Financing a buy to let has just become a lot hard for many would-be expat landlords.
A new mortgage credit directive was introduced across Europe on March 16, 2016 to protect the rights of homeowners taking out a mortgage.
But the directive also created a new class of consumer landlords in the UK.
Consumer landlords are ‘accidental’ property investors who have to move and rent out a home they cannot sell behind them or inherit a property that they decide to let in the short term.
These landlords will find buy to let mortgages harder to find because they have to beat tougher affordability tests than commercial landlords.
What is a consumer landlord?
A consumer landlord is someone who rents out a home while waiting to sell rather than as a property business aimed at making a rental profit or capital gain.
They own no other investment property and the borrowing is a remortgage rather than a buy to let purchase.
What mortgage directive rules affect them?
Lenders must treat them more like home owners than professional landlords. This means they have similar consumer rights to owner occupiers.
For instance, they can complain the Financial Ombudsman if they feel their lender is unfairly treating them.
What does this mean for consumer buy to let loans?
Besides consumer rights, the important issue is affordability of the loan. Professional landlords have their loans assessed on how much rent a buy to let home generates, but consumer landlords have to show they can support the borrowing from their income.
Who is considered a professional landlord?
A professional or commercial landlord is an investor with several properties already rented out on tenancy agreements
How does the mortgage directive affect commercial landlords?
It doesn’t really, buy to let borrowing stays much the same for them. Borrowing is still a commercial transaction and they are running a business looking for profits, so they do not have the same consumer rights as owner occupiers or accidental landlords.
How do borrowers apply for a consumer buy to let loan?
All lenders demand borrowers make clear on their application forms whether they are consumer or commercial borrowers. Some lenders, such as The Mortgage Trust, are even offering specialist consumer landlord loans.
