How soon can you remortgage to a Buy to Let?

You can remortgage typically from day one – there are lenders that would accept this, but generally you will have more options after six months. There are consequences to any type of remortgage, so you must check your deal before you make a decision.

Most residential customers are on a fixed rate mortgage – and once you’ve agreed your deal with a lender, any change or remortgage will incur fees if you move away from that lender during your fixed period. There will almost certainly be an early repayment charge.

That’s why a lot of customers decide to seek Consent to Let while they’re in that period. Then at the end, come to a broker and we will help you find a suitable Buy to Let investment mortgage. Again, a broker can explain all this to you and tell you how much the early repayment charge would cost.

How much deposit do you need for a Buy to Let?

Deposits are a little bit bigger for a Buy to Let. With residential mortgages you’re looking at a minimum of five percent deposit in the current climate. Ten percent is ideal and then the bigger the deposit the better rates you might get.

But in a Buy to Let world, you need an equity stake or a deposit of more than 20% – ideally 25% or more. So, if you’ve got a good amount of equity and you’ve had the house a while you should be able to switch over.

If you’re struggling with the numbers and can’t quite figure out whether you’ve got enough equity, again, contact a broker. We do this day in, day out so we understand how much your house is worth.

How much can I borrow with a Buy to Let mortgage?

The borrowing amount does differ from lender to lender. Each has an affordability assessment or a ‘stress test’ based on a number of factors.

On a residential mortgage this is all about your income and your commitments. On a commercial Buy to Let mortgage this is done very differently. Instead the rental income is very important.

Your broker will ask you how much you plan to let the property out for, as this is the basis of how much you could borrow, as well as how much equity you’ve got in the property.

Speak to local letting agents or your broker to understand rental prices in the area you’re in.

Will I pay Stamp Duty on a Buy to Let?

When you’ve bought a house that changes from a residence to a Buy to Let, you may have bought it with a stamp duty exemption, as it is calculated differently on a residential property.

Once your property becomes an investment, there are different taxations to consider. The date you bought the house and the date it changes to Buy to Let is very important.

Seek out tax advice from an accountant or somebody who specialises in property taxation as there are certain things to consider, including Capital Gains Tax. When you change your residential property to an investment, you need to understand that when you sell that asset eventually or when you pass away it may be subject to tax.

Meanwhile, Stamp Duty is only paid when you acquire the property – when you first buy it. Buying a property to let is subject to a higher rate of Stamp Duty than a residential home, but you only pay this tax once when you buy the home.

Is it illegal to rent a house on a residential mortgage?

It isn’t illegal from a criminal standpoint, but it is a breach of the contract you have with your lender. You are obliged to tell them that you are letting your property out – if not you can be in a lot of trouble.

Contractually, the lender would be within their rights to retract the lending and potentially request the money back.

My advice is to always be honest. Be transparent and tell the lender what your intentions are, what your plans are. A broker would be able to tell you whether it’s allowable.

Are there any other costs involved?

There’s no cost to a Consent to Let and going back to your existing lender. Most brokers will charge a fee for their professional advice and knowledge – some charge this upfront while others seek payment at the end of the process.

A broker has to tell you what their fees and terms of business are before they give you any advice. Generally the broker will spend time understanding what you’re trying to do in an initial meeting, and this consultation is usually free.

It’s our job to point out the advantages, if something is going to make you money or save you money, and explore all the options so that you can make an informed decision.

If in doubt, pick up the phone. A lot of people out there have just put a tenant in their property without exploring the savings that they could have made. Just take half an hour of your time to understand if your mortgage can be reduced with better interest rates. Many people get a tenant, their interest rate is four percent and the rent’s covering that – they think it’s great. But what they don’t realise is they could be on a two percent interest rate and generating extra income straight into their pocket.