Non-Owner/Occupier Rental Property – Case Study

Key facts:

• Client owned his own property that he lived in
• He wanted to rent it out and move in with his partner in her property
• His current mortgage lender would not let him switch his mortgage to a buy-to-let mortgage
• Most lenders would not allow him to remortgage with them as he would not own a residential property.
• Other lenders would not allow him to remortgage as there was no proof of rental income being received yet.

Our client:

The client was referred to us by one of our existing clients that we had previously helped. He approached Oportfolio to give him some guidance as he didn’t know where to start with a new mortgage and didn’t even know if what he wanted to do was possible.

He had owned his own mortgaged residential property for several years on his own and had recently decided that he wanted to move in with his partner and start a life in a home together. His partner owned her own property, and it was a much more suitable place for them to both move into, so our client decided that he would like to keep his house and rent it out.

He had already approached his current mortgage lender to see what his options were with transferring his residential mortgage to a buy-to-let mortgage however they said that they were not willing to do this, so he was stuck with where to go next.

How did we help?

Our client contacted us to see if we could give him some guidance and our senior mortgage advisor Jade was there to help. Jade had an initial telephone appointment with the client to get a clear understanding of what he was looking to do, what he hoped to achieve and, what setbacks he had experienced so far.

After getting to know the client and his situation, Jade set to work speaking to several lenders and business development managers at banks and building societies to understand their different takes on the situation.

Unfortunately, there were two main issues that most of the mortgage lenders had with the whole situation. Firstly, once he moved out of the property and into his partners, he would no longer be a homeowner or owner/occupier as he would not technically own his own residential property anymore. Most mortgage lenders stipulate that to have a buy-to-let property, you must not be a first-time buyer and must own your own residential property.

The second reason that a lot of the lenders had issues with the scenario was that because he did not currently rent the property out, he would not have any proof of rental income received or potentially received. A lot of buy-to-let lenders will base the amount of mortgage they are willing to lend on the rental income received. Without having ever rented out the property and having only used it for residential purposes, he did not have this proof.

After carrying out in-depth research, Jade managed to find a high street bank who was not concerned with the client being an owner/occupier and not concerned with him not currently receiving any rent. The lender was a well-known high-street bank with competitive rates and products, so the client was very happy with Jade’s research and recommendations, and we managed to arrange a buy-to-let remortgage for him on his current home which he now rents out. He and his partner now live together in her property and are building a life for themselves.

What was the rate?

The loan was secured as an interest-only mortgage on a fixed rate for 2 years at 2.18%. After the fixed period, they would revert to the bank’s 5.24% standard variable rate at which time we will contact the clients to discuss remortgaging on to another new competitive fixed rate.

The overall cost for comparison is 5.0% APRC. The arrangement fee was £1,795 which was added to the balance of the loan, and early repayment charges were applied. The mortgage term was 25 years.

If you or someone you know is thinking of letting their current property out or looking for a buy-to-let mortgage in general, feel free to give our friendly and knowledgeable advisors a call today to see how we can help you.