What is a consumer buy to let?

A consumer buy to let is when a homeowner becomes an accidental landlord without intending to d so. This could be by getting a buy to let property in an inheritance or a similar placed scenario.

Consumer buy to let mortgages have more regulatory protection than business or regular buy to let mortgages. Consumer buy to let mortgages are subject to the legislative framework set out in the mortgage credit directive order 2015.

If you think you may be eligible for a consumer buy to let mortgage then you may want to get in touch with a mortgage broker to assess your eligibility for a consumer buy to let mortgage.

As consumer buy to let mortgages are regulated in the same way as residential mortgages by the FCA so you can expect the same level of mortgage affordability assessments.

Consumer buy to let as defined by HMRC

“There are some situations where borrowers do not seem to be acting in a business capacity. Examples of this may be where the property has been inherited or where a borrower has previously lived in a property, but is unable to sell it so resorts to a buy to let arrangement.

In these cases, the borrower is a landlord as a result of circumstance rather than through their own active business decision. The government’s view is that such borrowers are consumers and would need to be covered by an appropriate framework.“

What are the eligibility requirements for a consumer buy to let mortgage?

Due to the accidental nature of consumer buy to let mortgages the criteria for being eligible for a consumer buy to let mortgage is slightly different.

To be eligible for a consumer buy to let mortgage you will usually have to meet the below requirements:

You or your family have lived in the property for a certain amount of time

You didn’t purchase the property with an intention to rent it out

When the proeprty is rented outit will not be your only or main source of income

You do not own any other consumer buy to let properties or buy to let properties

If you are a professional buy to let landlord then you may find it hard to get a consumer buy to let mortgage. If you have also purchased the property with intentions to rent it out you may also not be eligible for the consumer buy to let mortgage as this is primarily targetted at accidental landlords.

What mortgage deposit do you need for a consumer buy to let?

Consumer buy to let mortgages will usually have a smaller mortgage deposit requirement than a standard buy to let mortgage. This means consumer buy to let mortgage lenders are more willing to lend more and offer loan to value rates of around 85% and you could potentially get a higher loan to value rate based on your circumstances.

Can you get a consumer buy to let with bad credit?

Getting a consumer buy to let mortgage with bad credit may be possible but most mortgage lenders like borrowers who have good credit so you may want to consider building credit before seeking a consumer buy to let mortgage. A better credit score could potentially reduce the mortgage rate which you end up paying.

Consumer buy to let mortgage lenders will usually look at bad credit applications on a case by case basis.

If it was a CCJ which was satisfied and is a certain age then some consumer buy to let mortgage lenders may be willing to lend. Other mortgage lenders may lend if the CCJ was a maximum amount.

When looking to get a mortgage with bad credit the requirements from different mortgage lenders will differ and a bad credit mortgage broker may be able to assist you in getting a consumer buy to let mortgage.

When considering consumer buy to let mortgages bad credit could include:

A CCJ

An IVA

A debt management plan

A default

A bankruptcy

A home reposession

Can you get a consumer buy to let if you are self-employed?

You may be able to get a consumer buy to let mortgage if you are self-employed but as with residential mortgages, the consumer buy to let mortgage lender will want to see evidence of a stable and reliable income with no huge gaps of unemployment which cannot be explained.

The documents the consumer buy to let mortgage lender may request from you could include:

Your P60 tax return

Yous SA302 tax calculation form

Accounts for 3 years

Your bank statements for 3 months

Your CV

Any contracts you may have

Are consumer buy to lets regulated?

Yes, consumer buy to lets are regulated by the FCA in the same way as residential mortgages and if you are given wrong mortgage advice in regards to a consumer buy to let you may be able to claim compensation from the financial services compensation scheme.

When you may need a consumer buy to let mortgage?

There are several reasons you may become an accidental landlord and need a consumer buy to let mortgage. If you begin to let out your home without informing your mortgage lender you may be in breach of your mortgage agreement and your current home insurance.

This means your current mortgage lender could cancel your mortgage and if anything goes wrong at your house such as a fire you may not be covered by your insurance.

You should always inform your mortgage lender if you plan to let out your property and they may then advise you on a consumer buy to let mortgage.

Some of the scenarios where you may become an accidental landlord and eligible for a consumer buy to let mortgage include:

Moving in with a partner

If you are moving in with a partner but don’t want to sell your home then you may also be able to get a consumer buy to let mortgage.

Inherited a property

If you have gotten a mortgaged property through inheritance then you may need a consumer buy to let property if you don’t want to sell the property or don’t intend to move into the property( maybe because you already have a home)

Moving abroad

If you are moving abroad but do not want to sell your property for whatever reason then you may be able to get a consumer buy to let mortgage.

Going travelling

If you are travelling for a prolonged period of time but intend to return then you may be able to use a consumer buy to let mortgage to gain some income from your property whilst you are abroad

How to get a consumer buy to let mortgage?

If you think you need a consumer buy to let mortgage you may want to consider speaking to a mortgage broker or asking your current mortgage lender for permission to let out the property

Your current mortgage lender may add a “consent to let” condition on your current mortgage which will allow you to let out the property.

You may also have to speak with your current home insurance provider to inform them of the change in circumstances and they will likely provide you a ew quote as your past insurance me now be void. Home insurance quotes for properties where tenants are housed tend to e much higher than for residential homes. You can expect to pay significantly more on your consumer buy to let property insurance.

There are now a few mortgage lenders which offer consumer buy to let mortgages and so the market is now more competitive than it was prior to 2015.

If you are curious about getting a consumer buy to let mortgage then you may want to get in touch with a buy to let mortgage broker who may be able to assist you.

John Bate

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.