Can I Live In My Buy-To-Let Property?

Due to one unfortunate circumstance or another, there may be a time when you’re forced to think about moving into your rental property.

Unfortunate circumstances befall us all, and this is a realistic possibility to consider. It may seem reasonable to assume that, as the borrower paying the rent, it would be fine for you to live in your buy-to-let property.

In reality, the answer isn’t that straightforward. Certain laws and regulations prevent landlords from living in a property financed as a to-let mortgage.

And should you ignore them, there may be legal ramifications that can further complicate the matter.

Let’s go over these details and discuss buy-to-let mortgages and living in one as the borrower of the property.

Can I Live In My Buy-To-Let Property?

No, you typically can’t live in your buy-to-let property in the UK. Buy-to-let mortgages are specifically arranged on the understanding that the property is for rental purposes and not for the owner to reside in. If you live in the property, it could be considered a breach of the mortgage agreement.

How Buy-To-Let Mortgages Work?

Buy-to-let mortgages are similar to ordinary mortgages with a few key differences.

The most notable of them is that the property is seen as an investment for the owner, with higher fees, interest rates and minimum deposit.

Most buy-to-let properties are interest-only, eliminating the capital amount from the equation entirely. And once the mortgage term ends, the owner is required to repay the loan in full. 

The governing body that regulates advising, lending, arranging and administering buy-to-let mortgages is the Financial Conduct Authority (FCA) under the same ruleset as residential rentals.

The Legal Aspect Of Living In A Buy-To-Let Property

Per FCA guidelines, buy-to-let properties are meant to be used for the sole purpose of letting tenants.

There are a couple of simple reasons for this, with the first being that buy-to-let mortgages are classified as the private rented sector. 

And secondly, since the loan principles and interest rates are calculated in fundamentally different ways, the terms for buy-to-let and residential mortgages are completely different.

Lenders of buy-to-let properties generally factor in the target rental income when calculating the principal amount. 

Additionally, the interest rates tend to be notably higher for such properties than for owner-occupied ones.

This is because financial institutions typically consider buy-to-let properties to carry more risk when compared to owner occupancies. 

Living in a property that is intended for the sole purpose of renting is a clear violation of the guidelines provided by the FCA.

And if found to be living in your buy-to-let property, you will face legal ramifications for the guideline violation.

These consequences are unpleasant to deal with, the least of which is to pay back the loan in full to avoid property repossession.

The Consequences Of Living In A Buy-To-Let Property

If caught living in your buy-to-let property, your occupancy will be under investigation by the authorities.

Should they find that your occupancy of the buy-to-let property has a monetary motivation, you may be found breaching the Fraud Act of 2006.

According to the Fraud Act, if you are found clearly guilty of violating these guidelines, you may be imprisoned for up to 12 months. While this is bad enough already, the consequences don’t stop there.

You could stand to lose all of your monetary possessions and property. Moreover, the authorities will have your name on a permanent criminal record, minimising your chances of working with a bank in the future.

A permanent criminal record is a blemish upon your name that can actively harm your future endeavours. 

On top of that, your name will likely be entered onto the rogue landlord and property agents database.

The gist of this database is to identify landlords that are known to be troubling for the tenants or the authorities in general. Their troubling activities include illegal or outright criminal activities. 

And while tenants currently do not have access to the list, should they ever gain it, your chances of finding one would be reduced drastically.

Being barred from working with banks or government entities was bad enough as is, but this has the potential of eliminating any letting opportunities for you.

Suffice it to say; none would like to be placed in such a database.

The Possibilities Of Moving Into A Buy-To-Let Property

With that being said, there are a few niche possibilities for moving into a buy-to-let home.

One such instance is if the lenders find your reasons for moving into the home understandable. In such cases, you have the option of changing your rental agreement from a buy-to-let mortgage to a residential one.

Per FCA rules, owners can freely change standard buy-to-let rental agreements to residential or regulated buy-to-let ones.

The former is generally better if your stay extends beyond a reasonable period of time, while the latter is better suited for temporary stays. Consider residential mortgage properties to be a more permanent solution in such cases.

Of course, this process requires plenty of legal documentation and may lighten your wallet a bit. Not to mention the time consumed by the application process.

And if you move in without informing the lender, you may face additional fines. Needless to say, moving into a buy-to-let property can be more trouble than it’s worth.

It’s worth mentioning that landlords can move into the properties that they are the owners of, without the property being a buy-to-let mortgage.

While this will still result in a violation of the tenancy agreement if tenants occupy the property, the consequences are far less severe. 

Moreover, if your standard residential rental property has no tenants, you can freely move in without fear.

Summing Up

The regulations surrounding buy-to-let mortgages are quite strict, and for good reasons too.

It’s in the best interest of both the lender and the borrower that no instances of fraud occur when such properties are in discussion.

If you have a buy-to-let mortgage and desperately need to move in, you will be required to go through the legal process.

Simultaneously, you will be required to inform the lender about your circumstances beforehand to prevent any legal action as well.

But as a general rule, it’s better to leave the buy-to-let mortgage to tenants.

**A buy to let mortgage will be secured against your property.

Some types of buy to let mortgages are not regulated by the Financial Conduct Authority.

All content is written by qualified mortgage advisors to provide current, reliable and accurate mortgage information. The information on this website is not specific for each individual reader and therefore does not constitute financial advice.