Renting out property on residential mortgage

Messiah9

Hi,
I'm a first time buyer and in the phase of doing research on buying properties in UK. I'm not a UK citizen. I'm a foreign national who is living here on a work-permit visa as a private tenant.
So far, I have understood the mortgage process and I want to buy a flat to live in with a residential mortgage. Now, my question is:
Let's say I get a residential mortgage with a fixed term for 2 years or 5 years. If my circumstances were to change in that period of time (the first 5 years of the fixed term) and I had to move to another city in UK or another region, am I legally allowed to rent out the apartment to a tenant?
As I understand, residential mortgages are different from buy-to-let mortgages. So are there any restrictions on whether or not I can rent out my apartment after I get the leasehold?
Thanks.

AdrianC

Yes, you're legally allowed to...

There may, however, be other restrictions.
The terms of your mortgage are almost certain not to allow it - without either consent to let, or changing to a BtL mortgage.
The lease on the flat may forbid it.
Breach of those isn't a legal (as in criminal) problem, it's merely a contractual issue with the lender which may see them demand to be repaid... or an issue with the freeholder which may, ultimately, see your lease voided.

davidmcn

Yes, you're not allowed to unless the lender gives you permission. You would need to ask them at the time, and if they do say yes it is likely to be a temporary arrangement. Otherwise you would need to remortgage to a BTL mortgage.

Messiah9

AdrianC said:

Yes, you're legally allowed to...

There may, however, be other restrictions.
The terms of your mortgage are almost certain not to allow it - without either consent to let, or changing to a BtL mortgage.
The lease on the flat may forbid it.
Breach of those isn't a legal (as in criminal) problem, it's merely a contractual issue with the lender which may see them demand to be repaid... or an issue with the freeholder which may, ultimately, see your lease voided.

Thanks. It is interesting. I'm wondering that most people get residential mortgages for a duration of 25 years. So are they expected to live in the same apartment or house for the next 25 years? Just curious how do other people handle such situations when they have relocate to another city or even country and the house is still on mortgage. Do they leave it empty or do they update the mortgage contract to allow them to rent it out?

Messiah9

davidmcn said:

Yes, you're not allowed to unless the lender gives you permission. You would need to ask them at the time, and if they do say yes it is likely to be a temporary arrangement. Otherwise you would need to remortgage to a BTL mortgage.

Thanks for confirming. Is it a complicated process to remortgage from residential to BTL? I guess I would have to pay some kind of penalty for this.

Hannimal

Mortgage term just means how long it would take for you to pay the whole mortgage off at the rate you're paying. Usually you have a 2, 5 or 10 year 'fixed period' in the beginning during which you have a fixed rate. During this time it can be more difficult to sell or remortgage - you might have to pay a fee - but no lender expects you will live in the property for the whole term, just for the fix. It is almost expected that after your fixed fee ends you will go and find a new mortgage deal with another lender. Typically at this point, were you thinking of moving abroad for a while, you could remortgage (i.e. more your mortgage to another lender or deal) as a BTL mortgage that allows you to rent the property out. 
Most mortgages will also allow you to rent the property on a residential mortgage but there are restrictions, for example that you can only rent it out for up to 11 months over a 5 year fix. You are certainly not stuck but if you are looking to buy now and you think you might rent it out in the next year or two, it is a bit risky and can end up being expensive. 

davidmcn

Messiah9 said:

AdrianC said:

Yes, you're legally allowed to...

There may, however, be other restrictions.
The terms of your mortgage are almost certain not to allow it - without either consent to let, or changing to a BtL mortgage.
The lease on the flat may forbid it.
Breach of those isn't a legal (as in criminal) problem, it's merely a contractual issue with the lender which may see them demand to be repaid... or an issue with the freeholder which may, ultimately, see your lease voided.

Thanks. It is interesting. I'm wondering that most people get residential mortgages for a duration of 25 years. So are they expected to live in the same apartment or house for the next 25 years?

No, you can sell and repay the mortgage balance whenever you want.

davidmcn

Messiah9 said:

davidmcn said:

Yes, you're not allowed to unless the lender gives you permission. You would need to ask them at the time, and if they do say yes it is likely to be a temporary arrangement. Otherwise you would need to remortgage to a BTL mortgage.

Thanks for confirming. Is it a complicated process to remortgage from residential to BTL? I guess I would have to pay some kind of penalty for this.

You'd have an additional charge for breaking your fixed rate deal before the end of it. Otherwise there's no penalty other than the fact that BTL mortgages are more expensive (to reflect the additional risk to the lender).

Caz3121

also be aware that the maximum LTV on a BTL mortgage is generally lower than on a residential mortgage so if you were to move from one to the other you may need to add a lump sum to reduce the LTV
eg 200k property on a residential 90% LTV requires a £20k deposit, 200k property on a BTL 75% LTV requires a £50k deposit/equity

AdrianC

Messiah9 said:
I'm wondering that most people get residential mortgages for a duration of 25 years. So are they expected to live in the same apartment or house for the next 25 years?

The repayment of the borrowed amount is amortised over 25yrs, but the mortgage can be repaid at any time - usually on sale, sometimes by borrowing from somebody else.

Just curious how do other people handle such situations when they have relocate to another city or even country and the house is still on mortgage. Do they leave it empty or do they update the mortgage contract to allow them to rent it out?

...or they sell the property.

Slithery

Messiah9 said:
I'm wondering that most people get residential mortgages for a duration of 25 years. So are they expected to live in the same apartment or house for the next 25 years?

No. People usually sell the property and pay off the mortgage, and then buy a new property in the new location.