As most buy-to-let landlords know, mortgages on buy-to-let properties are treated as commercial transactions. This means that the projected rental income from the property can be taken into account when applying for a buy-to-let mortgage.
The draft proposed EU Directive covering Credit Agreements on Residential Properties will cause huge changes if given the go ahead by Parliament. The directive will mean that buy-to-let mortgages will be regulated.
The biggest change will be that mortgages on buy-to-let properties will be assessed based on the borrowers earnings or income in the same way as a mortgage on the borrower’s home. Any projected income from rental of the property will not be taken into account.
While current buy to let landlords with portfolios of properties should not face any major problems with the changes, clearly the planned changes will impact on potential buy-to-let landlords and investors in the buy-to-let market alike.
It remains to be seen what the full extent of the proposed changes will be, but the changes risk halting growth of the buy-to-let sector.
By associate solicitor and landlord specialist, Louise Hebborn