Buy to let mortgages are designed for individuals purchasing property to rent out rather than live in. These mortgages typically require a larger deposit and have higher interest rates compared to residential mortgages. Rental income is used to cover mortgage payments, and lenders assess the property’s potential rental yield to ensure it can meet repayments.
Standard Buy-to-Let (BTL) Properties
A standard Buy-to-Let (BTL) property is intended for long-term rental to a single family. It can accommodate multiple families unless it qualifies as an HMO (Houses in Multiple Occupation). Lenders may have varying definitions of an HMO (House in Multiple Occupation), and there are also distinct definitions and regulations for HMOs set by government bodies and local authorities.
Regulation of BTL Mortgages
BTL mortgages are typically unregulated, falling outside the scope of FCA regulations. However, a regulated version known as a Consumer BTL exists. It may be referred to as an “Accidental Landlord” mortgage and requires careful identification as some lenders may not consider it.
Let to Buy Mortgages
Let to Buy mortgages allow homeowners to purchase a new property while renting out their current one. The mortgage on the current property becomes a Let to Buy loan, which falls under the Consumer BTL mortgage category.
Backdoor Resi Purchases
“Backdoor Resi” refers to borrowers purchasing a property as a BTL investment but ultimately residing in it themselves. Lenders are cautious about such cases and scrutinise purchases near the borrower’s current residence or workplace.
Transparency and Honesty
It is crucial to maintain transparency and honesty with lenders about the intended use of the property. Dishonest practices, such as Backdoor Resi purchases, are strongly discouraged, as lenders have rules in place to protect borrowers’ interests.
- The purpose of the rules in place is to safeguard the interests of borrowers