Paul Huxter - Head of Intermediary Sales and Distribution

Many homeowners moving from their main residence into another property are potential Consumer Buy-to-Let (CBTL) clients. And it’s an opportunity a lot of brokers have been missing.

Usually, clients go for the only option they know: Sell their main residence and buy another. However, it’s important for brokers to highlight that other options are available, particularly the possibility of becoming an “accidental landlord” through a CBTL mortgage.

Beyond wanting to keep the property, there are several compelling reasons why a sale may not be the most appropriate option:

Higher costs associated with selling: Solicitor’s fees and estate agents’ commission typically cost more than CBTL product fees.

Bad timing: Selling can take a long time in a slow-moving market, while chain breaks and misjudged home appreciations can cause further delays.

CBTL allows capital raising: Selling isn’t always required for raising capital to afford a new mortgage. With enough equity, remortgaging onto a CBTL can help raise the capital necessary for a deposit and stamp duty on the new home.

The CBTL route presents a unique set of advantages for clients and brokers:

Upfront cost savings: While there are advice and product-fees associated with a CBTL, these are typically much lower than the cost of selling.

Capital appreciation: Over time, the value gained from capital appreciation tends to overshadow costs associated with mortgage lending. For clients looking to build long-term wealth, a CBTL can be a solid option if they are able to manage the costs over the longer period.

2+ products: A CBTL on the existing property and the onward residential mortgage for the new home means two opportunities to introduce business to the lender(s) involved. You may also have an opportunity to serve your client with related products like landlord insurance or income protection.

Relationship building: By introducing the CBTL option to your clients, you strengthen your relationship with them and open the door to future business such as portfolio expansion (standard BTL).

Growing market: CBTLs are becoming a common occurrence among expats who leave their UK residence to move abroad and want to retain the property for when they return.

However, there are some important things to consider:

CBTLs are FCA-regulated products: Brokers must have regulatory permissions to advise on these deals, creating a range of opportunities for such brokers when a client seeks advice.

Costs related to each option: Keeping both properties will likely incur higher costs in the long run due to interest payments on the mortgages. When selling, most of the costs are front-loaded, while mortgages spread costs over a longer period.

Assessing client appetites: Not every client will be comfortable with the responsibilities of becoming an accidental landlord. However, managed services may make it more attractive if the associated costs are affordable.

CBTL isn’t always possible: Without significant equity already accrued in the property, clients are unlikely to afford the 25% deposit typically required on CBTLs plus the deposit required for a new home. Projected rental income must also cover 125-145% of the mortgage payments, which may not be realistic depending on property type and location.

Ultimately, the decision to become an accidental landlord via CBTL is a personal one based on the client’s individual circumstances and risk tolerance. By presenting it as an option, brokers can empower clients to make an informed choice. Regulatory protections for CBTLs and tailored advice become especially valuable here, as all eligible clients (those who never originally set out to be landlords) will be navigating unfamiliar territory.

With the right circumstances, CBTL can be a win-win, offering long-term financial benefit to clients, while offering brokers a way to add value and deepen client relationships. West One’s regulatory status means all our buy-to-let products offer a CBTL option. To find out more about West One’s CBTL solutions, please call us on 0333 123 4556 or visit www.westoneloans.co.uk today.