Which mortgage: Consumer buy-to-let or buy-to-let for accidental landlords

Which mortgage: Consumer buy-to-let or buy-to-let for accidental landlords

In today’s housing market it’s not uncommon for homeowners to find themselves accidental landlords through necessity, not choice because they are struggling to sell, or have inherited a property.

Renting these properties to tenants while holding a residential mortgage on them is likely to breach mortgage terms, resulting in penalties from lenders or even the full loan amount being called in. While navigating the buy-to-let market can be daunting with no previous experience, and securing a mortgage can be an intimidating process, there are some good options available.

Support for accidental landlords

Sainsbury’s Bank has launched a new mortgage product aimed specifically at accidental landlords who find they need to switch their residential mortgage to a buy-to-let. Rather than having to undergo the steep learning curve to understand the often difficult and complex buy-to-let mortgage sector, the Sainsbury’s ‘consumer buy-to-let mortgage range’ is aimed specifically at making things simple for homeowners who find themselves accidentally becoming landlords.

To qualify, borrowers must show that the property was not bought with an intention to let and not own any other buy-to-let properties. Borrowers will still need to meet the same rental income requirements as any other buy-to let property, show that they can meet the mortgage repayments if interest rates rise above 5% and demonstrate that they can fund their current lifestyle without relying on rental income (unlike buy-to-let investors).

Unlike most buy-to-let lenders who are less amenable if you have started letting a property without the correct mortgage in place, accidental landlords can make the application to Sainsbury’s Bank before renting or after finding a tenant.

David Buxton, head of banking at Sainsbury’s Bank, said: “We are delighted to introduce our…consumer buy-to-let products as we’re keen to begin to help smaller investors and non-portfolio landlords manage their mortgage outgoings.”

Consider exploring buy-to-let products for the best deal

However, Sainsbury’s Bank is not the only option for accidental landlords who are willing to make a case for themselves and their borrowing requirements. Existing lenders with a buy-to-let range should be investigated to see what deals are available and then used as a benchmark to evaluate other mortgage products against.

Whilst the buy-to-let market can seem challenging, it is often no more difficult to navigate than residential mortgages once you have all your personal and financial information in order. The best deal is always the one whose true cost over the mortgage term is the least, regardless of its product name or lender.

Regulatory differences might be a deciding factor

Although a typical buy-to-let mortgage might offer the best financial deal, some borrowers might prefer the security of a consumer buy-to-let mortgage. Buy-to-let mortgages are business mortgages and do not offer the same levels of protection as consumer buy-to-let mortgages. These are regulated in the same way as residential mortgages, since the mortgage was needed as a result of a business decision. For those that prefer the higher level of consumer protection, a consumer buy-to-let mortgage might be the preferred option.

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