Consumer buy to let mortgages guide
In recent years, the buy-to-let (BTL) market has seen significant changes.
Owning a buy-to-let property has become more complicated due to tax reforms, increased Stamp Duty and changes in lender criteria.
One of the most significant changes has been the introduction of consumer buy-to-let. This regulated borrowing is primarily for an informal group known as accidental landlords and those who wish to rent a property to their relatives.
They will, free of charge, discuss any mortgage questions such as mortgage payments, lending criteria and anything else you may want to know when looking for a mortgage deal.
What is a consumer mortgage buy-to-let?
A consumer buy-to-let mortgage is for someone who has been an accidental landlord. This could be, for example, someone who inherits property or moves in with a partner and rents out their property short-term. The Financial Conduct Authority (FCA) does not regulate buy-to-let mortgages. However, this type is regulated just like regular mortgages.
The FCA introduced this new legislation in 2016 to offer greater protection to borrowers who might not have intended to become landlords.
This could also be considered consumer buy-to-let if you purchase a property to rent to a relative or if being a landlord isn’t your primary occupation.
What is the difference between consumer buy-to-let and standard buy-to-let?
These two types of buy-to-let mortgages are different in that they target different people and are regulated differently. The consumer buy-to-let mortgage is more suited to accidental landlords or people who are letting their homes to family members, while the standard buy-to-let mortgage is for anyone looking to buy an investment property that can be rented to tenants.
Read our comprehensive guide on buy-to-let mortgages and how they work.
Regulation and protection of consumers
The FCA regulates consumer buy-to-let mortgages in the same manner as residential mortgages.
“Deliberate” landlords (i.e. Investors who purchased the property to be used as a buy-to-let investment don’t require the same protection and are not regulated.
Customers operating the property as a source of income or a small business can get additional protection through consumer protection. This includes the FCA-regulated contracts that offer protection and the Financial Services Compensation Scheme. This protects you from misselling and bad advice.
Who offers consumer buy-to-let loans?
BTL mortgages are offered by some of the most prominent names in buy-to-let.
There are also specialist lenders. Some providers are Santander and Virgin Money, Bluestone, Bluestone, Kensington Mortgages, and other lenders.
It is not advisable to approach these lenders directly as you will only be able to access their products and may miss out on better deals elsewhere. Before you proceed, speak to a mortgage broker specialising in consumer BTL to get access to all the products you are eligible for and expert advice.
Although the FCA does not regulate this market, brokers need additional consumer buy-to-let permission to offer advice on such cases. Our advisors can help you find the right firms and mortgage lenders. This concept is still relatively new. We can expect more consumer-buy-to-let lenders to come on the market.
What to do if an accident happens?
First, notify your mortgage lender about your changes in circumstances.
Then you can obtain permission to rent your property to tenants. You will break the terms of your residential mortgage by letting out a property. You must inform your lender about your plans.
The lender could have the right to recall all of your debts in one instance if you break the terms. This would cause most people to default and damage their credit reports.
Sometimes, your lender might raise your interest rate if you give consent to let. In other cases, they may keep the same deal but charge an administration fee. If your lender refuses to consent, you must remortgage to a consumer buy-to-let product.
Please get in touch if you find yourself in this position and are unsure what to do. The consumer buy-to-let advisors we work with can assess your case and offer expert insight. They will also be able to connect you with mortgage lenders who specialise in these products.
Eligibility criteria for consumer buy-to-let mortgages
If you can apply for a consumer mortgage,
- You didn’t buy the property to rent it.
- It is not your primary occupation to rent out properties.
- There may have been a relative who lived there before you.
- You don’t have any other rental properties.
The consumer buy-to-mortgage regulations for consumers state that you can’t apply if one of the following applies:
- You plan to rent out a property you have just purchased.
- You are a professional landlord.
- You have multiple properties that you own and want to let out.
Eligibility criteria for consumer buy-to-let mortgages
If you can apply for a consumer mortgage,
- You didn’t buy the property to rent it.
- It is not your primary occupation to rent out properties.
- There may have been a relative who lived there before you.
- You don’t have any other rental properties.
The consumer buy-to-mortgage regulations for consumers state that you can’t apply if one of the following applies:
- You plan to rent out a property you have just purchased.
- You are a professional landlord.
- You have multiple properties that you own and want to let out.
Insurance for consumer buy-to-let landlords
Insurance is something that landlords who buy to let properties to tenants should consider. Your standard home insurance will not cover your property if you rent it out to tenants. Although your insurer might be able to adjust your policy to meet your needs, it is always best to shop around and ensure you get the best deal.
A typical insurance policy that a BTL landlord would need is…
- Landlord’s buildings and contents insurance (can be combined or separate policies)
- Rent protection insurance
- Public liability insurance
- Coverage for legal expenses
You can learn more about landlord insurance through our links. Or, you can save time by speaking with one of our insurance specialists. They will help you find the right coverage and search all the markets to ensure you get the best deal.
Talk to an expert
A consumer buy-to-let mortgage may be right for you if you are an accidental landlord or want to rent a property to your family. However, getting professional advice before making that decision is a good idea.
Talking to the right broker, one specialising in consumer buy-to-let mortgages, before making any decisions could help you save time, money, and your credit score.
Our broker-matching service will match you with the right broker for free. We’ll help you find the right broker if you are an accidental landlord. If you’re looking to buy a property to rent to family members, we will connect you with an advisor who specialises in this type of arrangement.
We can provide expert advice and help you navigate the process. Call today or submit an enquiry for a no-obligation chat with the perfect broker.