If you’ve decided that you’d like to move out of your main residence and rent it out, then it’s much easier if you intend to buy another property.
Moving into rental accommodation may affect your chances of converting or getting a buy-to-let mortgage. This is due to fraud concerns by the lender. Some lenders will, however, so it’s always worth shopping around.
Changing to buy-to-let and buying a new property
It’s a common occurrence to choose to rent out your current property, while you are looking for another property to buy.
This practice is increasingly popular due to the low rates on savings. People are looking for tangible ways to save money, and putting it into property is likely to increase earnings while leaving it languishing in a savings account with low interest rates.
There are two ways to achieve this:
Let-to-buy
This is where you buy a new property using a new residential mortgage. This becomes your main mortgage and you rent out your old property by converting it to a buy-to-let. If enough equity is available, you can raise money on your first property to pay for the deposit on the new house.
Not all lenders will approve this kind of deal, so you need to investigate who will and choose the best deal available. Lenders can feel that a buy-to-let property endangers their money, as it’s not possible to guarantee there won’t be a gap in tenancy. This would leave the borrower in the position of needing to pay for both mortgages. They’d also consider this an even higher risk if it’s first time landlords who haven’t rented a property before.
Consent-to-let
If you’re happy with the mortgage you have, then asking the current lender for permission to rent your property out could be the way to go. They don’t have to agree, and they may not, but it’s worth asking. If they refuse, then you’ll have to re-mortgage on to a buy-to-let loan.
If you get a consent-to-let, then the property you’re renting out is technically still on a residential mortgage. This might affect getting a new mortgage for another house, as there is generally a limit as to how many residential mortgages you can have. Some will allow two or more if you can prove that you can pay.