When does an unregulated mortgage become a regulated mortgage contract?

by Readers Question

9:00 AM, 10th March 2016
About 3 years ago

When does an unregulated mortgage become a regulated mortgage contract?

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When does an unregulated mortgage become a regulated mortgage contract?

If a property is bought (as a family home) with a buy to let mortgage, and has always been more than 40% occupied as a dwelling by the borrower and their relatives. Does the mortgage contract then become regulated? I have checked the FCA handbook and PERG section 4.1 seems to confirm the above (the 40% threshold). But I would like to know if this gives the protection of a regulated mortgage and safeguards a property from being forcibly sold at auction by a mortgage lender?FCA

Any advice would be much appreciated.

Freya



Comments

Neil Patterson

9:25 AM, 10th March 2016
About 3 years ago

Hi Freya,

The decision on whether a mortgage application is a regulated transaction is taken out at the time of the application based upon your intentions for the property at that time.

If it is the intention for a close relative is to live at the property any time after purchase or yourself then it is a regulated transaction. It is also a regulated transaction where the property was not purchased for the intention of Buy to Let.

The property should not have been purchased as a family home with a BTL mortgage unless you stated that was not your intention.

The 40% threshold is misleading. If you or a close relative live in any percentage of the property a lender will consider it a regulated transaction.

Howard Reuben CeMap CeRER

12:21 PM, 10th March 2016
About 3 years ago

Hello Freya

Life in the mortgage world is not (and no longer) 'simple', especially when the permutations of BTL, Family BTL, Consumer BTL, Corporate BTL and all other sectors are imposed upon us.

From 21st March 2016 there is a whole new raft of regulations for the world of mortgage finance being implemented. This is governed by the EU's Mortgage Credit Directive (MCD) and BTL is caught up in it.

The good news though is that YOU don't have to worry about any of this.

The current, and everchanging, rules surrounding advice, products and services is for your Adviser to keep up to date with and to professionally provide a service to ensure that you (and your Adviser) sleep well at night by doing the right thing at all times.

In short, if you have a mortgage requirement, we will Fact Find the current situation and then advise and recommend the proper route forward.

The regulated BTL mortgage market is far smaller than the non regulated 'typical' BTL market, but that does not mean it's impossible to secure a regulated BTL mortgage, just that the choice is more limited.

Hope that helps and if you do have any specific enquiries, my Firms contact details are available via my member profile.

Howard Reuben recently posted...H D Consultants | Mortgage & Protection Broker | Buy To Let | Colchester Essex

Nick Pope

11:25 AM, 12th March 2016
About 3 years ago

Neil' s comment above "The property should not have been purchased as a family home with a BTL mortgage unless you stated that was not your intention" doesn't mention the potential consequences is someone obtains a Buy to Let mortgage with the intention for themselves or a close relative to occupy.

This is in fact mortgage fraud and a criminal offence. If you succeed and the lender finds out they will have the right to require re-payment of the full outstanding amount immediately. You could then try to re-mortgage but lenders share information and any other lender will have concerns and at least check the application with a fine toothcomb.
Also be aware that valuers acting for the lender will report back if they have any suspicion that there is potential fraud.
So just think first before trying as it might ruin your credit record.


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