Surely, a Buy To Let Mortgage is just what it says in the title- ‘A mortgage for a Buy-To-Let property’? Not so fast…
In the array of variations of Buy-To-Let mortgages, Consumer Buy To Let’s have a been a popular topic- specifically- what one considers, by definition, as a Consumer Buy To Let.
However, what hasn’t been so popular is the topic of, when does a Consumer Buy-To-Let become a Regulated Buy-To-Let and do Regulated Buy-To-Let Lenders even still exist?
Also known as a Family Buy-To-Let, this type of mortgage has a reasonably narrow definition. Ostensibly, this is a property that will be let to a family member (e.g. a child at University) or where up to 40% of a property is occupied by the owner with the remainder let.
Fairly simple, right?
Not at all, at least not in the lenders eyes! If a family member is to be the tenant of the property to be mortgaged, red alarm bells ring and lenders do not want to come within any proximity of the property or the situation.
There are various reasons but fundamentally, relatives are arguably more likely to agree a rental income under the market value. Situations affecting both the tenant and the landlord can leave both parties in a vulnerable position. For example: If the tenant were no longer able to pay the rent, the landlord would be less likely to evict them, when emotional obstacles block the way, which could ultimately result in missed mortgage payments and the next thing you know the bailiffs will be knocking at the door.
These scenarios pose an immense problem to the lender as their underwriting assessment is determined by and large by the expected rental figure provided by the valuer and there is no way of factoring in such charitable adjustments.
This has reluctantly led to few mortgage lenders being active in the Family/Regulated Buy To Let mortgage sector and the further bureaucracy has seen a number of the already few lenders exit the market this year! Most notably, BM Solutions a very large buy-to-let player, and ironically part of the Lloyds Banking Group which is predominately government owned; this highlights the difficulties the new rule set presents to lenders that wish to trade in the family let market.
Of the few lenders remaining in the market many fail to mention in their criteria that no element of gifted deposits, especially from the tenants, are accepted. Essentially, your family member cannot gift you the money to purchase the property which they can then rent off you. They also do not depict a maximum age limit for the tenant, yet, they are disinclined to letting to an elderly relative, particularly if they are retired, where they are viewed as a dependent, due to the absence of employed income. The rarity and complexity of such mortgages, has deterred discussion and uptake in the now delicate area and it seems that it is an increasing possibility that in the next few years Regulated Buy-To-Lets will become as extinct as the dinosaurs.
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