Q I am currently living in a shared ownership property that I jointly own with my wife. We have a 25% share of the property which is valued at £82,000. The full value of the property when we bought it in March 2021 was approximately £328,000. We bought this with a five-year mortgage with a fixed rate of 2.2% and we’ve been overpaying the maximum 10% of the overall mortgage without incurring an overpayment penalty.
Would it be possible for me to remortgage for 100% ownership as a buy-to-let? If so, what would the procedure be? We can pay off the mortgage for the share of the property we own (there is about £50,000 remaining of the mortgage), as I’ve come into a bit of money through inheritance. Is it a case of staircasing to 100% while applying to a bank for a buy-to-let mortgage?
A Unless there are exceptional circumstances, under the terms of your shared ownership lease you are not allowed to let your home if you only own a part of it (although you are usually allowed to have a lodger who lives with you). However, once you have staircased to 100%, you will own the property outright and so can let your home to whomever you like.
To be able to staircase to 100%, you’ll need to pay to get a valuation done by an independent Rics-qualified valuer. Then you need to calculate whether the money you inherited will be enough to cover 75% of the valuation or whether you’ll need to increase your current mortgage to be able to buy your home outright. If the figures add up and – if applicable – your mortgage lender agrees to increase your mortgage, you can go ahead with buying the final share of your home. Once that’s done, you can go ahead with getting a buy-to-let mortgage or your current lender’s permission to let the property. But bear in mind that if you switch to a buy-to-let mortgage you’ll have to pay an early repayment charge because you’d be paying off your current residential mortgage before the five-year fixed-rate term is up.
But what I don’t understand is why you want to switch to a buy-to-let mortgage even if you can. Where are you going to live if you let your home to tenants? It seems to me that a simpler and more sensible course of action would be for you and your wife to use the money you have inherited to buy a further share in your home and to carry on living there.