Tenants, Beware of Buy-to-Let landlords when renting

The Council of Mortgage Lenders (CML) has released figures this month that show a sharp rise in homes being repossessed. The figures show that 40,000 people lost their homes last year which is up from 26,200 in 2007. These figures also included buy-to-let repossessions from landlords with buy-to-let mortgages and landlords who are renting out their homes on a residential mortgage. There are currently around three million homes that are rented in the UK

Time could be ticking on your Landlord

Time could be ticking on your Landlord!

Be aware of Buy-to-Let landlords

Tenants need to be aware of unscrupulous landlords that rent out their homes without notifying their mortgage lenders. Many property owners have not changed their residential mortgage to buy-to-let mortgage which would allow them to rent their homes or properties. The consequences of this situation becomes apparent when one day the bailiffs turn up to evict the tenants’ as the landlord has not paid their mortgage and the house is being repossessed. In these circumstances tenants do not have any rights and now have to find new living accommodation immediately. These tenants are left looking like the villain and not the victims in this situation.

It is not often that a tenant would find out if their landlord was facing any financial problems. The landlord would normally have all their post sent to their homes so it would be impossible for the tenants’ to know if there was a problem. Tenants need to start asking their landlord how they have financed their properties as it makes a big difference when selecting a landlord. This question is important if the tenant does not want to be thrown out of their rented home mid-term because the landlord has a residential mortgage and not a buy-to-let mortgage.

Carry out your own ‘due diligence’

If the property owner has a buy-to-let mortgage then the tenants’ would not be evicted if the property was repossessed by the mortgage lender. The ownership of the property and the tenants would move to the mortgage lender and the tenants would be informed that they need to start paying the mortgage company their rent.  It is better to be safe then sorry and due diligence is required by anyone looking to rent from a buy-to-let landlord. Remember he or she will be carrying out checks on your credibility and your ability to pay the rent. This money saving tip could save youmoney, time and embarasment.

Mortgage lending for buy-to-let owners had fallen 56% by the end of 2008 and property owners with properties to rent have found it impossible to remortgage their buy-to-let property. Mortgage lenders have shown in the last year that they do not have the appetite to lend money. With property prices falling and mortgage lenders being reluctant to offer remortgages under 75% loan-to-values; many landlords have struggled when their properties have become vacant and they have been unable to find tenants immediately. In these circumstances they find themselves supplementing their mortgage commitment which places a huge burden on their finances. Others have simply found themselves redundant due to the recession.

Unlike any previous recession this one has hit everybody from plumbers, builders, car assemblers through to investment bankers.  Previous recessions tended to concentrate on the manual works and some middle management being made redundant

Light at the end of the tunnel

Not everything is doom and gloom there is a shimmer of sunshine peeking through. Your Move reported demand for rented accommodation was up by 56% over the last year and whilst the mortgage market was in dire straits, the drop in mortgage lending had boosted the rental market.  The Association of Residential Lettings Agents said that rental yields were consistently above four percent which was better than anything currently being offered by the Banks and Building Societies.

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One Response to Tenants, Beware of Buy-to-Let landlords when renting

  1. sonia June 3, 2009 at 2:58 pm #

    Many people who bought at peak prices from builders are definately suffering and the repossession rate is high. But although this means that the eviction rate is high, i’m not sure that a tenant will carry out a due dilligence to check a landlords mortgage. How would you do that?

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