What is a consumer buy-to-let mortgage?

Consumer buy-to-let mortgages are designed specifically for 'accidental landlords' - find out how you might become one.

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By

Matthew Boyle

Updated

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This type of mortgage arrived on the market in 2016. You’ll have to get one if you fit into the category of an ‘accidental landlord’.

What is an accidental landlord?

An accidental landlord is any homeowner who ends up letting out their home when it wasn’t their original intention. You’ll have to convince your lender that this is the case in order to be granted permission to let your home.

Here are some of the most common situations where you’d be considered an accidental landlord:

  • You inherit a home
  • You move into a partner’s home after buying a property
  • You need to move house, but are unable to sell the property at a reasonable price
  • If you deliberately let out a property to a family member, you’ll also be considered an accidental landlord

However, if any of the following situations apply to you, you won’t be considered an accidental landlord and will have to apply for a traditional buy-to-let mortgage:

  • You buy a new property with the intention of letting it out
  • You already own multiple buy-to-let properties

If you become an accidental landlord, you’ll need to notify your lender and obtain consent to let out your property. If you fail to do this, you’ll be in breach of your mortgage terms and may be asked to repay your debt in full.

It’s possible your lender will add a “consent to let” condition onto your current mortgage, although it may charge a fee or increase your mortgage rate. If your lender doesn’t agree to this, you’ll have to switch to a consumer buy-to-let mortgage.

Either way, you’ll also have to inform your home and contents insurance provider about any change of occupiers in your property. This may result in an increase to your insurance premiums, as buy-to-let properties are generally regarded as a bigger risk by insurers.

What is a consumer buy-to-let mortgage?

The main difference between traditional buy-to-let mortgages and consumer buy-to-let mortgages is regulation.

Consumer buy-to-let mortgages are regulated by the Financial Conduct Authority (FCA), the same body that regulates residential mortgages.

Under this regulation, mortgage lenders have to follow the same rules and standards that bind all other regulated financial companies in the UK.

The FCA ruled it was important for accidental landlords to have this extra layer of protection and this was the key reason why consumer buy-to-let mortgages were created.

You’ll have to seek out a deal from mortgage providers that serve the consumer buy-to-let mortgage market. As these mortgages have only existed for a short time, there are currently few lenders to choose from, although this market is growing.

A mortgage broker will be able to point you in the direction of the best consumer buy-to-let deals available to someone in your specific circumstances.

Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
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