Changing BTL mortgage to residential

56cheffy

I'm considering moving into a property that I currently let out.

Is it just a matter of me informing the lender and they 'press a few buttons' and make the necessary changes?

Or will I have to go through the process of applying for a residential mortgage?

Thanks

silvercar

Interesting question.

They could tell you that it is a breach of the conditions of the mortgage that you live in the property. There is generally a requirement for the property to be let under an AST.

Telling them that you will live in the property means the mortgage becomes a fully regulated one, requiring that the lender 'treats you fairly' rather than be a more commercial contract.

Given that (years ago) people used to do this to secure a mortgage that they otherwise would be able to justify in earnings terms, I would expect that the lender may want to do some checks that the mortgage is affordable to you.

Some people post on here that getting consent to let increases the risk to the lender, and therefore you should expect a higher interest rate for a BTL. Moving in the opposite direction, you would expect a lower rate of interest, so going through the official way, the lender may well agree to move you to one of their residential products at a decent rate.

If the situation became difficult and the lender refused, I don't know what their options would be. I can't imagine a court case where the lender says that someone is living in a property they own (albeit with a mortgage) and should be evicted when they are keeping up with mortgage repayments. They couldn't increase the mortgage rate, given that residential rates are lower, they could push you towards a repayment mortgage rather than interest only.

56cheffy

silvercar...many thanks for that.

My concern is that if I do go through the correct procedure by telling them, they may refuse me a mortgage as I am retired.

My current property is too big for me, hopefully, I intend to let that, subject to the lenders approval, which poses another question, do I tell them?

The mortgage payments on my current property are very similar to those on the BTL, so there is absolutely no problem affording them, especially if the rate were to be lowered!

The comments regarding a court case are interesting and make good sense.

Thanks again

Cornucopia

Lenders do lend into retirement these days, dependent still on whether the Mortgage is affordable.

I'd suggest three ways to go on this...

- If your BTL lender is one of the big names who also do lots of residential business under the same brand name, simply ask them about the "possibility" of the transer and see what they say.

- If not (or if you want to be more cautious), see if you can apply for a Resi Mortgage on the property with a different lender, with the intention of redeeming the BTL mortgage upon completion.

- Ask a broker what they think.

56cheffy

cornucopia...

I suppose I should have mentioned my age, I am 'only' 60 despite being retired.

I did consider contacting them about the 'possibility'.

Thanks

silvercar

With a rental property, the mortgage is eventually repaid from the sale of the property and in the mean time the rental income pays the mortgage.

With an owner occupied property, either you take a repayment mortgage or need some other financial vehicle (endowment/ pension lump sum etc) to repay. Do you have a strategy to clear one of your mortgages?