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Consumer Client vs
Regulated Client

Consumer Buy to Let Client

Following changes in March 2016 as a direct result of the Mortgage Credit Directive, Buy to Let clients fell into one of two categories.

You were either a non-regulated client i.e. a BTL borrower who was purchasing a property with the sole intent to let it out, was already a professional landlord, or, owned multiple properties that were the subject of a rental portfolio.

Or, you were a regulated Consumer Buy to Let client who did not buy a property (or are not buying a new property) with the intent to let it out, letting out property is not your main job, or, you or a relative have previously lived in the property. Because this is deemed to be a regulated transaction in the eyes of the regulator, this offers heightened protection to this type of client and any affordability should be addressed just as a conventional Residential mortgage client. This is because the perception is that they may not have the experience or had the exposure to this type of lending before and so need educating.

This legislation was superseded by PRA Changes in October 2017 (PRA Changes) but the term Consumer BTL has remained whereas the Professional Landlord became a Portfolio Landlord with stricter guidelines being applied to all landlords.

Regulated Buy to Let Client

This is where it all gets very confusing. A consumer BTL client falls under the definition of a regulated client although this term sometimes often refers to a different type of client within the industry.

The first is where you intend to live in the property yourself at any point in the future becoming an owner occupier. The key is when you are arranging the mortgage, is it your intention, or a likely possibility, that you will at some point move in yourself. This question should be posed by your adviser to determine if you could possibly qualify as a regulated client or not.

If this is a possibility then the mortgage will become regulated and must be treated the same way as a residential loan. Many people have moved into their buy to let properties years later through unforeseen changes in circumstances, but as this was not their intention from the outset they are not breaking any rules as long as the lender is informed and consents for them to do so.

The second exception, is when you intend for a close relative to occupy the property. A close relative is defined by the vertical family tree going upwards to parents and grandparents or downwards to children or grandchildren and also by one horizontal such as brothers and sisters.

Again this question should always be posed and answered honestly. Otherwise it may lead to a breach of mortgage contract and has grave consequences.

Make an informed decision

To ensure that you make the informed choice that you are entitled to, talk to a CDMB adviser today.

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