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Consumer buy-to-let mortgages
Consumer buy-to-let mortgages can be helpful if you find yourself in the position of becoming an accidental landlord, giving you a regulated solution for renting out a property.
Looking to explore your buy-to-let mortgage options? Our broker partner, Mojo Mortgages, might be able to help. Tell them a bit about you and they'll compare mortgage deals to find the most suitable option for you.
What is a consumer buy-to-let mortgage?
A consumer buy-to-let (CBTL) mortgage is a type of buy-to-let mortgage intended specifically for accidental landlords, offering broader opportunities than a regulated buy-to-let which must be used purely to rent property to close family. According to buy-to-let statistics, UK consumer buy-to-let mortgages could be worth over £46 biillion by 2032.
Unlike standard buy-to-let mortgages, consumer buy-to-let mortgages are regulated by the Financial Conduct Authority (FCA). This gives you the same financial protections as you would have with a regular residential mortgage. Anyone providing advice to someone considering a consumer buy-to-let mortgage must also be registered with the FCA as qualified to do so.
How does a consumer buy-to-let differ from a regulated buy-to-let?
A regulated buy-to-let has much more stringent rules in terms of who you can let out your home to. It is only suited to those homeowners intending to let their property to immediate family members. So, for example, even cousins would not typically be considered an acceptable tenant.
A consumer buy-to-let can be let out to anyone, so long as the property has not been purchased with the intention of making a profit and you own no other rental properties.
Get a consumer buy-to-let mortgage
If you're looking for a consumer buy-to-let mortgage, or another type of buy-to-let mortgage, our broker partner Mojo might be able to help.
Let their expert mortgage brokers compare deals to find the best one for you.
How does a consumer buy-to-let mortgage work?
A consumer buy-to-let works similarly to any other buy-to-let mortgage, but are regulated as if they were a residential mortgage. That said, there are additional criteria you'll need to meet in order to qualify for a consumer buy-to-let.
Although buy-to-let mortgages are typically taken as interest-only mortgages, the majority of lenders offer a capital repayment option for their consumer buy-to-let products. This is likely to be easier to qualify for than an interest-only mortgage in this scenario, unless you intend to sell the property at the end of the mortgage term, or have an alternative robust repayment plan.
Who might find a consumer buy-to-let mortgage helpful?
A consumer buy-to-let mortgage allows:
Any home that was originally bought and lived in by the buyer or a member of their family OR
Any home that's been inherited...
... to be let on the open market, so long as the rental is not intended to provide a main source of income and remains their only rental property.
A consumer buy-to-let mortgage is not intended for use by professional landlords to invest in residential property on a commercial basis.
A consumer BTL mortgage could, therefore, be a useful solution in several scenarios...
You won’t be living at home for a set period of time. If you need to move for work or travel for period of time longer than a typical ‘consent to let’ agreement allows, a consumer buy-to-let could allow you to rent your home out.
You've inherited a property. If you inherit a home you don't want to sell, a CBTL mortgage can allow you to rent it out. This can help you to cover mortgage repayments on any outstanding mortgage balance, or perhaps maintenance costs.
You're moving to a new property. Whether you're moving in with a partner or buying somewhere new, if you don't want to (or are unable to) sell your home, you can use a consumer buy-to-let to rent it out. This could help you cover any remaining balance on your previous mortgage, or make some extra cash - depending on your circumstances.
You're using a 'let to buy' arrangement. Let-to-buy is when you remortgage your current home onto a buy-to-let product to release equity for a deposit on a new home to live in. Some lenders only accept a consumer buy-to-let application as a part of a let-to-buy transaction.
Key differences between BTL and CBTL
Other than the FCA protection offered by a consumer buy-to-let mortgage, the main difference between a BTL and CBTL is intent.
Consumer buy-to-let mortgages are aimed purely at individuals who have become a landlord accidentally, but don’t want to (or can’t) sell the property in question.
| Consumer buy-to-let | Standard buy-to-let | |
|---|---|---|
| Type of borrower | Accidental landlords who are renting out their property due to a change in circumstance | Professional landlords who are buying property for business purposes |
| Regulation | Regulated by the FCA | Not regulated by the FCA |
| Property requirements | The borrower or a close family member/occupant must have lived in the property previously | Usually purchased with the specific intent to rent it out |
How much can you borrow with a consumer buy-to-let mortgage?
Most lenders will offer a maximum of 75% LTV (loan to value), which means that you'll be able to borrow up to 75% of the current cost of the property and the rest of the cost must be covered by your deposit (25%).
