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Property Finance Success Story: Accidental landlords and Consumer BTL Mortgages 

Published on 24th September 2020

At Rangewell we recently helped a new client deal with the problem of turning his home into a buy to let venture. 

TL:DR - One client found they had become an 'accidental' landlord when they decided to rent out the property they live in rather than sell, when moving jobs for example. Because he had lived in the property, he was not eligible for a Buy to Let Mortgage, and due to his, understandable, lack of experience in the property finance market, he didn't know where to turn. We explained his options and found him a Consumer Buy to Let Mortgage which fit his needs perfectly, even getting the deal accepted during Covid, and negotiating the funding at 3% with 70% loan to value.

Investing in Buy to Let properties have been on the increase for a number of years, but concern about BTL investors distorting the market and pricing out first-time buyers has led to tax changes which may make becoming a landlord much less rewarding. 

But it may still be possible to buy and rent out a home or homes and show a profit - if you have done the necessary calculations and have a mortgage with a really competitive rate. However, there's more to getting the right mortgage than simply comparing rates. 

Getting the right kind of property funding is essential - and there are several types to consider. 

A consumer mortgage is designed to let people buy the home they live in. It requires the borrower to have an income which is sufficient to make to repayments on the mortgage, and the lender and the product they offer will be regulated by the FCA.

A standard (or business) Buy to Let mortgage is secured against a property investment where you rent out the property for profit. A Buy to Let mortgage is assessed differently in comparison to a residential mortgage. It is mostly based on the profitability of the property, i.e. how much rent can be generated from it, unlike a residential mortgage which depends on your own financial circumstances.

You will need to provide a slightly higher deposit amount for a Buy to Let Mortgage which usually would be 20% of the value of the property. A minimum salary of around £20,000 also applies, depending on the mortgage lender.

But there is another type of mortgage - a Consumer Buy to Let Mortgage. We recently helped a property owner solve his property problems by helping him arrange a Consumer Buy to Let Mortgage.

For landowners who have experience renting and deliberately want to rent out a property, Business Buy to Let Mortgages are ideal. However, many individual homeowners fall into the trap of becoming an accidental landlord - where they want to let out a property that they have lived in themselves.

What is an 'accidental' landlord? 

The term ‘accidental landlord’ is common in the lettings industry. It is someone who didn’t buy a property to let out but found that they needed to become a landlord because of unexpected circumstances.

Those circumstances can also vary. One of the most common is when someone may own their home but get a job offer abroad and not want to sell. They also might not like the idea of leaving the property empty for an extended period of time. In such case, the best route is often to rent it out.

Alternatively, someone might inherit a property and decide that letting it yields the best results financially. They might even wish to remortgage and borrow extra capital against it, so they have more funds in the bank.

If you move away but keep the property you were living in to let out, you may be defined as an ‘accidental landlord’.

The criteria for most Consumer Buy to Let mortgages are:

  • The property was not purchased with intend to rent it out
  • Renting property is not your main source of income 
  • You do not own other properties that are being rented
  • You have lived in the property

A Consumer Buy to Let provides a great deal more protection than the regular Buy to Let Mortgage, which is arranged for business purposes. However, the requirements, as well as the application, will be stricter - about the same as if you were trying to apply for a home mortgage. 

Are you struggling with a lack of property funding knowledge to know where to turn to with a complicated need? Have you aslso become an 'accidental' landlord? Contact our Property Funding team today for the solutions you need

Solving our client’s problem

Our client was in his late twenties and had bought a home in Bournemouth. However, when a career opportunity took him to London, he realised that the long commute was not going to be feasible. He wanted to let out the Bournemouth property while he looked at his position in London. He would initially rent but had plans to buy if the job went well.

However, he was reluctant to sell his Bournemouth property and felt that the best solution would be to let it out for the short term while he decided what to do. He knew that his existing mortgage would prohibit letting out the property, but that it would be relatively simple to replace it with a standard Buy to Let Mortgage.

However, when he started to look at the necessary arrangements, he soon found that things were not as simple as he had expected.

Because he had lived in the property, most lenders that he spoke to would not consider him for a Buy to Let Mortgage. Their view was that as an owner-occupier, the existing homeowners' mortgage was appropriate.

This was a regulated product, and lenders would be understandably wary of any conflict with the guidance provided by the FCA, the regulatory body for the lending industry.

