Do ‘Accidental Landlords’ Really Need to get a Buy to Let Loan?
One of the big challenges for many of Britain’s accidental landlords – as those who rent out former homes are known – is to obtain a buy-to-let mortgage to replace their traditional homeowner loan.
A quick look at the market will reveal dozens of mortgage providers happy to lend money but unfortunately for landlords, matters are not that simple.
Buy-to-let lending is much tighter than traditional home loans and it’s standard to be asked for a deposit of 25%, some 15% more than those borrowing to buy a home, plus interest rates on buy-to-let mortgages are between 1% and 1.5% higher. Also, there are often fees charged by many lenders when remortgaging.
Such additional financial pain has forced many accidental landlords to circumvent the system and let out their property without notifying their bank. This is now so common that late last year UK lenders joined forces to announce a ‘crackdown’ on errant landlords revealing that banks would use tactics such as searching the electoral register and scanning social media to track them down.
The penalties for not notifying a lender when renting out a property can be harsh and include the bank demanding full and final payment of a loan without notice – which unless a new loan could be arranged quickly might lead to the property being repossessed.
But lenders can be more lenient if you do notify them of a change and, for example, many will let a landlord convert their mortgage if the property is being rented out for less than a year rather than remortgage from scratch.