Landlords looking to finance a buy to let property may find it difficult if they are planning to let it out to tenants on benefits. This may come as an unpleasant surprise to many would be landlords and it certainly adds to the problems prospective tenants face if they are on a low income or unemployed. Many lenders in the buy to let market refuse to lend money on mortgages to landlords who take benefit claimants as tenants.
Anyone looking to buy landlord insurance and thinking about entering this area of the market will need to check very carefully with his or her intended lenders in case they operate a ban on lending on properties where there is a tenant on benefits. The problem may be getting worse because many people have had to accept part time work or low paid work and need state benefits to cope with their expenses. There could be a vicious circle at work if this means that the range of potential rental property is restricted because of difficulties the landlords face in obtaining finance for homes occupied by benefits claimants.
As well as being open and honest with your mortgage lender you need top ensure that your household insurer is aware of the type of tenants you are seeking to attract. Some insurers operate a ban on some types of tenants and others will impose higher premiums depending on the tenants’ occupations.
The coalition government has announced some changes to the benefit system and next year the new Universal Credit is introduced. Landlords need to be aware of the existing and proposed rules about the type of properties for which tenants will receive help from the state with their rent payments and the processes involved. There is plenty of information on the internet if you take the time to search and it makes a lot of sense to do plenty of research if you are thinking of entering this sector of the let property market.