Does anyone know anything about switching an existing repayment mortgage over to buy to let?

[messylittlemonkey]

We have seen a house we would like to buy but would need to either sell or rent out our current home.

We have a repayment mortgage on our current house and would need the same to purchase a new one.

My question is, what are the practicalities of switching our current mortgage to a buy to let and renting this property out? Has anyone done this? Is it much more expensive than a repayment?

TIA :)

You can still make repayments on a BTL mortgage (we do), in fact it is encouraged. In order to qualify for a BTL mortgage you have to have at least 25% equity in your house otherwise rates are horrendous and the rental income has to cover the interest element of the mortgage by, iirc, about 130%.

The problem with BTL mortgages at the moment is that they are monstrously expensive to set up in many cases (some lenders want 3% of the amount advanced in fees) and the rates are usually 1.5-2% higher than domestic mortgages. On a practical level, is your current home the sort of place that will rent easily? Is there much of a rental market where you live? Is it in good rentable condition?

I would think long and hard about this. Do you rely on the equity in your current home? i.e. are you relying on your home being worth a certain amount? If you were to rent out and 'values' were to adjust downwards. would that put financial pressure on you, or could you absorb financially?

If it were me, I would be very wary of becoming responsible for two mortgages, on houses which may/may not be currently looking at losing some value. Also, while many tenants are wonderful and reliable/trustworthy, some people are experiencing issues with tenants not taking due care of their home and not paying their rent on time. It can be a real hassle - even if you know them! A good letting agent means sizeable fees.

Just a note of caution. I wouldn't want anyone to add to their sources of stress - unless not a problem for you. Wouldn't want to presume!

The house that you like - can you have a talk to the EA and get yours on the market to dip your toe in the water to see how much yours might attract? Potential for sale?

I rented my house out when I moved in with my then DP. Phoned my mortgage company and asked them how to switch to a buy to let mortgage, they sent me something to sign, and I got it all on the same %rate!

Thanks for your responses.

I agree that this isn't something to enter into lightly.

Basically, our current home is too small for our needs (we have two growing DDs who have to share a very small bedroom). We bought the house about 2.5 years ago with a 90% mortgage. My guess is that it hasn't increased in value during that time, but eqaully hasn't decreased either which is something at least.

The thing with the house is that I'm not sure who it would appeal in terms of buyers (if I'm honest, we bought it in a bit of a whirl as a kind of make do sort of thing). It's in a good location and is in good repair. We have gradually modernised it. I do feel that it would be a good rental property and that might be the best way to make any money from it.

The other thing that I've heard about is the 'let to buy' mortgage but I'm not sure I really understand how it works.

I think we are beginning to feel a bit 'trapped' here! We don't have lots of cash at present, I only work a few hours each week so my pay is negligible. We rely on DPs salary (which is good but not fantastic!). We have no savings at the mo either. the only money we have is tied up in the house, so from that point of view we might need to try and sell anyway, to release it as we woujld need it for our next deposit.

Sorry for the ramble!

If I were you, I'd research your options very carefully, but it sounds as though committing to a second mortgage would not be a good idea for you.

How can you put a deposit on the house you want to buy? It doesn't sound like you have enough to even have a buy to let deposit in your current house, you need around 25% let alone to buy another house, another 10-25%.

Thanks Fiddlededee, that's what I meant in my last post - we need to sell this one to release the equity for a deposit for the next one.

Having thought more about it, I don't think BTL is the way forward for us.