

It depends on the terms and conditions (the small print!) of your mortgage. Newer ones usually have a clause that if the house is rented you loose your tracker.
Depending on your bank it might be an idea to see if they will switch your current mortgage (and rate!) to the new property and you take out a buy to let mortgage on your existing.
Its very unlikely they would let you do this though as trackers are usually loss leaders for banks but worth a try.

[chicaguapa]

It depends on the lender.

We're with Skipton and moved for DH's job. We let our house out and rent one in the new area. Skipton are happy for us to let the house but we had to send them a copy of the tenancy agreement and they added 0.5% onto the interest rate.

I'd imagine things would change if you got a 2nd mortgage though. Especially if you're removing £50k from the offset account, which will affect the interest repayable on the 1st mortgage.

You will have to pay CGT on any increase in value from when you moved out (or 2 years later) and when you sell the property. You have £7,500 each allowance though.

[NewJobNewLife]

Completely dependant on your mortgage product (it can vary across products with the same provider).

If it gives you hope, I have an obscenely good tracker rate for the life of my mortgage, and was allowed to rent out for the princely sum of £125 per annum admin fee. Miracles are out there :)

I hope your mortgage lets you do what you want to do :)

[DewClawDisaster]

Thanks for all the info.

Interesting re: CGT, we live a long, long way from London so unlikely to end up with a huge liability but there's a good few year's left on the mortgage so anything could happen I guess.

I'm pretty sure the mortgage company wouldn't let us transfer this tracker - it's so good I think they will want to change it if we do anything different. Shame.

We have an appointment with an IFA next week, so will discuss in detail but good to hear what others have done.

[DewClawDisaster]

Wow, NewLife - good to hear!

[DewClawDisaster]

What's a typical ltv for a buy to let?

[financialwizard]

You may be able to get consent to let with a nominal charge without changing the product or the lender may increase the rate. To be honest too many variants to be able to cover them all.

With regard to CGT don't forget the last three years of owning the property will be classed as you in occupation and 2 years letting relief will be granted (current regs)

[DewClawDisaster]

Sorry financial, do you mean that if we sold it in 5 years' time no cgt would be due? Ie you get to let it for 2 years without cgt, and the 3 years prior to selling count as it being yours? Or something else?

[HaveToWearHeels]

OP You would need 25% equity in the property, if you need a BTL mortgage.

[DewClawDisaster]

That's good to know Habeto, the house is worth just under £200k I would think and the mortgage has about £112 left, so we could possibly switch it all around and take out some equity and still keep it as a rental.

[specialsubject]

the three years exemption was changed to 18 months in the small print of the last budget.

[HaveToWearHeels]

OP If you have that much equity and you do have to swap you should get a good rate.