It is useful to have some basic background information regarding how buy-to-let mortgages are calculated and how buy-to-lets are regulated.
When you purchase a standard buy to let property owned either in your personal name or via a Limited Company (SPV),the level of borrowing is based on the actual or projected rental income, not your personal income. This is why you can purchase multiple buy-to-let properties.
The second area that affects clients purchasing/owning buy-to-let mortgages is if they are regulated by the Financial Conduct Authority (5% of btl lending) or unregulated (95% of btl lending).
If you purchased a buy-to-let property for your spouse or civil partner, children, parents, brothers or sisters to live in and pay you rent, this should have been arranged on a regulated basis. This offers protection by the Financial Conduct Authority. The mortgage would have been subject to stricter underwriting, usually ignoring the rental income and lending based on your disposable income.
In these circumstances, the lender may grant you permission to move into the buy-to-let as the borrowing was based on your disposable income.
Unregulated Buy to Let
If you purchased the buy to let as a business opportunity, and the tenant is unrelated to you, the mortgage will be unregulated and the mortgage advance is based on the rental income. This is the mortgage offered by most buy-to-let lenders.
In the mortgage offer there will be a standard condition to cover this requirement. This paragraph is from a Kent Reliance mortgage offer:
“This is a Buy-to-Let mortgage. The property must not be occupied by the borrower or any family member. Failure to adhere to this condition will put you in breach of your mortgage terms and may result in the rate and/or terms of your mortgage being reviewed or enforcement action being taken by the Bank. Enforcement action could involve formal demand of repayment of the loan or commencement of possession proceedings.”
In these circumstances the lender will not give you permission to move back into the buy-to- let. The only alternative is to remortgage the property onto a residential basis.
If the property is owned via a Ld Co/ SPV, this will be more complex as the property will have to be sold to you (not remortgaged) as the buy to let is owned by the company (a different legal entity) not you personally.
Solicitors and Accountants
The change of use may result in possible tax implications. We recommend you speak to a solicitor and accountant before proceeding. If you do not have your own solicitor or account or feel that they do not have the specialist knowledge we can recommend one for you.
If you find yourself in this position or maybe considering this route, we can discuss your options and give possible solutions.
Why Use Neil Soundy Financial Services For Your Mortgage Advice?
- We are experts in complex lending
- We are experts in SPV/Ltd Co lending
- Your initial consultation is free with no obligation
What Our Clients Say
What you see is what you get with Neil Soundy FS! Very professional, very experienced and always on time. Securing mortgages on 2 properties simultaneously using SPV was unbelievable and amazing. We would always recommend Jake, a man that knows his onions, very brilliant at his job!
How Much Will It Cost Me For Your Advice?
A fee of £495 is payable on completion of the mortgage and Neil Soundy Financial Services Ltd will keep the commission received from the lender for arranging the mortgage.
Neil Soundy Financial Services Ltd is an appointed representative of HL Partnership Ltd which is authorised and regulated by the Financial Services Authority.
The Financial Conduct Authority does not regulate some forms of buy-to-lets.
We do not give or imply legal or taxation advice. We recommend you contact a solicitor or accountant for advice in these areas.
Think carefully before securing other debts against your home/property. Your home/property may be repossessed if you do not keep up repayments on your mortgage.