A buy-to-let property is acquired with the intention of renting it to tenants. Generally, the property owner is not permitted to reside in a buy-to-let property. However, there may be circumstances under which living in such a property is allowed.
You are allowed to live in such a property which does not have a buy-to-let mortgage, but it’s important to note that serious consequences may arise if you choose to reside in a property for which a mortgage has been secured.
Violating the terms of the mortgage agreement can lead to legal and financial repercussions.
The Legal Implications of Living in a Buy-to-Let Property
Buy-to-let mortgages are designed for property investors who intend to buy a residential property to rent it out rather than live in it themselves. When securing this mortgage, the amount you can borrow is closely linked to the expected rental income from the property.
The rental yield is crucial, and lenders typically want to ensure that the rental income can cover the mortgage repayments.
Moving into your property would mean that you will not be able to generate rental income from that property, and it will be a matter of concern for mortgage lenders, so they explicitly state that the property must be let to tenants.
Residing in a property funded with a buy-to-let mortgage is not inherently illegal; however, many mortgage agreements explicitly state that the property must be let to tenants.
Violating these terms may lead to significant consequences, as it would be committing occupancy fraud, a form of mortgage fraud under the Fraud Act 2006.
Consequences of Occupying a Buy-to-Let Property
As a breach of mortgage rules could also be a breach of the Fraud Act 2006, the consequences could be harsh. Violating these rules may be considered a criminal offence and could result in imprisonment for up to 10 years.
Additionally, you may be listed as a rogue landlord, comprising individuals with a criminal activity history. A criminal record from such an offence can make obtaining a mortgage in the future extremely challenging.
Beyond legal troubles, mortgage lenders can demand immediate full repayment of the loan, placing a substantial financial burden on the individual. Failure to comply with this demand might lead to foreclosure, resulting in the loss of the property.
Is There Any Way Around It?
If you are determined to live in your buy-to-let property, switching from your BTL mortgage to a residential one is recommended.
While you can remortgage with your existing lender, not every lender will facilitate this transition. It’s important to note that changing from a BTL to a residential mortgage may involve differences in eligibility criteria.
Read About: Essential Tips for Every Buy-to-Let Landlord
In the mortgage, affordability is typically assessed based on the property’s ability to generate rental income.
Conversely, your income will be checked under a residential mortgage to determine your ability to afford mortgage payments.
With numerous potential lenders available, seeking the guidance of an experienced broker is advisable. They can navigate the various options based on your situation, ensuring you explore the full range of possibilities.
Conclusion
The consequences of breaching mortgage rules extend legally and financially, emphasising the importance of compliance with mortgage agreements.
If you want to reside in a property acquired initially with a buy-to-let mortgage, a viable option is to explore switching to a residential mortgage. This transition allows for compliance with the terms and conditions of a mortgage.
