Switching to a buy to let mortgage

rustyuk

We've currently got a mortgage with Northern Rock (paying SVR of 4.79%). The mortgage is worth more than the house but we are looking to switch to a interest only buy to let mortgage so we can rent the house out.

Has anybody out there done this before whilst they were in negative equity? I'm trying to gauge whether this is possible or not? We want to rent the house out until the value starts to creep back up to what we paid for it.

HenBroon

I'm no expert but as I understand it most banks let you switch to interest only without any problem, and my bank (RBS) has no problem allowing me to let out my property on my normal mortgage - I just have to tell them what I am planning and pay a £100 admin fee. So you wouldn't have to change your mortgage at all. I am not in neg equity though. Best to speak to Northern Rock and ask what's permitted.

HenBroon

I think I was maybe too optimitisc on your behalf - look at Catlover32's new post "Consent to Let" -looks like Northern Rock are not as flexible as RBS.

Also, you might well find that a condition of going from repayment to interest only is a LTV acceptable to the bank.

But no harm in asking!

catlover32

Indeed - I'm having terrible probs. They're annoying me.

dimbo61

NR will not let you change to IO when you are in negative equity ( no one will )
You can not change to a BTL without a 20/25% deposit due to the current market so you are stuck with the SVR which is a very good rate at the moment of 4.79%.
If you can overpay!!

rustyuk

Thanks for the replies, I expected that I wouldn't be able to do what I wanted to.

We are in negative equity because we bought our house when prices were at their peak two years ago. However, on the flipside myself and my Partner now earn twice as much as we did when we initially took out the mortgage. We want to buy a bigger house and could afford the increased mortgage payments. Letting our current house out seemed like a sensible option as we thought we could delay selling it until the value was back at what we paid for it. However, we wouldn't be able to find a 20%+ deposit so it sounds like that won't be possible.

I think I'll still speak to somebody at Northern Rock but I don't expect to get any positive news.