Working/travelling abroad- mortgage advice

davecon1

Afternoon all

I have exactly 1 year left of my 5 year fixed mortgage at 3.99%. The balance is around £42k and there is lot's of equity in my house. Hopefully I will have paid the mortgage off by then as it will revert to the Santander SVR which is a rubbish rate (5%).

After years of planning I finally have the chance to take some time off and intend to go travelling and possibly work in Canada as I have citizenship there. Whilst away I would rent my place out which should generate a decent income.

With rates so low at the moment I'm thinking of borrowing some more money against the house and investing it in property.

Am assuming I be able to raise a mortgage against a rental income or would I be better off paying the small redemption penalty now and moving the mortgage to a new lender?

Thanks!

kingstreet

If you mention "consent to let" to your existing lender, they will not want to lend you more money. They may be willing to give you additional borrowing on a residential basis now, before you request consent, but that will be based on your current personal income, of course and the rate on offer may not be attractive.

You could consider remortgaging onto a formal BTL product, but the fees and rates will be higher and you'll also have the ERP to pay, as you mention. This will be based on the rental income, with a typical need for the rent to be 125% of the monthly mortgage interest, assuming a rate of about 6%pa. The upper limit for a BTL mortgage is 75%, so you'll get the lower of those two figures.

davecon1

That's what I'm a bit afraid of- getting stung if I want to rent the place out and having to make it a BTL mortgage.

If I were to remortgage now and take a 5 year fix could they change the terms and conditions and force me to move onto a different product? To put it in perspective I have around 90% equity in the house at the moment.

The other choice would be to attempt to pay off the mortgage. Then no one can tell me what to do!!

kingstreet

You don't have to make it a BTL mortgage, but a lender can levy a charge, a higher rate, or both in return for consent to let on your current residential mortgage.

You need to sort out the issue of extra borrowing first, IMHO.

hamster2013

read the T&C - when you take a residential mortgage,..... you can not rent it out.
if you are implying by your answers that you intend to do so without letting the lender know - be well aware of consequences.