How to change your home sweet home loan to buy-to-let

Yorkshire Post - Property - - PROPERTY - Franz Muelthaler

You would be ad­vised to take the mort­gage out now on a res­i­den­tial ba­sis then, when you plan to let the prop­erty, sim­ply in­form the lender that you wish to do so. The lender will then de­cide if they will give con­sent to let, sub­ject to their own in­di­vid­ual cri­te­ria. This could, but by all means will not al­ways, lead to an in­crease in the rate of in­ter­est charged on the out­stand­ing bal­ance.

Ul­ti­mately, you could also re­mort­gage the prop­erty on a buy-to-let ba­sis, sub­ject to a suit­able Loan To Val­u­a­tion ra­tio and rental in­come po­ten­tial. it means that the home­own­ers each have a de­fined per­cent­age stake in the prop­erty, de­ter­mined by their in­di­vid­ual con­tri­bu­tion to the pur­chase price. In ad­di­tion, in the event of the death of one of the par­ties, their share will pass ac­cord­ing to the terms of their will.

The al­ter­na­tive is to hold the prop­erty as joint ten­ants (the usual hus­band/wife way). The im­pli­ca­tion of this is that, no mat­ter what con­tri­bu­tion each party makes to the pur­chase price, in the eyes of the law they each have an equal 50:50 share. Fur­ther­more, if one party dies, his or her share will au­to­mat­i­cally pass to the other, out­side the terms of their will. In gen­eral, the own­er­ship reg­is­ter in the ti­tle deeds to the prop­erty must match the names on the mort­gage ap­pli­ca­tion. The rea­son is that the lender has a vested in­ter­est in the prop­erty. Be­cause the so­lic­i­tor nor­mally acts for the lender as well as the buyer, he will have to take into con­sid­er­a­tion the need to ad­e­quately se­cure the lender’s rights over the prop­erty, in case of de­fault. One al­ter­na­tive is for you to take a sec­ond charge over the prop­erty. This would ef­fec­tively make you a sec­ond lender, so you would have a le­gal claim to your per­cent­age in­ter­est in the house when it is sold, but this would not af­fect the prin­ci­pal lender’s rights over the prop­erty in case of de­fault. Most len­ders will agree to the grant­ing of a sec­ond charge, pro­vided that it does not ad­versely af­fect their own po­si­tion.

Be­cause your in­ter­ests are po­ten­tially in con­flict with those of the lender, you would be ad­vised to seek in­de­pen­dent le­gal ad­vice. Any con­veyanc­ing lawyer should be able to draw up a suit­able doc­u­ment.

Given in­ter­est rates are low, you could ask your lender if they would ad­vance you the ad­di­tional amount that you need to pur­chase the re­main­der of the prop­erty.

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