Changing from Repayment to Interest Only

AccidentalLandlord

Hi all,

So the situation in a nutshell, me and Mrs. Accidental Landlord bought our first property 10 years ago, on a repayment mortgage, and lived there for the first 5 years. Work took us both out of the area and so decided to let it out. Other than having to apply for consent to lease every year, there are no other special t's & c's.

There are no live products remaining and so we are on the lenders SVR.

What we would ideally like to do is to switch over to a buy-to-let/interest only mortgage, as this will now be a long term rental property, which we do not plan to move back into. I don't really want the stress of being refused consent to lease by the lender, and would also like to hopefully turn a profit going forward instead of just breaking even each month.

Does anybody have experience of this, and the transition between the two mortgage types.

I'm unable to make the switch with my current mortgage provider due to being under consent to lease, however this expires soon and property is currently empty so not sure if this would work in our favour elsewhere.

Thanks in advance for any help

kingstreet

Typically, you'll be able to borrow the lower of 75% of the value of the property and the rental income at/above mortgage interest @ 5.5%pa x 145%.

Your pool of lenders will depend on the above and your current residential situation.

Contact an independent broker for a proper assessment.

AnotherJoe

Did you fall over a rental contract whilst holding a pen and accidentally sign it when you landed on it, and then the tenant snatched it up and ran away? Because otherwise you sure as heck are not an Accidental Landlord :mad:

Why not just go and see a broker and find out your options for a new BTL mortgage?

Mortgage_Adviser

AnotherJoe wrote: »

Did you fall over a rental contract whilst holding a pen and accidentally sign it when you landed on it, and then the tenant snatched it up and ran away? Because otherwise you sure as heck are not an Accidental Landlord :mad:

And then when the tennant calls him and tells him the boiler is not working he accidentially contacts the gas engineer to come and fix it. He also accidentially took the deposit from the tennant and accidentially put it in to deposit protection scheme...

Thrugelmir

AccidentalLandlord wrote: »

What we would ideally like to do is to switch over to a buy-to-let/interest only mortgage, as this will now be a long term rental property, which we do not plan to move back into. I don't really want the stress of being refused consent to lease by the lender, and would also like to hopefully turn a profit going forward instead of just breaking even each month.

If you are repaying the capital off. Then ultimately once the mortgage is cleared. The property wil be highly profitable.

Are you declaring the income to the tax authorities. Or simply using the rent to pay the mortgage?

poppy10_2

Mortgage_Adviser wrote: »

And then when the tennant calls him and tells him the boiler is not working he accidentially contacts the gas engineer to come and fix it. He also accidentially took the deposit from the tennant and accidentially put it in to deposit protection scheme...

More likely he has accidentally failed to declare his rental income to HMRC

millwalls

We’re in the same situation, bought a house to live in, moved out to a rented flat after a couple of years and don’t intend to go back. Our fix is now coming to an end and need to remortgage to BTL else will fall onto a horrendously high SVR.

1. Definitely a job for a broker.
2. Since we’ve lived in the property it apparently qualifies as a regulated Consumer BTL, thus reducing the pool of potential lenders.
3. We live in a rented flat ie aren’t owner-occupiers so that further reduces the pool of lenders.

We struggled a bit to find a broker and thought it was a lost cause but thanks to ACG and other brokers on the thread who assured us that it’s definitely doable by any half-decent broker, we’ve persisted and are waiting for recommendations from 2 brokers at the moment.

The brokers on the forum are kind enough to volunteer their expertise (though they can’t recomend specific lenders) to guide people who ask questions. Might be helpful to shed a bit more light on the specifics - Ltv, income, loan amount, current residential status, etc.

AccidentalLandlord wrote: »

Hi all,

So the situation in a nutshell, me and Mrs. Accidental Landlord bought our first property 10 years ago, on a repayment mortgage, and lived there for the first 5 years. Work took us both out of the area and so decided to let it out. Other than having to apply for consent to lease every year, there are no other special t's & c's.

There are no live products remaining and so we are on the lenders SVR.

What we would ideally like to do is to switch over to a buy-to-let/interest only mortgage, as this will now be a long term rental property, which we do not plan to move back into. I don't really want the stress of being refused consent to lease by the lender, and would also like to hopefully turn a profit going forward instead of just breaking even each month.

Does anybody have experience of this, and the transition between the two mortgage types.

I'm unable to make the switch with my current mortgage provider due to being under consent to lease, however this expires soon and property is currently empty so not sure if this would work in our favour elsewhere.

Thanks in advance for any help

AccidentalLandlord

AnotherJoe, yes I am. That's what it's known as, a number of lenders refer to this situation as being an accidental landlord. The FT even ran an article on the very same.
Mortgage Adviser, if you are one, it is Tenant not tennant, and
Accidentally not accidentially. I hope you're better with numbers than words.
Poppy, how is it 'more likely' that this is the case? Nothing to offer to the topic, remain quiet.

Millwalls, thanks for your reply, I have an appointment with a broker, just wondered if others had any experience of the same and any issues I may have overlooked ahead of the transition.

Takmon

AccidentalLandlord wrote: »

AnotherJoe, yes I am. That's what it's known as, a number of lenders refer to this situation as being an accidental landlord. The FT even ran an article on the very same.
Mortgage Adviser, if you are one, it is Tenant not tennant, and
Accidentally not accidentially. I hope you're better with numbers than words.
Poppy, how is it 'more likely' that this is the case? Nothing to offer to the topic, remain quiet.

I agree with what AnotherJoe is saying, how can you possibly be an "Accidental Landlord". You chose to be a landlord when you chose to let out your house instead of selling it. Most people who move to a different are for work sell the property they are living in. If you decided that not to sell then that is in no way accidental.

AccidentalLandlord wrote: »

So the situation in a nutshell, me and Mrs. Accidental Landlord bought our first property 10 years ago, on a repayment mortgage, and lived there for the first 5 years. Work took us both out of the area and so decided to let it out. Other than having to apply for consent to lease every year, there are no other special t's & c's.

AccidentalLandlord

I didn't coin the phrase, it is what it is. Lender told me somebody who takes out a mortgage on a property in which they will live, but through a change of circumstances ends up renting it out, is known in this way.
It is not an accident, obviously, but was not in the plan for the future when the mortgage was taken out.
We can call it something else if you like, since everybody seems to be getting all excited about it.

millwalls

Just got my interest-only mortgage recommendation (lender - The Mortgage Works) from one broker. He said that it was fairly straightforward and that I would have had a choice of lenders and access to better rates if I was an owner occupier at my current residence as opposed to a renter.

You should talk to a broker, good luck!

AccidentalLandlord wrote: »

I didn't coin the phrase, it is what it is. Lender told me somebody who takes out a mortgage on a property in which they will live, but through a change of circumstances ends up renting it out, is known in this way.
It is not an accident, obviously, but was not in the plan for the future when the mortgage was taken out.
We can call it something else if you like, since everybody seems to be getting all excited about it.