Switching to a Buy to Let Mortgage – What You Need to Know

For many homeowners in the UK, there comes a point where a property that started life as a home may be better suited as a rental investment. Whether you’re relocating for work, moving in with a partner, or downsizing but want to hold onto your current home, switching to a buy to let (BTL) mortgage can open the door to a long-term income stream.

At Avid Finance, we regularly guide clients through this process. This article explains why you might make the switch, what lenders look for, the practical steps involved, and the pitfalls to avoid.

There are several common scenarios where homeowners consider changing from a residential mortgage to a buy to let mortgage:

• Relocating for work – keeping your current home as an investment while moving to a new location.

• Moving in with a partner – holding on to your existing property and renting it out rather than selling.

• Downsizing – retaining your former home as an income-producing asset.

• Let-to-buy – releasing equity from your current property to buy a new one, while renting out the old.

• Accidental landlords – inheriting a property or struggling to sell in the current market.

In all of these cases, switching to a buy to let mortgage ensures you’re compliant with lender requirements while unlocking the potential for rental income.

In our experience, many people only discover the need to switch after speaking to their lender. Renting out your home without permission can breach your mortgage terms, so planning ahead is crucial.

Lenders assess buy to let applications differently from residential mortgages. Instead of focusing primarily on your salary, they focus on the property’s ability to generate rental income.

• Rental coverage – Most lenders require rental income to cover 125%–145% of the mortgage payment. The exact percentage depends on your personal income and tax position.

• Minimum landlord income – Some lenders expect proof of a minimum personal income, often around £25,000 per year, to ensure you can cover costs during void periods.

• Loan-to-value (LTV) – Buy to let mortgages typically cap at 75% LTV, meaning you’ll need at least 25% equity in the property.

Worked example: Suppose you want to switch a property with a £200,000 loan outstanding. Your monthly mortgage payment is £800. Most lenders will require projected rental income of at least 125%–145% of this. That means you’d need to show achievable rent of between £1,000 and £1,160 per month. If local rents are closer to £950, the application could fall short. This is often where landlords are caught out, because the lender’s calculations don’t always align with what’s happening on the ground.

There are two main routes when moving from a residential to a buy to let mortgage.

If you’re moving out temporarily but want to rent out your existing home, some lenders grant a consent to let. This allows you to let the property while still on a residential mortgage. It is usually a short-term solution (often 12 months).

If you intend to rent your property long-term, you’ll need to switch fully to a buy to let mortgage. This can be done either with your existing lender (if they offer buy to let products) or by remortgaging with a new lender.

This is where many borrowers feel unsure: is it worth switching products straight away, or should you request a consent to let first? In our experience, it usually depends on how long you intend to rent out the property.

Switching to a buy to let mortgage comes with costs that need careful consideration:

• Arrangement fees – These can be as high as 6%. Many lenders use low-rate, high-fee products to attract borrowers.

• Valuation and legal fees – A new valuation is required to assess rental income potential, along with legal fees for the switch.

• Early repayment charges (ERCs) – If you’re still within a fixed-rate residential deal, you may face an ERC to exit early.

Tax is often overlooked when making the switch. Key points include:

• Stamp Duty Land Tax (SDLT) – If you’re moving into a new property while keeping your existing one, you’ll pay the higher rate of SDLT on the new purchase.

• Income tax – Rental income is taxable, even if much of it goes straight to mortgage payments. You must declare rental profits to HMRC via a Self-Assessment tax return.

• Mortgage interest relief – Since 2020, landlords can no longer deduct mortgage interest from rental income. Instead, you receive a basic rate tax credit.

For full details, visit HMRC’s guide on property income or use the official SDLT calculator.

Owning a buy to let property is not without challenges.

• Void periods – Months when the property is not rented but mortgage payments are still due.

• Problem tenants – UK tenancy law increasingly protects tenants, making eviction a slow and sometimes costly process.

• Interest rate rises – Buy to let rates can be more volatile than residential rates, so fixing your mortgage may offer peace of mind.

• Stricter criteria – Lenders continue to tighten their affordability checks, especially in areas with rising rents or high demand.

In our experience, many landlords underestimate the impact of even a two-month void period. Building a buffer fund is essential.

A mortgage broker can save you significant time and money by identifying the most suitable lender and product.

At Avid Finance, we take time to understand your circumstances.

• Are you looking for the lowest fixed rate over five years, even if the fees are high?

• Or would a low-fee, flexible product suit you better if you plan to sell or refinance soon?

By understanding your long-term goals, we can recommend the right strategy rather than a one-size-fits-all product.

For more information on short-term options, see our guide to Bridging Loans.

Switching to a buy to let mortgage can be a smart way to turn your current home into an income-generating asset, but the process involves costs, tax implications, and lender requirements that aren’t always obvious.

At Avid Finance, we’ve helped countless clients transition smoothly from residential to buy to let. If you’re considering making the switch, speak to us first – we’ll guide you through the options, compare the true cost of different products, and help you avoid the common pitfalls.

See our case studies for real-world examples of how we’ve helped clients make the move.

Call Dan Scott on 020 3920 6920 or get in touch with Avid Finance today.