Landlords who use owner occupied mortgages committing fraud

Landlords that are tempted to take out an owner-occupier mortage as a way of securing more benificial terms to purchase a buy-to-let property are committing fraud according to the industry organisation The Council of Mortgage Lenders.

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Landlords tenants disadvantaged.
It could also put the landlord's tenants at a disadvantage should the landlord stop paying the mortgage.

This is because specialist buy-to-let mortgage products have a mechanism in place to accept tenants' rent in place of mortgage payments which negates the need for court action and the possibility of repossession.

An owner-occupier mortgage on a rented property can lead to problems for the tenant if the landlord fails to keep up repayments and also increases the risk for the lender, with the CML describing such behaviour as "irresponsible".

"Everyone sympathises with those tenants who are paying their rent, and fulfilling their obligations, but who find that their landlord has not been paying their mortgage and not told their lender that they are renting out the property," said director general Michael Coogan.

"Good tenants should not be disadvantaged, and nor should lenders, by the irresponsible behaviour of a small minority of landlords. We look forward to working with the government and advice agencies on effective measures to help the modest number of tenants affected."

CIFAS warning
The other risk to landlords of trying to obtain a owner occupation mortgage is an impairment of their credit rating should they be found out. This is activated by a lender who identifies a borrower trying to access funds fraudently potentially including the borrowers details on the CIFAS register. This warning will remain on a landlords credit file and be shared between other CIFAS members. Lenders can take this warning into account when looking to advance funds to the landlord in future.

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