Question on 10 year fixed mortgage

swindiff

Lets say I take out a long term fixed residential mortgage and then a year or 2 down the line circumstances changed and I want to let the property out. I know that you are supposed to let the mortgage company know (although many don't). If I was to inform the lender I understand there may be a few outcomes.

They may give permission to let and charge an administration fee (is this likely on such a long fixed term mortgage)

They may force me to change to a BTL mortgage at a higher rate. Is this then a change of product, would there be any early redemption charge?

They could say that I have to repay the mortgage.

Obviously option 1 would be the preferred choice, but If they tell me that the loan has to be repaid would the early redemption charge still be payable as it would be the mortgage company that would be calling in the loan rather than me choosing to pay it off early? If this were to happen I would obviously have to sell the house to pay off the mortgage.

Just exploring options and possible outcomes at the moment

Cheers

Cornucopia

The most likely outcome these days is Consent to Let being granted as long as the mortgage has run for a reasonable period (at least a year or more), and has always been paid, and as long as the rental makes commercial sense (i.e. the rent more than covers the mortgage payments).

In addition, there will probably be an admin fee and an increased rate or periodic fee. The rate increase is likely to be 0.5% or more.

If you're looking for flexibility, then perhaps choose a product other than a 10-year fix?

swindiff

I could choose a shorter fixed period, its just that the 10 year fixed are very attractive at the moment, realistically they will not go lower and are only likely to increase.

If a mortgage company were to call in a loan under these circumstances would the ERC still apply?

Cornucopia

Of course.

There are long-term fixes on BTL mortgages, too.

swindiff

Yes but for the first year or 2 it will be our residential property. I guess I am fixated (pun) with trying to get a long term fix whilst rates are low. By the time we want to let the property out rates could be a lot higher.

Cornucopia

Perhaps you could contact your intended lender or a broker and ask for advice? In particular, what their rules are regarding consent-to-let and whether they might allow you to use a Let-to-Buy product, depending on how long you intend to be resident?

Unfortunately, it's often the case that something that looks really good and useful is off-limits in exactly the situation it might be best and most useful for.

swindiff

Hmm let to buy looks like it might be a solution, not really come across them before. Are the rates comparable to residential or BTL or somewhere in between

Cornucopia

Similar/same as BTL.

You'd need to check the lender's rules on how long you can stay there yourself whilst you are organising your second property.

In my case, I was there for about 9 months, as I used the funds released by the LTB to actually purchase my second property from scratch. I never bothered checking their rules, and they never asked.