Becoming a landlord unexpectedly can be overwhelming.
Whether you’ve inherited a property, need to relocate temporarily, or your living situation has changed, you might be considering renting out your existing home. This is where a Consumer Buy-to-Let (CBTL) mortgage comes in.
This specialised mortgage is designed for “accidental landlords” – people who didn’t set out to be in the property rental business.
Let’s explore what it is, why you might need one, and how to get a good deal.
What is a Consumer Buy-to-Let Mortgage?
A consumer buy-to-let mortgage is a specialised lending product designed for individuals like you!
If you’ve inherited a property or plan to rent out your previous home rather than selling it, this could be your go-to option.
These mortgages fall under the umbrella of regulated buy-to-let products and are overseen by the Financial Conduct Authority (FCA), offering borrowers similar protections to residential mortgages.
How they differ from standard buy to let
The big difference is that they are ‘regulated’ by the FCA.
Lenders (and brokers) must follow strict guidelines about how they assess your ability to afford the mortgage, provide clear information, and treat you fairly. The FCA provides formal complaint processes and potential compensation routes if things go wrong.
In addition, lenders must conduct rigorous assessments of your income and expenditure to ensure you can truly afford the mortgage payments, even if rental income fluctuates. This is different to most standard buy to let mortgages, where the rental income alone can justify the mortgage.
Eligibility
You might qualify as an accidental landlord if you’ve inherited a property or are renting out your former home. This is for someone who didn’t purchase a property with the intent to rent it out. Key eligibility factors include not being a professional landlord and having other primary income sources.
You or a family member must have lived in the property at some point.
There are also age limits, most lenders accept applications where you are aged 21-75.
Under consumer buy-to-let regulations, you are not eligible for a CBTL mortgage if you are actively seeking to become a professional landlord. This includes scenarios where you are purchasing a new property with the express intent to rent it out, are already an established landlord with existing rental properties, or derive your primary income from rental properties.
How to apply
It’s important to understand that these mortgages are not as readily available as a ‘standard’ buy to let.
This is due to the extra regulations.
When assessing affordability, lenders consider both projected rental income and your personal income.
Be prepared to demonstrate that the rental income will cover at least 125% of the mortgage repayments. Additionally, your income, spending, age, debt, credit history, and desired deposit amount (LTV) will be evaluated.
Compared to residential mortgages, consumer buy-to-let mortgages typically have a maximum LTV of around 75%.
How a broker can help
Consulting an independent mortgage broker can transform your mortgage application experience.
They are experts in the market and can advise on the best deals that you might not find alone. Plus, they’ll guide you through the application process step by step.
Mortgage advisers have a deep understanding of the consumer BTL landscape. Their knowledge can be invaluable, especially for understanding nuances such as being an accidental landlord.
Some lenders offer products exclusively through brokers. Therefore, you could gain access to better terms than applying directly.
The application process involves comprehensive paperwork; brokers can help you get it right the first time.
Regulated buy-to-let mortgages
These are slightly different again.
If you plan to purchase a property to rent to a family member, you’ll need a Regulated Buy-to-Let mortgage.
The Financial Conduct Authority (FCA) oversees these mortgages, ensuring a fair process for the borrower.
A common scenario is parents buying a home for their child, especially if they are a university student. However, you might also help elderly parents downsize or move closer to you. Some established landlords even rent to family members for convenience, or homeowners rent out spare rooms within their own residence to relatives.
Due to the unique risks, many lenders hesitate to offer Regulated Buy-to-Let mortgages. Therefore, always work with a mortgage broker who specialises in this area. Their expertise will guide you to the most suitable lender and deal for your specific situation, potentially saving you time and money.
The Origins and Evolution of Consumer Buy-to-Let Mortgages
The concept of renting out residential property is not new, but the idea of tailored mortgages for “accidental landlords” is relatively recent. Before 2016, anyone renting out property, regardless of their circumstances, typically fell under standard buy-to-let mortgage agreements.
A Shift in Perspective
The UK housing market began experiencing significant shifts that brought a new type of landlord to light. More people were inheriting properties, needing to relocate temporarily, or choosing to rent their original home when moving in with a partner. These individuals didn’t fit the “professional investor” profile that standard buy-to-let mortgages were designed for.
The Birth of CBTLs
On March 21st, 2016, the Mortgage Credit Directive Order changed the landscape. Consumer Buy-to-Let mortgages were formally introduced as part of an effort to ensure these accidental landlords had better financial protections. CBTLs are regulated by the Financial Conduct Authority (FCA), offering a level of security that wasn’t previously mandated.
An Evolving Market
Since their introduction, CBTLs have evolved with the property market. While initially only offered by a few lenders, the growing demand has led to greater availability and increased competition. Specific eligibility criteria can also subtly change over time, depending on lender policies and broader housing trends.