When large sums are involved, all lenders have to be cautious. Even those who are prepared to fund property may have a tight set of criteria that they will work to. Proposals that fall out of these restrictions may be rejected simply on principle.

“I needed to find funding quickly - the cost of keeping up a house in Bournemouth and renting in central London was putting a strain on my finances. But I could see things would be very much better if the Bournemouth property started to generate an income. It might make it very much easier for me to buy in London. Plus there was always the possibility that I would want to move back in a few years' time. 

But I had three problems to deal with. The first that I was a first-time landlord. With no experience in Buy to Let, I didn’t know what was possible and what was not and lenders seemed to have little faith in me. The second was that I was still living in the Bournemouth property, according to the electoral register, even if I was never there. 

And thirdly, thanks to Covid, most lenders were simply not lending.”

He had already spent weeks trying to secure the funding he needed to move forward and realised that he needed professional help to do so. Naturally, he turned to Rangewell.

“I had heard that Rangewell have solutions when it comes to borrowing for property. Most lenders will only want to sell you what they have to offer but Rangewell work to find you the solutions you actually need.”

We saw that this lack of experience would be a problem with many lenders, but we knew those who might be able to help.

We also knew those who could act fast - despite the problems caused by Covid - and some ways to speed up the process.

Finding a solution

Consumer Buy to Let Mortgages are regulated as residential mortgages and are aimed at ‘accidental landlords’ and non-professional landlords.

In 2016, The Mortgage Credit Directive introduced a legislative framework to regulate the mortgage market. Consumer Buy to Let Mortgages were part of this new change and offered consumer protection to individual landlords.

Consumer Buy to Let Mortgages are regulated by the Financial Conduct Authority (FCA) in the same way as residential mortgages. The real reason for their existence is to offer protection to customers who find themselves running a property for income, by providing them with the same insurances all FCA regulated mortgages cover.

We saw that a Consumer Buy to Let Mortgage would be the answer.

“I had never heard of a Consumer Buy to Let Mortgage, so I had never asked lenders about the possibilities of arranging one. Rangewell’s expertise started paying dividends immediately.”

We knew which property funders can offer this kind of mortgage, but we also knew that many had shut up shop until a post-Covid future became more clear - but we did know of one that might be interested and still prepared to lend.

We approached them with full details and were able to get a positive decision.

The funding we arranged

We were able to negotiate funding at 3% with 70% loan to value. Our client already had built up sufficient equity in his home to cover the deposit, so arranging a remortgage was simple.

“I never planned to be a landlord, but I was able to find a very nice family who were keen to have a home in the area and things went very smoothly. Now I am thinking about buying a flat in London, and having the extra income from the property I already own is going to make that very much easier.” 

Why we were able to help

At Rangewell, our focus is on funding for businesses - but we understand that some people become accidental landlords and don’t realise that they are running a business.

Naturally, we are pleased to help them. We work with all the lenders in the UK finance market, and not only do we know which are most suitable for a particular type of deal or a particular sector, we know those that can offer the most cost-effective solution for any individual need.

Our team includes experts in Property Finance and our service is personal. It means you can talk to a BTL funding expert who understands your particular challenges to helps to find a clear solution that is planned around your business needs.

The world of buy to let and property investment has grown tremendously over the last few years, but while this means that more mortgages may be available, the current circumstances have increased the challenges of securing the mortgage you need. 

As independent lending advisors, we can discuss all the available products and will scour the market to find you the most appropriate and, equally important, the most affordable deal for your needs. We will help you to decide which Buy to Let Mortgage product best suits your needs based on your individual circumstances and your long-term objective

We discuss your plans then call on our network of lenders, which includes virtually every name in the UK market to get the funds you need quickly and simply.

Just call us and one of our experts will be able to discuss your options in a clear and simple way, and work out the most cost-effective solutions to provide the funding you want - whatever the challenge your business plans present - and in most cases, our services are absolutely free.

To find out more, call the Rangewell property funding team for an informal discussion on 020 3318 2613 or email [email protected].

Property ownership costs less with help from Rangewell

  • Individual arrangements tailored to your circumstances
  • Adverse Credit – no problem
  • Repayments geared to your revenue stream - including interest roll-up
  • Understanding the funding challenges for your sector
  • Personal service

Talk to Rangewell – the business finance experts


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