|By TurnKey Landlords||
|January 17, 2014 09:02 PM EST||
There is every chance that, at some point, you might find yourself looking for a new place to live.
There a numerous reasons that this might happen. Your relationship might break down, or you might find yourself unable to keep up mortgage repayments on your main home. On the flipside, of course, you might just want to downsize after the kids have moved out or you’ve retired. Maybe you just fancy a change of scenery.
Whatever the case, if you have a buy to let property, a novel suggestion might occur to you: why not just live there?
After all, you already have a mortgage on it. It saves you extending yourself to a further home loan, or even renting somewhere. If the place is currently empty, more the better – with no tenant in situ, it’s just costing you money without making any back.
Unfortunately, living in a buy to let property isn’t quite that simple.
Why living in a buy to let property is usually impossible
The distinction between residential and buy to let mortgages generally comes down to Financial Conduct Authority (FCA) regulation.
Residential mortgages benefit from FCA regulation because the customer knows they’ll receive the best advice and that the mortgage will be suitable and affordable. On the flipside, buy to let mortgages benefit from not being regulated, because commercial investment sometimes requires risk-taking and over-extension that wouldn’t be possible under FCA scrutiny.
Herein lies the problem – if you might be living in the property, even for just one night, the mortgage on it needs to be regulated and the mortgage lender could be on the naughty step for not having ensured as much at the point of sale. This is why most lenders make it a condition of your buy to let mortgage that you don’t live in the property yourself, under any circumstances.
So when I said that living in a buy to let property was ‘impossible’, I was of course speaking figuratively – nothing is physically stopping you from regaining possession of the property and setting up kip. But doing so will in all likelihood invalidate your mortgage, and that is not something you want to do, because you may be asked to repay the whole thing in full.
So when can I live in my buy to let property?
Buy to let mortgages aren’t always unregulated. If you will be letting the property to a close family member or explicitly plan to live in the property yourself in the future, the sale will be regulated.
If you knew when taking out the mortgage that you planned to eventually live in your buy to let, and informed your mortgage broker of the fact, then the sale was probably regulated and your lender will be less squeamish about letting you move in. You should still check with them before picking out new curtains, however.
What if I’ve paid off my buy to let mortgage?
If you’ve paid off your mortgage, then all of this is a moot point. With no charge on a property, no lender can tell you what you can and can’t do with it – so fill your boots!
Of course, if you have tenants in situ, they might be a little concerned to find you as their new roommate. Instead, you’ll want to regain possession – see here for guidance on how to do so. It’s important to remember that you’re evicting your tenant from their home, so remember to give them ample notice. (It’s even better if you can advise them when their tenancy begins that you might wish to move back in to the property in the future.)
What are my other options?
If you find that the conditions of a particular mortgage or lender are overly restrictive, you can always refinance with a new loan. Bear in mind that you might incur early repayment charges (ERCs) for paying off your existing buy to let mortgage early. You might be able to avoid this by sticking with your current lender, though doing so will close off the rest of the market and you might miss out on a good deal.
If you want to have the option to go back to letting the property in the future, it may be possible to switch to a regulated buy to let mortgage that will allow you to live in the property for a period. See our buy to let remortgage page for more details.
Alternatively, if letting the property out in the future is not a priority (or you don’t mind going through the potential minefield of ‘let to buy’ somewhere along the line), you can switch to a residential loan. The advisers in our sister company, TurnKey Mortgages, will be able to help you with this.
Your final option, if you’d prefer to continue to gain the benefits of a buy to let investment without the hassle of remortgaging, is to ‘let to let’. Let to let entails continuing to let out your own property whilst paying rent to live in someone else’s. Our article, Let to let – a guide, has more information.
Some landlords might balk at the idea of ‘paying someone else’s mortgage’ – it’s hardly a savvy investment, after all! But if you only require a temporary solution before getting back onto the residential property ladder, a minimum of six months’ renting might just be the ideal alternative to living in your buy to let property.