The property and mortgage lending market is continually adapting and evolving to meet the needs and demands of peoples lifestyles and requirements, for both tenants and landlords. This is one of the reasons why the Consumer Buy-To-Let product was introduced. But what exactly is it? And who is it for?
A consumer buy-to-let mortgage is a type of home loan for those who find themselves in the position of a landlord by circumstance, or who want to let a property to a family member. These mortgage products are regulated by the Financial Conduct Authority and provide financial ombudsman protection.
This mortgage product is becoming very popular with a group of people who are commonly referred to in the industry as ‘accidental landlords’. They do not actively seek to be landlords, but letting a property to tenants is preferable to either selling or leaving a property uninhabited.
A couple of examples include inheriting property or moving into a partners property whilst renting their previous home instead of selling it.
There are a number of reasons why someone may decide to rent their previous home or inherited property as opposed to selling it.
Maybe the market conditions are not right and they feel that they won’t achieve the desired price if they sold, or perhaps they intend to move back to their previous home or into their inherited property, for whatever reason, at a later date.
If you’re interested in finding out more about this type of investment and mortgage product, keep reading! In this article I will identify the differences between a Buy-To-Let and a Consumer Buy-To-Let mortgage; the eligibility criteria for a Consumer Buy-To-Let mortgage and the advantages and disadvantages of a Consumer Buy-To-Let mortgage.
Is A Consumer Buy-To-Let Mortgage Regulated?
Yes, Consumer Buy-To-Let mortgages are regulated by the Financial Conduct Authority (FCA). This means that all products must meet certain criteria and offer a high level of protection for the borrowers. This can include Financial Ombudsman protection in case of a dispute.
Consumer Buy-To-Let mortgages are regulated in the same way that a residential mortgage is regulated. In other words, Consumer Buy-To-Let Mortgages offer the exact same protections that a home owner receives on their mortgage.
Regular Buy-To-Let mortgages, which are used by property investors and landlords as a business tool, are not regulated by the FCA.
Difference Between A Buy-To-Let And Consumer Buy-To-Let Mortgage?
A Buy-To-Let mortgage and Consumer Buy-To-Let mortgages are very similar in the way of terms and conditions, but there are some key differences between them:
- A Buy-To-Let mortgage product is designed for property investors and landlords who are actively looking to invest in property.
- A Consumer Buy-To-Let mortgage product is designed for those who have found themselves in the position of a landlord by circumstance.
What Is The Eligibility Criteria For A Consumer Buy-To-Let Mortgage?
There is no specific buy-to-let experience required to be eligible for a Consumer Buy-To-Let mortgage. However, you will need to meet the lender’s criteria in order to be approved for the product. This will include things like a suitable credit score and an affordability assessment.
- You or a family member must have previously lived in the property.
- Letting property and being a landlord is not a current business for you.
- You did not buy the property with the purpose of letting it to tenants.
Everybody’s circumstances are different, so if you have questions or concerns as to whether you think you would meet the eligibility criteria for a Consumer Buy-To-Let mortgage, I would recommend talking to a mortgage broker at L&C who can provide ‘fee free’ expert advice, to explain your situation.
Once they have a full understanding of your situation, they will then be able to advise you on the best mortgage product for your needs. This may or may not include a Consumer Buy-To-Let mortgage, but you will at least be presented with options to consider before moving forward.
You should not receive notification of any fees until a specific mortgage product has been identified for your needs and the application process is started.
What Are The Advantages Of A Consumer buy-to-let Mortgage?
There are a few key advantages in opting for a Consumer Buy-To-Let mortgage over a standard Buy-To-Let mortgage, if you are eligible:
- Financial Ombudsman Protection
If there is a dispute with your lender, the financial ombudsman can help to resolve the issue.
- Regulated by the FCA
Regulated buy-to-let mortgage products must meet certain criteria. This means that the lender is obligated to adhere to a high level of protection for borrowers, giving you peace of mind while making your purchase.
- Tax Benefits
As buy-to-let mortgages are generally not taxed in the same way as other investment products, you may be able to save money on your tax bill.
Are There Any Disadvantages To A Consumer Buy-To-let Mortgage?
Like any mortgage product, there are a few potential disadvantages to consider before applying:
- The Interest Rate
As consumer buy-to-let mortgages are not as common as buy-to-let mortgages, the interest rate may be slightly higher.
- The Application Process
Consumer Buy-To-Let mortgages aren’t as common as Buy-To-Let mortgages so there is a chance that your application could take longer to process as it will require more time and consideration from the lender.
How Much Can I Borrow With A Consumer Buy-To-Let Mortgage?
The amount you can borrow with a Consumer Buy-To-Let mortgage will vary depending on the lender, the value of the property and your individual circumstances. It’s important to note that the maximum loan to value (LTV) may be lower than with a standard Buy-To-Let mortgage product.
So, there you have it! Everything you need to know about the basics of Consumer Buy-To-Let mortgages.
If you’re one of the growing number of people who have found themselves in the position of being a landlord by circumstance, then a Consumer Buy-To-Let mortgage is certainly worth investigating further.