Lenders Favour Professionals when it comes to Buy-to-Let

As more and more people turn to renting out their homes when they cannot sell, mortgage brokers warn they could find themselves paying higher than necessary interest rates if they don’t organise their change in circumstances correctly.

David Hollingworth, a director at mortgage brokers London & Country, says home owners should inform their loan company about their mortgage and their insurance provider about their property insurance if they don’t want to find themselves with higher bills.

He explained: “You must tell your mortgage lender before renting out your home. Otherwise you are breaching the terms of your contract. Banks have different policies, but it’s likely you will have to move on to a slightly more expensive rate. Before the credit crunch, banks were more relaxed about so-called ‘consent to let’. But these days borrowers can be refused outright, or charged a higher rate. Some lenders will not let homeowners rent out their property. The same applies to insurance; a conventional home insurance policy has to be changed to a landlord insurance policy.”

It appears that loan providers differentiate between the “professional” landlord who has many years of experience in the business and a portfolio of properties; and the “accidental” landlord who is renting out their home because they have little option. There is a definite difference in the rates available, probably because lenders see the accidental landlord has a less secure proposition. Unfortunately the accidental landlord will just have to grin and bear it a little longer if experts in the housing sector are correct. Most insiders forecast little change in the market for the rest of 2012 with the majority anticipating a drop in prices of around 2%.