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Consumer Buy-to-Let Mortgages

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By Pete Mugleston  | Mortgage Advisor Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 10th October 2019 *

The buy to let (BTL) market has changed considerably in recent years. Tax overhauls, a Stamp Duty increase and changes to lender criteria have meant owning a buy to let property is more complex than ever. 

One particular change has been the introduction of so-called consumer buy-to-let - a type of regulated borrowing for a group of buyers known as ‘accidental landlords’.

In this article you can find out:

If you’re an accidental landlord and are interested in how you might benefit from a consumer buy-to-let mortgage, save time and hassle by talking to one of the experts we work with.

All the experts we work with are whole-of-market mortgage brokers and have the knowledge and the tools to help ensure you get the right mortgage solution at the best possible price.

Call 0808 189 2301 or make a quick enquiry and we’ll match you with a broker experienced  in consumer buy-to-let mortgages. They’ll be happy to answer all your questions and help you understand how regulated buy-to-let mortgages work.

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What is a consumer buy-to-let mortgage?

The term consumer buy to let was introduced when the financial services regulator, the Financial Conduct Authority (FCA), introduced new legislation in the mortgage industry called the Mortgage Credit Directive. The aim was to provide greater protection for borrowers who may not have intended to be landlords and, therefore, might be more vulnerable.

The Mortgage Credit Directive gives this consumer buy to let definition: “A buy-to-let mortgage contract which is not entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower.”

Essentially, a consumer buy-to-let mortgage is for someone who has become an 'accidental landlord'.

There are plenty of reasons why someone might accidentally find themselves with a property to rent out - if you inherited a home, for example, or you and your partner move into together, having both owned your own homes. If you buy a property to let to a family member this will also be classed as consumer buy to let.

How does consumer buy to let differ from standard buy to let?

Now that we’ve covered the definition of consumer buy to let, it’s time to take a closer look at this product and how it differs from a standard buy-to-let mortgage.

Regulation

The key difference between the two is regulation. Consumer buy-to-let mortgages are regulated by the FCA in the same way as residential mortgages.

‘Deliberate’ landlords (i.e. investors who bought the property specifically to run as a buy to let investment) don’t need the same level of protection and, as such, are still unregulated.

Consumer protection

The point of this was to offer additional protection to customers who have found themselves running a property for income as a mini business, by giving them the protection all FCA regulated contracts offer, including cover by the Financial Services Compensation Scheme (FSCS).

Who provides consumer buy-to-let mortgages?

Some of the biggest names in buy to let are offering consumer BTL mortgages, alongside several specialist lenders.

While the FCA doesn’t regulate this market sector, brokers require supplementary consumer buy to let permission to advise on such cases, and the advisors we work with can connect you with the firms that have this.

Given the concept is only three years old, we can expect to see more consumer buy-to-let mortgage lenders come to market going forward.

Call 0808 189 2301 and we’ll connect you with one of the brokers we work with who has experience of consumer buy-to-let mortgages and knows the lenders with the best products for you.

Steps you need to take to become an accidental landlord

The first thing you must do is notify your mortgage lender of your change in circumstances and obtain consent to let your property to tenants. 

Letting out a property with a residential mortgage will be in breach of the mortgage terms, so it’s vitally important you contact your lender to let them know your plans.

In some cases the lender may increase your interest rate upon giving you consent to let, or perhaps keep the same deal but charge an admin fee. 

If your lender does not give you consent to let you will have to remortgage onto a consumer buy to let product.

If you’ve found yourself in this situation and are still unsure what to do, get in touch and the consumer buy to let advisors we work with will assess your case, offer expert insight, and can connect you with lenders who specialise in these remortgage products.

Call 0808 189 2301 or make an enquiry for a free, no obligation chat.

Will I be eligible for a consumer BTL mortgage?

You should be able to apply for a consumer buy-to-let mortgage if…

  • You did not buy the property in question with the intention to let it out.
  • Renting out property is not your main occupation.
  • You or one of your relatives previously lived there.
  • You don’t own any other rental properties.

Consumer buy to let regulations state that you cannot apply for a consumer buy-to-let mortgage if any of the following applies to you…

  • You are buying a new property and plan to let it out.
  • You’re a professional landlord.
  • You already own multiple buy to let properties and are letting them out.

Can I remortgage to consumer buy to let if I have bad credit?

If the lender insists the property is remortgaged onto a buy to let and you don’t have the best credit history, your choice of lenders will reduce, but that doesn’t mean getting a consumer buy-to-let mortgage will be impossible.

The mortgages available to you will depend on how bad your credit history is. Some lenders are particularly strict and won’t accept your application if you have anything more than the smallest of issues.

Others are more lenient, and may still approve your application depending on what the adverse credit is (a missed phone bill payment is less severe than a recent bankruptcy or repossession, for example) and how long ago it was registered also plays a part (the older the issue, the better).

Below is a list of credit issues some consumer buy to let lenders might be willing to overlook, providing you meet their other eligibility requirements:

  • Low credit score
  • Mortgage Arrears
  • Defaults
  • County Court Judgements (CCJs)
  • Individual Voluntary Arrangements (IVAs)
  • Debt Management Plans (DMPs)
  • Bankruptcy
  • Repossession

It helps to have a good idea of your credit situation to begin with. You can access your credit score for free on all three of the main credit score agencies that lenders will use - CallCredit, Equifax and Experian, or better yet, make an enquiry and we’ll do this for you.

Get your credit rating


What else should I be aware of?

One of the most important things to consider is insurance. 

If you let your property to tenants, your standard home insurance is unlikely to cover it. 

Your insurer may be able to adapt your policy to cover your new needs but it’s always advisable to shop around to make sure you’re getting the best deal – and the best standard of cover. 

Read more about Buy to let Insurance and landlord insurance or save time and hassle by talking to one of the insurance experts we work with. 

Speak to an expert about consumer buy-to-let mortgages

All the experts we work with are whole-of-market brokers with access to all the mortgage lenders across the UK. They have the knowledge and the tools to ensure you get the right mortgage at the best available price.

Call 0808 189 2301 or make an enquiry for a free, no obligation chat. 

Updated: 10th October 2019
OnlineMortgageAdvisor 2019 ©

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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