If you are looking to let a property out to your family member using a mortgage, you will need a regulated mortgage to buy it. Family members can rent to other family members, which can offer many advantages. However, there are risks associated with renting, especially to a mortgage lender.
Many lenders avoid renting properties to relatives. This is due mainly to the inherent risks. It is not always easy to get a mortgage in these conditions, but it is possible.
Before making any commitments, make sure you seek out the right advice if a buy to let mortgage is required. You could lose your request for a mortgage if you apply to the wrong mortgagee.
What is a regulated purchase to let mortgage?
A regulated buy to let mortgages is used for property rent payment to domestic members. Because conventional mortgages for buy to lease aren’t regulated, this is why the term regulated is used.
Buy to let mortgages are more tightly regulated than regular buys to let. FCA regulates all buy-to let mortgages. In this way, the application process is more difficult than conventional buy-to-let mortgages.
There are some examples for regulated buy and allow:
A landlord rents property to a sibling
Parents rent a home to their child
A landlord rents out a property for parents
Grandparents renting from their grandsons/daughters
Important note: Regulated buy to let is only for immediate family. It doesn’t apply to relatives, aunties, cousins or uncles. If you are renting to a distant relative or sibling, or any member of the family other than your parents, grandparents, siblings, children, or grandchildren, a conventional mortgage to buy to let should suffice.
How much deposit am I required to secure a regulated purchase to let?
Lenders typically require a minimum a 25% deposit. Lenders won’t lend above 75% ltv. Lenders will have less flexibility as a result of this regulation.
Higher deposits can often get the best mortgage deals. Lenders can lower their mortgage rates by having higher deposits because they have greater protection on their loans. You should be eligible for headline rates, if you have a 40% down payment and require a 60% mortgage.
How much can I borrow if I have a regulated buyer to rent?
Mortgages that are registered buy to let don’t have the highest rates tend to be those with regulated mortgages. This can also negatively impact your ability to borrow.
Lenders who offer mortgages may not be able or willing to lend you money in this market. You may not be able to get the best deal, though these terms might sometimes be too rigid. We’ve secured great deals on buy to let that have been regulated in the past for different situations.
Regulated buy to let mortgages are assessed in an entirely different way to traditional buy to let loans. Conventional buy and let is often based on the rental income rather than the applicant. Regulated buying to let is mostly based on income and affordability. Lenders want assurance that the borrower will be able to repay their mortgage.