remortgaging a flat

guygamps

A few years ago I bought a small flat (in addition to the family home which my wife and i have owned many years). At first our daughter lived in it, then after a couple of years she moved on and we let it for the first time to paying tenants. 4 years further down the line, I have had 100% occupancy and I want to remortgage it. The original mortgage was NOT buy to let (family member living in it), but now it is occupied by paying tenant.

I can product switch the existing mortgage to a 1.79% fixed rate, but in doing so I would be maintaining that it is still not buy to let.

But also I would like to increase the amount borrowed against the flat, and a product switch does not allow an increase in borrowing.

If I take out a new mortgage (re mortgage) I am finding the BTL rates not nearly as attractive, not sure why the difference myself,

I think I have to re-mortage due to the change in usage and the increased amount I want to borrow, and I reckon that I can only look at BTL mortgage products this time,

Do you agree?

Guy

Contemptuous

guygamps wrote: »

Do you agree?

Yes.

Do you have consent to let the property currently?

lucie_1985

The difference in rates between residential and buy to let is due to the additional risk associated with taking on tenants, largely that there could be periods when the flat is empty but also as the tenants themselves are an unknown quantity and could default on rental payments, could cause damage to the flat and mortgage interest is tax deductible for buy to let so it's all factored in to generate a higher rate.


Has the flat been let commercially for the past 4 years without informing the lender?


Has the income been declared to HMRC?

guygamps

current lender was informed

all income declared to HMRC and taxes paid

100% occupancy over 3 years now

Current tenant (2 years in so far) treats the place like a palace.

Never had any issues either with this flat or other flat I own (Mortage free), both 100% occupancy and never had any issues with rent being paid.

lucie_1985

Living the landlord dream! I'd start with speaking to your lender but more than likely it'll mean a BTL product with a higher rate

Thrugelmir

guygamps wrote: »

Never had any issues either with this flat or other flat I own (Mortage free), both 100% occupancy and never had any issues with rent being paid.

When running a business never wise to be complacent. As matters can literally change overnight.

audigex

guygamps wrote: »

Never had any issues either with this flat or other flat I own (Mortage free), both 100% occupancy and never had any issues with rent being paid.

Why not remortgage your own current flat instead?

If your current lender has given consent to let, they may be willing to allow additional borrowing on the current terms (possibly with an interest rate hike). Otherwise you're going to need a BTL: they're more expensive for a reason, and you never know when your tenant will up sticks and leave, even if they do treat it like a palace.

Edit: Sorry I misunderstood, the other is rented too. Why not re-mortgage your house? If you got into real trouble later you could just sell the flats anyway, so in essence they're the unofficial security rather than your home.