CeMAP MRT1 Regulated Mortgage Contracts, Borrower Types & MCOB Roles question: mortgage to buy a third flat to let

CeMAP MRT1Regulated Mortgage Contracts, Borrower Types & MCOB Roles

Gwen owns her home and two flats she lets to unrelated tenants. She now wants a mortgage to buy a third flat to let. Which describes the new loan?

A A consumer buy-to-let mortgage contract, because Gwen is borrowing as an individual rather than as a company
B Neither a regulated mortgage contract nor consumer buy-to-let, because she is letting as a business
C A regulated mortgage contract, because Gwen lives in one of the properties she owns and so she counts as an owner-occupier borrower
D A regulated mortgage contract, because with fewer than four mortgaged lets she is not yet a portfolio landlord

Show the answer and explanation

Answer: B. Neither a regulated mortgage contract nor consumer buy-to-let, because she is letting as a business

The flat will be let to unrelated tenants, so the dwelling-use condition in RAO 2001 art 61(3)(a)(iii) fails and it is not a regulated mortgage contract. It is not consumer buy-to-let either: under the Mortgage Credit Directive Order 2015 art 4, a borrower is treated as acting for business purposes if she owns other let property or is buying the property with the intention of letting it, and Gwen does both. Her own home is a different property, and the portfolio landlord label is a lender underwriting term, not a test of regulation.

Common mistake

Assuming any individual landlord's loan is consumer buy-to-let.

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