Consumer Buy-to-Let Mortgages

In this article, we’ll explain when you might need a consumer buy-to-let mortgage, how to know if you’re eligible and how the right specialist support can help you secure the best rates.

What is a consumer buy-to-let mortgage?

A consumer buy-to-let mortgage is for accidental landlords, such as those inheriting a property or renting out their previous home. It’s regulated, offering protections similar to residential mortgages, and focuses on the owner’s circumstances rather than rental income potential.

Established in 2016, it’s specifically designed for:

• “Accidental landlords:” people who didn’t initially plan on renting out a property, perhaps because they inherited one, have to temporarily relocate or are moving into a partner’s property but wish to retain their own.
• Want to rent a property out to their family.
• People who are not professional landlords.

Consumer buy-to-let definition: “A buy-to-let mortgage contract which is not entered into by the borrower wholly or predominantly for the purpose of a business carried on, or intended to be carried on, by the borrower.” – Mortgage Credit Directive Order 2015

The differences

The main difference between a consumer buy-to-let mortgage and the traditional route is that the consumer version is regulated by the Financial Conduct Authority, offering extra protection than would be typically available. That’s because, as an accidental landlord, there is a perceived level of vulnerability that FCA regulation can help to mitigate.

Other differences are outlined in the table below.

Eligibility criteria

To qualify for a consumer buy-to-let mortgage, you will need:

• To be an accidental landlord i.e you didn’t buy a property and intend to rent it out.
• Not be a professional landlord i.e. you derive your income from means other than renting properties.
• To have lived in the property yourself or had a relative live in the property before acquiring the property.

Lenders will look at your projected rental income rather than your personal income when assessing affordability – they’ll look for rental income of at least 125% of the mortgage repayments to be sure you can afford the loan. They will also assess your income and outgoings, age, debt, deposit amount and credit history as part of the application process. You’ll find that the deposit or LTV requirements are different to a residential mortgage – maximum LTVs on consumer buy-to-let mortgages are normally around 75%.

How to get a consumer buy-to-let mortgage

If you think you fit the above criteria and wish to apply for a consumer buy-to-let mortgage, get in touch and we can match you with a broker who specialises in these types of mortgage. They can help you:

• Get a rental income estimation.  Lenders for this type of mortgage base much of their decisions around projected rental income. Typically, they look for it to be between 125% and 145% of the mortgage repayments to feel confident in your ability to make your repayments. A local letting or estate agent can provide a rental income estimate.
• Work out your LTV. Eligibility for a consumer buy-to-let property will depend on how much equity you have. Your broker can then search for the right lenders to fit your circumstances.
• Manage an inherited property. If the property is inherited, the property’s existing mortgage lender can share information on whether they’d allow you to remortgage onto a consumer buy-to-let mortgage or if you need to remortgage with another lender.

Which lenders offer these mortgages?

There are some lenders such as Vida Home Loans, Natwest and CHL Mortgages who won’t offer consumer buy-to-let mortgages, meaning that the pool of lenders is going to be smaller.

There are still, however, plenty who do. For example, high street lenders including Metro Bank, TSB and Santander accept applications, as do specialist lenders such as the Teachers Building Society, BM Solutions and InterBay Commercial.

The best way to find the right lender is to get in touch and let us match you with a specialist broker. They’ll have access to lenders that you might not find on your own and will always compare the whole market.

Interest rates

Just like with other buy-to-let mortgages, the interest rate on a consumer buy-to-let mortgage is likely to be higher than on a conventional mortgage.

The table below illustrates the best rates currently available.

Please note that the above rates are always subject to change at the lender’s discretion. Speaking to a mortgage broker is the best way to find the most up-to-date deals.

Rental Yields

Becoming a landlord by accident can mean there’s quite a lot of information you need to digest in a short space of time – one term you’ll likely hear used will be ‘rental yield’, which is the amount of rent you make from your buy-to-let property per year expressed as a percentage.

Rather than try to work this out for yourself, just use the calculator below:

Remortgaging a consumer buy-to-let property

If you already have a consumer buy-to-let mortgage, there may be a few reasons you might consider remortgaging further down the line:

• If you are looking to free up some equity, perhaps to do some home renovations.
• If you want to switch to a residential mortgage because you’re moving into the property.

Should one of the above reasons apply to you, the first thing to do is to enquire with your current lender if they’ll allow for a remortgage. Some specialist buy-to-let lenders may not offer residential mortgages.

After that, it’s best to consult a broker who’ll be able to compare the whole market to see which lenders currently have the best rates and how they compare to what your existing provider can offer. If you’re remortgaging but remaining on a consumer buy-to-let mortgage, it could be that another lender has more attractive rates.

Should you opt to go with a new lender for your remortgage, you’ll have to go through the mortgage application process and ensure you meet their eligibility criteria, which for a residential mortgage includes an affordability assessment. Lenders typically allow for a loan of around 4.5 to 5 times an applicant’s income.

Get matched with a consumer buy-to-let specialist

An unexpected change of circumstances naturally comes with stress. Unexpectedly becoming a first-time landlord adds an additional layer to that. This is why it’s worth teaming up with an expert in consumer buy-to-let mortgages.

Offering real-time, bespoke advice, an expert broker can help eliminate any unnecessary stress that comes with pursuing a landlord arrangement and ensure you’re accessing the best mortgage deal possible. You can be connected today for an initial consultation free of charge. Just call 0808 189 2301 or fill out an enquiry form.