How to change a mortgage to buy-to-let

A standard mortgage is a home loan that you pay off over time while living in the hous. A buy-to-let loan, on the other hand, is a mortgage that is designed for people to buy houses then rent them out to third parties.

If your circumstances change and you want to rent a house out rather than live in it, you can change your mortgage to a buy-to-let mortgage, which is often more competitive in terms of interest rates. This process is essentially just a refinancing process, replacing one loan with another.

Assemble all the relevant financial information. This includes your expected rental income, the current value of the house, how much you are going to need to borrow and what you can afford to pay back.

Shop around for a mortgage rate that works for you. Some mortgages are fixed while others are variable; the latter tend to have lower interest rates in the short term but have the possibility of rising in the future. The former keep your costs stable.

Approach a mortgage broker with your financial information. You should expect to have to borrow more than the value of the property to compensate for things like periods without renters and the associated costs that come with renting out a house.

Ensure you fully understand the buy-to-let mortgage. One persistent feature is a penalty for paying the mortgage off early. If you are speculating, intending on selling the property when the value rises, you should avoid a mortgage with this feature--buy-to-let mortgages are longer-term, lower-return investments, not short-term, higher-return investments.

About the Author

Sam Grover began writing in 2005, also having worked as a behavior therapist and teacher. His work has appeared in New Zealand publications "Critic" and "Logic," where he covered political and educational issues. Grover graduated from the University of Otago with a Bachelor of Arts in history.

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