Just in case you were wondering, the phrase "buy to rent" is a British term that refers to a property acquired with the intention of renting it out. The purpose of the Mortgage Credit Directive (MCD) is to create a unified mortgage credit market across the European Union, with a high level of consumer protection. Therefore, a Consumer Buy-to-Let (CBTL) mortgage agreement is a purchase-to-rent mortgage agreement that the borrower does not enter into for commercial purposes. CBTL mortgages are regulated by the Financial Conduct Authority (FCA) in the same way as residential mortgages.
The MCD also proposes certain protective measures for credit agreements in foreign currency due to the potential risks they pose to consumers. However, companies are not required to apply the MCD requirements to customers who have stated that they are taking out a Buy-to-Let (BTL) mortgage and understand that they are waiving the protections offered by legislation to consumers. Consumer purchase-to-rent mortgages are regulated as residential mortgages, aimed at "accidental landlords" and non-professional landlords. While residential mortgages focus on the applicant's income, purchase-to-rent mortgages depend on how much the property earns from rent.
The MCD gave member states the option of exempting BTL loans from their requirements; the UK government used this option and established a new framework for CBTL mortgages, which does not fall within the full framework of the RAO. The MCD Order contains a set of rules of conduct that apply to companies that provide brokerage or lending services for CBTL mortgages. Consumer purchase-to-rent mortgages were part of this new change and provided consumer protection to individual homeowners. Whether you're an experienced buy-to-let investor or just starting out, navigating the ever-changing world of mortgages can be tricky.
