Frequently Asked Property Investment Questions – Renting Out a Flat on a Consent to Let

Lucia France: Paul in Australia. A question for you about renting out a flat. Hello, for a couple of years I’ve been renting out my flat on a consent to lease. Every year I have to fill out a form saying that one day I intend to move back. If I decide to no longer do this, and move to a buy-to-let mortgage, then what happens? Will I essentially be taking out an entirely new mortgage? Will I have to pay a load of fees? Are my monthly payments likely to be higher? Thanks in advance.

Paul Mahoney: Okay, good question. And so you currently on a consent to let, as you say you need to continue that. The need does need to be some sort of intent to move back at some point, and you’re renewing it every year. If you were to … Well, if you have decided that you’re not going to move back there, if you were to decide that, then yes, you’re right you’d need to move on to a buy-to-let product. Whether there’d be any fees, or whether the rates be higher associated with that change, would really depend on your current lender, and / or the product that you were to remortgage to.

For example, some lenders will make that process quite easy. They’ll allow you to switch your product over from a residential to a buy-to-let, those fees should be relatively minimal because you’re staying with that lender, but not necessarily because they are a different product.

The other option would be to, go and seek out a buy-to-let mortgage yourself, or speak with an advisor, an intermediae or your financial advisor who can arrange an alternative product for you. And again, perhaps there would be fees and increase in rates, but perhaps there wouldn’t. It really depends what your current mortgage is as well. Your current mortgage might be outdated or at a higher rate than current market, or it might be old and at a much lower rate than current market. So without knowing that information it’s hard for me to tell you whether you’re going to incur extra costs.

But of course, there will be a change. Going from a residential mortgage to a buy-to-let mortgage, they are two different products, and as I say, if you’ve decided that you’re no longer going to live there, then the right thing to do, the most correct thing to do, would be to change over to a buy-to-let product.

Without having to necessarily make that decision and incur those costs, you could go and speak with an advisor about what your options are, so that would be based upon your current financial position, the property itself, what you’re planning to do with it all, and they would come back to you with a recommendation, which would usually include all of the costs that you would incur in implementing that recommendation. Most mortgage advisors will do that free of charge, or at least give you an indication free of charge, of what your options are, so that you can make a decision on whether you actually want to make that change. So, I’d say that’s probably your best course of action.

Lucia France: Thank you very much to Paul there.

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