It has emerged that one of the property investor’s best mortgage resources is going to have restrictions placed on their Buy To Let mortgage products.
The Mortgage Works, who were once the lender of choice for hundreds of UK property investors, have changed their mortgage acceptance and lending criteria to such an extent that they will no longer accept buy to let properties that will be inhabited by any tenants claiming any form of state benefit, local housing allowance (LHA) housing benefit or even the upcoming Universal Credit.
As the major buy to let mortgage lender used by portfolio landlords, this news is a real blow for anyone with DSS tenants or even working tenants claiming Housing Benefit.
Property valuation surveyors are likely to pass comment if they believe the property will only attract DSS / LHA tenants even if the landlord’s intention is set for working tenants and do not intend to accept benefit tenants in the first instance.
Property investors are being warned to be wary of what and where properties are purchased as there is a possibility that they may lose out and be unable to recover any mortgage arrangement fees.
It’ is already difficult enough to get Buy To Let mortgages for ex Local Authority properties, if it becomes the same for residential property, with restrictive covenants affecting the type of tenants that will be allowed to live in the rental property, it could become a major disaster that is just waiting to happen, and worse still if other lenders decide to follow suit.
Many Mortgage brokers are not surprised that this lender is seeking to avoid LHA and benefit tenants, assuming Universal Credit is implemented as planned there are likely to be some degree of rent arrears and that means that some Landlords could face the extra expense of tenant eviction and will be unable to service their mortgages so the lenders are looking to avoid taking on properties that could end up as bad debts on their ledgers.
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