Renting out your home? Is a buy-to-let mortgage necessary?
A reader from London is moving in with her boyfriend and wants to know if she needs a buy-to-let mortgage for her current home if she is renting it out.
Drawing on years of experience, mortgage adviser Katie Tucker - of mortgage broker charcol.co.uk - takes her through the situation and what it means for her finances.
Sue from London asks:
Do I need a buy-to-let mortgage if I rent my property out?
I am moving in with my boyfriend and will not have any outgoings on rent etc.
Thanks
Sue
Katie responds:
Hi Sue,
Yes you should really change to a buy-to-let mortgage because your current residential mortgage will stipulate as a condition, that you are not permitted to rent the property out.
You can also ask your current lender for special permission, and they might increase your interest rate by, say, one per cent. The advantage of switching your current mortgage over is that your own income is then freed up to be part of your new residential mortgage.
In terms of the features of the mortgage, I would always suggest that you go through a broker as the calculations the lenders make do all vary, and the interest rates are structured in a very varied way: some have high fees but low rates, and vice-versa.
It's important that you discuss with an impartial advisor how long you intend to keep the property on, and whether you think rates will go up, whether you could cope if they did, and very importantly: what rental income you expect to receive from your flat. Speak to a local lettings agency for a better idea of what you could get.
Some lenders now ask that the rent only matches the monthly mortgage payments: they aren't insisting on a safety margin, so these ones are likely to give the largest loan, however their rates may be higher than average so you have to consider your priorities.
If you have a question for Katie, go to the myfinances.co.uk Ask the Mortgage Expert section.
For more information on the issues discussed here, go to mortgage broker charcol.co.uk or call 0800 358 5560.
Charcol Limited is authorised and regulated by the Financial Services Authority (FSA registration number 427339). The FSA does not regulate credit cards, personal loans or some investment mortgage contracts. Some buy-to-let mortgages are regulated by the Consumer Credit Act (CCA).
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