Question: I got a buy-to-let mortgage when I planned to rent out my house but now I have decided to live in it myself. What happens about the mortgage? What can I do?
Answer: Lenders generally treat a buy-to-let mortgage application in a different way to one for a residential mortgage. For a buy-to-let mortgage they will take into account the expected monthly rental income to calculate the amount they are prepared to lend. For an owner-occupier residential mortgage the lender will base lending on a multiple of the annual income of the applicant.
There are also likely to be conditions imposed on the buy-to-let mortgage which dictate the type of tenants to which the property may be let. For example, it is not usually possible for the property to be let to a family member, and any tenancy should be an assured short hold tenancy for not more than 12 months.
Consider the terms and conditions of your buy-to-let mortgage very carefully. If you occupy your property and continue to have the buy-to-let mortgage you are likely to be in breach of your mortgage conditions. Your best option may be to redeem the buy-to-let mortgage and to take out a residential mortgage. The interest rate is likely to be lower, anyway, as lenders usually consider buy-to-let mortgages to be a higher risk.
Alternatively, try to agree with your lender that you may occupy the property. Such agreement will depend on whether your income is sufficient to meet their criteria. Communicate with your lender — don't avoid the issue.
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If you have a question for Fiona McNulty, please email firstname.lastname@example.org or write to Legal Solutions, Homes & Property, London Evening Standard, 2 Derry Street, W8 5EE. We regret that questions cannot be answered individually but we will try to feature them here. Fiona McNulty is a partner in the residential property, farms and estates team at Withy King LLP (www.withyking.co.uk).
These answers can only be a very brief commentary on the issues raised and should not be relied on as legal advice. No liability is accepted for such reliance. If you have similar issues, you should obtain advice from a solicitor.