When it comes to investing in property, buy-to-let mortgages are an increasingly popular option. But are they regulated? As a commercial transaction, purchase-to-rent mortgages are not regulated by the Financial Conduct Authority (FCA). However, as of March 21, some types of purchase-to-rent mortgages are now regulated by the FCA. It's important to think carefully before securing other debts against your home, as the mortgage is secured against your property and can be foreclosed if you don't meet your mortgage payments.
The capital released from your home will also be insured against it. If you need a regulated buy-to-rent mortgage, you can talk to one of our experts. Regulated buying to rent is considered a niche type of mortgage, so there isn't a wide variety of lenders and offers to choose from. However, our consultants specialize in this area and have access to exclusive offers. Simply put, the vast majority of purchase-to-rent mortgages are not regulated by the FCA because they are considered a commercial transaction and, therefore, do not comply with the FCA's consumer protection standards, which aim to protect the general public. Therefore, the quotes we send you will often indicate that the “product” is not regulated. Purchase-to-rent mortgages that are regulated include those in which more than 40% of the property is used or will be used by the borrower or a member of the borrower's immediate family as a residence.
These are called “purchase-to-rent mortgages by the consumer” and are evaluated as if they were normal residential mortgages. In an already tight market, lenders who are willing to offer you a mortgage can only do so on their own terms. I thought about starting small by remortgaging my purchase-to-rent contract to generate money to buy another rental property, but I found it difficult to find good advice. If you would like to submit an application to a specialized lender, you can also facilitate that connection, since many custom lenders, such as Paragon Bank and Fleet Mortgages, do not negotiate directly with the applicant. In practice, a consumer's purchase-to-rent transaction will be treated similarly to a residential mortgage transaction, so it will require a little more paperwork. They're classified as commercial loans and not residential mortgages, so you'll generally have to come up with a business plan to get a buy-to-rent commercial mortgage. Consumer purchase-to-rent mortgages were part of this new change and offered consumer protection to individual homeowners.
If you are buying, rather than fully owning the property, the only option available to you would be a buy-to-rent mortgage. They are classified as residential mortgages, so you will need another (main) source of income, and the credit criteria you must meet to obtain it are more stringent, since if you do not meet the payment requirements you could result in the loss of your home. While residential mortgages focus on the applicant's earnings, purchase-to-rent mortgages depend on how much the property earns with the rent. If you have a regulated buy-to-rent mortgage and your family member is moving, then you should be able to switch to a standard buy-to-rent mortgage. Consumer purchase-to-rent mortgages are regulated by the FCA in the same way as residential mortgages. Whether you're an expert at buying to rent or investing for the first time, navigating the changing world of mortgages can be difficult.
As with other purchase-to-rent mortgages, the interest rate on a consumer purchase-to-rent mortgage is likely to be higher than that of a conventional mortgage. If you choose to hire a new lender to remortgage, you'll need to follow the mortgage application process and make sure you meet their eligibility criteria, which for a residential mortgage include an affordability assessment.
