I bought a house but am renting it out as I’m working in a different city for a couple of years
Q: I bought my house in 2015 with a mortgage with an interest rate fixed for two years. At the end of the two years at the beginning of 2017, I remortgaged onto another two-year fixed-rate deal. However, in November 2017, I secured a job in a different city. I subsequently let out my home to tenants and obtained a consent to let from my mortgage lender for the remainder of my fixed-rate term (due to expire at the beginning of 2019). I now rent a flat in my new city. I have, of course, completed a self-assessment for the income and so on.
I am concerned that I will have to switch to a buy-to-let mortgage the next time I am due to remortgage. I could understand if I owned my flat in my new city, that I should be subject to higher rates of interest because I would effectively own two properties. However, my house is my only property and I fully intend on moving back to my old city at some point in the next two years or so. It would seem unusual that I would have to pay a buy-to-let mortgage rate when it’s my sole property. Is it possible to get a normal residential mortgage with immediate consent to let in these circumstances?
A: The short answer is, no, it isn’t possible to get a residential mortgage with an immediate consent to let. So unless you can persuade your current lender to extend your consent to let to a new residential remortgage – which I very much doubt – you’ll need to re-mortgage to a buy-to-let.
You are right in thinking that buy-to-let mortgages tend to have a higher interest rate than residential loans but it’s not because of the number of properties you own. It’s because properties which are let are considered higher risk than those that are lived in by the mortgage borrower. However, the good news is that, according to Moneyfacts, buy-to-let mortgage rates are at an all-time low. For example, assuming that you want to borrow no more than 60% of the value of your house, you could get a two-year fixed rate of 1.49% from the Post Office Money or 1.59% from Virgin Money. And those rates are pretty much on a par with the best two-year fixed-rates on residential mortgages. If you need to borrow 75% of the value of your house, Virgin Money charges 1.79% for a two-year fixed-rate buy-to-let mortgage with the Post Office Money charging 1.99%. If you need to borrow 80% of the value of your house, the interest rate could be as much as 3.99%. A loan of 85% of value can cost 4.99%. If you need to borrow above 85% of the value of your house, you won’t be able to get a buy-to-let mortgage and your only option if you can’t move back in would be to sell up.
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