Switching Buy to Let and Residential - switching houses?

mic1000

Hi,

Firstly 'hello' as this is my first post and thank you for all the interesting posts I've already read on the forums.

Here's our situation:
We live in a house which has a residential mortgage, but once we got married decided we'd like to move. We'd only just finished the build of the house, so didn't think we could sell straight away without Inland Revenue thinking we were developers, and so when the house we really wanted came on the market, we bought with a BtL and have let it for a year. Ideally we'd now just sell house 1, get a resdiential mortage for house 2 and move there - simple.

However, with the current market, we're thinking about moving to house 2 as planned, but now letting house 1 instead of selling. The problem is that it doesn't look like we could get a new BtL for house 1 at the moment as we'd need to find more capital to reduce the mortgage amount to get 125% rent coverage. But we can get permission to let from the existing lender for house 1 so can legitimately let house 1 without changing the mortgage.

That leaves us wanting to live in house 2, with its BtL mortgage. In isolation we'd have no problem getting a new residential deal for it, but not if we still have the residential mortgage on house 1. So, what are the implications of just living there with the existing BtL mortgage for a while? It's frustrating because it's not that we'd be struggling with payments, the mortgages we have work but are just the wrong way round, but switching them would seem to involve getting new mortgages which the change in climate limits us from doing!

I believe both the mortgages are portable and the situation on both houses is similar (similar value, mortgage amounts and rental valuations), but is there any hope of being able to coordinate the lenders into switching at the same time?

Any thoughts or advice much appreciated!

silvercar

Just do it.

Residing in a prperty intended to be let is not such a big deal in mortgage lenders eyes; certainly not as big a deal as the other way round - no pesky tenants to consider if they needed to repossess.

With consent to let you have permission to let house 1 so that's not a problem.

herbiesjp

You have consent to let for house 1 - so no problem there

House 2 being your main residence can therefore be on residential mortgage - as you will be living there.

mic1000

Thanks for your replies!

Yes, I'm quite relaxed about the letting of house 1 - all legitimate so none of the potential problems there.

In terms of house 2 I'm just concerned if getting insurance would cause a problem. It's obviously currently insured house-only as a let property, but would this still be valid if we were living there (and then get separate contents insurance as a tenant would), or would we need to get house/contents as normal owner/occupiers, in which case could this result in the lender finding out and causing problems?

We'd love to have house 2 on a residential mortgage (it would be cheaper!), but if we're still stuck with the residential on house 1 (let with permission), we'd never get one based on our income.

herbiesjp

Sorry - you are getting confused here

House 2 - as long as the rental income for house 1 covers the mortgage payment for House 1, then you will be able to find lenders to agree a re-mortgage for you on House 2 on a residential basis.

Yes you would need to change the insurance to covers you living there.

As long as the lender on house 1 is happy to give consent to let and offer you a residential deal than you are fine - you can have 2 residential deals

mic1000

Don't be sorry - I didn't know house 1 could be considered in that way when on a residential mortgage, so that's good news! Thanks!

Some final details:
The likely rental income for house 1 won't quite cover the mortgage payment. Does that actually matter, so is it the case that the rental income could be counted as income which with our salaries would then be sufficient to support the 2 residential mortgages? i.e. would the small net deficit on house 1 just be taken off our combined salaries when considering mortgage 2, or would it be a blunt 'no' if there's any deficit at all, regardless of whether that's £5 or £500?

However, mortgage 1 is a repayment one on a standard rate, so in isolation I could get a much better deal to reduce the payments - is there any chance I could get a new residential deal (let's say fixed rate) for house 1, ask them say a month later for permission to let and have any hope of the fixed rate remaining rather than being put back to standard because I'm letting? Obviously that saves money generally, but could turn the house 1 deficit into a surplus if that's what's required to then get the second residential mortgage on house 2.