From April 2016
“Accidental landlord” is a term for someone who is renting their property however, they didn’t purchase the property for that purpose. It could be due to an inheritance or an inability to sell for whatever reason. Also known as a consumer buy-to-let, which has a specific buy-to-let mortgage to suit. These types of mortgages are currently not regulated by the Financial Conduct Authority (FCA).
Changes are set for April 2016 though that could affect landlords.
What are the new Mortgage Credit Directive (MCD) rules?
New European Union regulations that will be enforced after April 2016, will stipulate that “accidental” landlords will be assessed for affordability, in a similar way that a borrower is assessed for a residential mortgage. It will be part of the MCD, which is a wider scheme, looking to regulate loans secured by a property.
Both income and expenditure of the borrower will be analysed in depth to ensure affordability in the event of a rise in future costs.
Why is the change in legislation necessary?
The Council of Mortgage Lenders (CML) reported 1,630,600 buy-to-let mortgage products existed in December 2014. Accidental landlords were responsible for one fifth of these.
The government feel that despite the decision to rent a property being circumstantial, these borrowers need to be assessed like any other borrower, using a standard framework.
Next steps
If you think this new legislation could affect you, it would help you to speak with a financial adviser who can assist you with understanding the implications this could have on your mortgage.
Dental & Medical Financial Services can help with your buy-to-let mortgage and discuss the topic of changing legislation with you in more detail.
Tel: 01403 780 770