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Can I change my buy to let mortgage to residential?
You may find it difficult to change your buy to let mortgage to a residential product if you plan to stay with your current lender.
This is because the current product is unregulated. When you try to move it to a regulated residential product, money lenders are not able to offer this.
There are however likely to be some that can accommodate this, so if you find yourself in a situation and have a buy to let mortgage on a property that you wish to live in, you should speak with your lender to see if they can allow a new product.
If they are willing to do this, they will likely make you go through a full income and expenditure assessment to make sure that you meet the affordability requirements for a residential mortgage product.
Lenders may not share their criteria for current mortgage borrowers, so may make you deal with them directly if you plan to change from an unregulated to regulated product with the same lender.
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Can I live in my property with a buy to let mortgage on it?
Lenders do not allow you or your family to live in the property if it has a buy to let mortgage against it. The reason is that it is an unregulated product and for personal or family use, the mortgage must be regulated.
Buy to let mortgages are strictly designed for tenants to live in the property with the owner remaining as the landlord.
Buy to let lenders do not calculate the mortgage borrowing potential based on a person’s standard earnings and use for rental income to determine the maximum loan amount.
As a result, lenders are not happy for owners or their families to move into the property to use it as a residential home.
Can I remortgage to switch my mortgage to a residential mortgage?
The most common way for a person to switch their buy to let mortgage to a residential mortgage is to fully remortgage with a new lender.
This involves underwriting the application from the very beginning. This means that your lender will carry out a full affordability assessment understanding your income dependants, liabilities and credit history.
You’re lending potential will be based on the outcome office affordability assessment. If you pass for the amount that you need, it may be possible to remortgage for property onto a residential mortgage product.
You should check with your current lender as their may be an option to switch products with them.
Finding an experienced mortgage broker that can calculate which lenders would give you the amount that you need, is always prudent.
The residential mortgage market is extremely large so with an overwhelming amount of products, taking professional advice is it always a good idea.
What happens if you get caught living in a buy to let property?
If you choose to live in your property that has a buy to let mortgage on it, you will be in breach of a lender’s terms and conditions. This ultimately means that the lender has the right to request that you redeem the mortgage.
If you do not have a way of refinancing this mortgage onto a residential product, this may mean selling the property.
Different lenders will deal with this scenario in their own way, but it is not recommended to live in a property with an incorrect product.
If you have an unsuitable mortgage against the property that you live in, you should speak to a mortgage adviser who can talk you through your options.
I am locked into a buy to let mortgage, will I pay a penalty if I change it to a residential mortgage?
If you have a buy to let mortgage that is fixed with an early redemption penalty on it, redeeming it would mean paying this penalty.
It is unlikely that a lender would waive this penalty if you need to refinance to a new lender to get the correct product. When the product was taken, it was on the basis that a tenant would remain in the property and it would be fixed for a certain amount of time. As a result, paying the lender back would likely incur this extra cost.
Would I need a mortgage broker to change my buy to let mortgage to residential?
If you were to refinance your property from a buy to let mortgage to a residential product, it would be wise to find an independent mortgage broker that can give you your options.
Mortgage brokers have access to the market and know the individual lender’s criteria meaning they can make recommendations for a suitable product for you.
A mortgage adviser would take time to fully understand your situation, income and expenditure and your credit history, to recommend a lender accordingly.
Your mortgage adviser will need to consider this when looking for a lender.
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It may be possible to do so without changing lenders so you should explore your options with your current lender before moving to a new one.
If you were thinking about taking a residential mortgage with a new lender, taking professional advice is always recommended.
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