BTL mortgage – No DSS LHA or Student clause?

by Readers Question

5:24 AM, 16th May 2015
About 4 years ago

BTL mortgage – No DSS LHA or Student clause?

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BTL mortgage – No DSS LHA or Student clause?

I’m in the process of buying my first Buy to Let property and have just received the mortgage offer from the solicitors and it states that no Dss / Housing authority / Students are allowed as tenants.

In my original mortgage offer from the financial advisors which I only received 4 days ago, there is no mention of this even in the special conditions attached to the end of the offer.

Is this a normal BTL mortgage condition? Although I am new to the purchase of BTL property, I have worked with/for a lot of landlords and have gained a fairly good knowledge of the subject – or so I thought!

Any advice or thoughts from the members would be appreciated.

Thanks

Neil



Comments

Neil Patterson

5:28 AM, 16th May 2015
About 4 years ago

Hi Neil

Part of a BTL lender’s overall criteria includes whether they allow DSS, LHA or student tenancies. This will be published in their criteria handbooks on their websites and available in the main search engines such as TriGold and MortgageBrain. Not allowing any of these types or all of them is very common and you need to check which lenders do allow each specific type of tenancy.

You were either not asked this specific question when you were searching for the mortgage or it was assumed you would only let to working tenants or you did not inform the mortgage broker that you may let to this type of tenant when you did the original fact find.

You will need to go back to the broker and search for another offer unfortunately or email me and I will get someone we know and trust to do this for you npatterson@property118.com

I hope that helps get you back on track 🙂

Hazel de Kloe

21:04 PM, 16th May 2015
About 4 years ago

Hi Neil

I agree with Neil P's comments-always important to mention to your broker if you intend to let to these tenant types as these are common conditions. However, you have not stated whether this is in fact a major problem. As you are just getting into buy-to-let yourself, you are bound to find out these nuances along the way!

Does it kill the mortgage offer with these terms, or could you still let to working tenants? If not, look into other options, but I hope you can still move forward.

In any case, good luck with your first property.

Neil J

18:46 PM, 17th May 2015
About 4 years ago

Hi Hazel / Neil,
Thanks for the comments, I didn't realise it was as common as it must be. It's not a major problem, the property is in an ok area so should let to working tenants without too much problem. I would of hoped that the broker, who has yet to reply to an email would have spotted this as a possible problem in the area that the house is in. But live and learn and go forward without too many drama's.

Rob Crawford

7:52 AM, 18th May 2015
About 4 years ago

Your broker should have asked you what type of tenants you will be letting the property to and ensured the mortgage providers criteria met you requirements before applying. I would suggest you follow Neil's advice and get an alternative via a competent 118 recognised broker.

Highland Lass McG

11:08 AM, 18th May 2015
About 4 years ago

What if you have employed tenants and they become eligible for Housing Benefit. Are you obliged to give them notice to leave?

If you are unaware that they are claiming benefits, will that also affect the landlord building insurance?

Jerry Jones

11:12 AM, 18th May 2015
About 4 years ago

I've often wondered, when using this kind of mortgage, what they expect you to do if the tenant loses their job within the first 6 months and becomes a claimant. You can't use a S21, I believe.

Rob Crawford

11:44 AM, 18th May 2015
About 4 years ago

Reply to the comment left by "Highland Lass " at "18/05/2015 - 11:08":

Hi HLass, of course your pre tenancy check will reveal what their income is and where it comes from. So you will know if they are DSS or not. With regard to insurance policies yes, some insurers either won't c over or will increase their premium for DSS or students. If an employed tenant becomes unemployed and reliant on DSS benefits then they should inform you. As this is considered a significant change that is contrary to the original T&C's of a lender or insurer you are liable to inform your lender and insurer. They will then provide you with guidance on what should be done. This is where rent protection insurance is useful, assuming you or the tenant has taken it out in advance.

Jireh Homes

16:30 PM, 18th May 2015
About 4 years ago

Hi Neil - suspect this arose because your broker did not ask the question as quite reasonable not to know letting to DSS or Students may be an issue. Students are not as far as I am aware an issue with Lenders as typically they will have a Guarantor, but can affect insurance premiums. On my few mortgages, only became aware of this restriction once received formal mortgage offer, and then got caught with a potential tenant who although in work was gaining some Housing Benefit support. Allan

Neil Patterson

16:52 PM, 18th May 2015
About 4 years ago

Reply to the comment left by "Jireh Homes" at "18/05/2015 - 16:30":

Unfortunately student tenancies are a common restriction to watch out for with lenders.

Gary Nock

10:09 AM, 23rd May 2015
About 4 years ago

Unfortunately this is very common, and lenders seek to mitigate their risk by limiting letting to low risk tenants.

A word of warning on immediately telling your mortgage company that your tenant has become unemployed. One of my colleagues did this- wanting to be up front about it. As soon as they notified then along comes in the post a "Breach of Mortgage Conditions Letter" advising that unless the breach was satisfied then they would call the mortgage in within three months. When she rang and asked how the breach was to be remedied (somehow anticipating the answer) she was told" Evict the tenant or tell them to get a job"

Most Helpful.

In some cases if you have Rent Insurance Guarantee with a reputable provider they will ask for proof of this and waive the breach. But some of the more hawk like providers who want to shift BTL Mortgages off their books will take any opportunity to get you to pay it off or to transfer to another provider.

And HB tenants wonder why 90% of LLs are pulling out of the HB sector!!

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