Are you considering taking out a buy-to-let mortgage? If so, you may be wondering if it is a regulated mortgage contract. The answer is yes, purchase-to-rent mortgages are regulated by the Financial Conduct Authority (FCA) in the same way as residential mortgages. These mortgages are designed for individual, part-time homeowners, rather than professional landlords. In this article, we'll explain how buy-to-let mortgages work for consumers and what makes them regulated. A regulated buy-to-let mortgage is used when renting a property to an immediate family member.
The reason the term “regulated” is used is because conventional purchase-to-rent mortgages are not regulated. A loan can be a regulated mortgage contract if the borrower does not occupy the property on which the loan is secured and, instead, intends to sell it to a third party, and the mortgage will remain on the house until then. In simple terms, a regulated mortgage agreement is a loan secured by a charge on a residential property where you, a family member, or other close person live and the purpose of the loan is not, wholly or predominantly, the purpose of a business activity that you carry out or intend to carry out. Some types of purchase-to-rent mortgages are not regulated by the FCA. It's important to think carefully before securing other debts against your home. Because the mortgage is secured against your home, it can be foreclosed if you don't meet your mortgage payments.
The capital released from your home will also be guaranteed against it. The Council of Mortgage Lenders (CML) expects most BTL mortgages to fall into the third category and therefore remain unregulated, since most BTL mortgages are where the borrower (the landlord) intends to rent the property to a tenant for commercial purposes, making the mortgage primarily intended for commercial purposes. It should be noted that, when a contract meets the necessary requirements for both a regulated mortgage contract and a home purchase plan, it will be treated only as a home purchase plan and will not be a regulated mortgage contract. To decide which of them you will apply for, you will need to evaluate which lender currently offers the most advantageous rates and consider that your circumstances are ideal for a purchase-to-rent mortgage for a consumer. There are some lenders, such as Vida Home Loans, Natwest and CHL Mortgages, that do not offer purchase-to-rent mortgages to consumers, which means that the group of lenders will be smaller. A broker specializing in this type of mortgage could save you research time and the risk of having the application rejected. In fact, you're not even allowed to get a buy-to-let mortgage if you're buying a new property or are a professional landlord. If you are buying, rather than fully owning the property, the only option available to you would be a buy-to-let mortgage.
What the RAO calls a “purchase-to-rent exempt mortgage agreement” for consumers is excluded. When taking out any type of loan or mortgage agreement it's important to understand all of your rights and responsibilities as well as any potential risks involved. Make sure you read all documents carefully before signing anything and seek independent financial advice if necessary. Pete's presence in the industry as the reference for finance specialists continues to grow, and he is quoted and writes regularly for local and national newspapers, as well as for trade publications, with a regular column in Mortgage Introducer and being LoveMoney's exclusive mortgage expert.