Usually your personal income is taken into consideration, so affordability is likely to be determined in the same way as it would for a residential mortgage - by using around four and a half times your annual income.
However, lenders may also include some or all of the potential rental income in their calculations, depending on individual lender criteria.
Are you eligible for a consumer buy-to-let mortgage?
It can be more difficult to qualify for a consumer buy-to-let than a standard buy-to-let mortgage, as lenders will be more cautious about affordability. They'll usually consider the rental income, but are likely to insist that you meet affordability through personal income too.
Standard mortgage criteria, such as creditworthiness, being within the application age limits and having a large enough deposit to meet the required LTV (Loan to value) ratio will also apply.
You'll also need to meet the following ownership criteria to use this type of product, including:
Proving that you didn't buy the property with the intention of letting it out
Demonstrating that property rental is not your main source of income and is not intended to replace an existing income
Proving that you or one of your relatives has previously lived in the property
Proving that you don’t own any other rental properties
Additional criteria may apply and will differ from one lender to the next, for example:
You may need to provide an income and expenditure plan
Some lenders only allow remortgage customers, given that you should be becoming a landlord accidentally
Some lenders only offer CBTL as part of a let-to-buy arrangement
Some lenders may insist that you meet a minimum rental income of between 125-145% of the mortgage repayments, even when using your personal income to determine affordability
How to apply for a CBTL if you become an accidental landlord
If you think you'll qualify for a CBTL mortgage, a good first move is to get an estimate on the potential rental yield (income you'll receive from letting it out) from your property. Most lenders prefer that you use an ARLA registered letting agent to carry out this assessment.
The next step is to reach out to the existing lender to see if they would allow you to switch mortgages onto a consumer buy-to-let product.
Not all lenders offer this option, so it may be that you'll need to remortgage with another lender to get a consumer buy-to-let mortgage.
A mortgage broker will be able to help you compare the consumer buy-to-let mortgage options available to you, and ensure you find the right lender and deal for your circumstances.
Consumer buy-to-let FAQ
Which lenders offer consumer buy-to-let mortgages?
They're quite specialist products, so it tends to be predominantly specialist lenders that offer them. However, there are a couple of bigger high street names that consider consumer buy-to-let applications, such as Barclays, TSB and Santander, although often these deals tend to be only available via brokers.
How much of a deposit do you need for a consumer buy-to-let mortgage?
As this is a type of buy-to-let mortgage, the deposit requirement will typically be a minimum of 25%, however, as you will typically be remortgaging when you take out this type of mortgage, this can often be taken from the equity in the property, rather than having to provide a cash deposit for this amount.
If your equity does not cover the deposit requirement, you may need to add to it with a cash deposit, however.
Can you remortgage with a consumer buy-to-let mortgage?
The vast majority of consumer buy-to-let mortgages will be remortgages, given that you are supposed to already own the property and have become an ‘accidental landlord’.
If you already have a consumer buy-to-let mortgage, however, you will be able to remortgage your buy-to-let home onto another deal, as you would with any other mortgage product.
The same rules will still apply, so if you’re in a fixed-term deal, you will likely have to pay early repayment charges (ERCs) if you remortgage before the end of the term.
Will I need landlord insurance on a consumer buy-to-let mortgage?
Buildings insurance on the property will be essential to your mortgage acceptance, however, landlords insurance is usually optional from the mortgage lender’s perspective.
This could be a sensible option for anyone planning to rent out their property, however, as it can cover your mortgage repayments when the property is vacant or your tenants are unable/unwilling to pay their rent.
Are consumer buy-to-let mortgages regulated?
Yes they are. A standard buy-to-let mortgage, on the other hand, is not regulated by the FCA as it's considered a commercial product.
YOUR HOME/PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
The FCA does not regulate mortgages on commercial or investment buy-to-let properties.
Uswitch makes introductions to Mojo Mortgages to provide mortgage solutions.
Uswitch and Mojo Mortgages are part of the same group of companies. Uswitch Limited is authorised and regulated by the Financial Conduct Authority (FCA) under firm reference number 312850. You can check this on the Financial Services Register by visiting the FCA website.
Uswitch Limited is registered in England and Wales (Company No 03612689) The Cooperage, 5 Copper Row, London SE1 2LH.
Mojo Mortgages is a trading style of Life's Great Limited which is registered in England and Wales (06246376). Mojo are authorised and regulated by the Financial Conduct Authority and are on the Financial Services Register (478215)
Mojo’s registered office is The Cooperage, 5 Copper Row, London, SE1 2LH. To contact Mojo by phone, please call 0333 123 0012.