In This Article
What are regulated buy to let mortgages?
When lenders talk of regulated buy to let mortgages, they are usually referring to buy to let properties for family members.
A strict rule of standard buy to let mortgages is that a family member is not allowed to live in the property.
The mortgage needs to be regulated for this to be permitted by the lender.
Many buy to let lenders do not offer this type of mortgage, so placing a family member in the property can be a serious breach of the terms.
When a lender offers a regulated buy to let mortgage to let to a family member, they underwrite the application differently.
Lenders that offer these mortgages usually need to say that you would be able to afford the mortgage yourself from your own personal income.
This means that they do not usually underwrite the loan amount based on the contracted rent on a tenancy agreement.
The reason is, that if a tenant is close a family member, you may be less likely to evict them from their home if the rent was not paid successfully.
Your mortgage adviser would be able to advise which lenders may be available to you on the basis that you wish to let your property to a family member.
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Do lenders offer regulated buy to let mortgages?
Not all lenders offer regulated buy to let mortgages. The majority of buy to let lenders only offer mortgages to people that plan to let the property to tenants that are not related to them. The exception to this is consumer buy to let mortgages.
However, many standard buy to let mortgage lenders offer consumer buy to let mortgages, although it is still a strict condition that the property is rented out to people outside of the family.
Your mortgage adviser with know which lenders are available to you based on your situation.
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Will my income always need to be taken into account for regulated buy to let mortgages?
If you are taking a buy to let mortgage that is regulated, as you plan to let the property to family members, most lenders would underwrite the mortgage on an affordability basis.
This would mean looking at your full income and expenditure to make sure that you could afford the payments for the mortgage, in addition to your own mortgage payments and commitments.
This is to make sure that you are in a position to pay the mortgage even if the property is not generating a rent from your family member.
There may still be lenders that are willing to underwrite a family tenancy on the rent the property will generate.
Your mortgage adviser will need to confirm to you what your options are if you plan to let to a family member.
If the mortgage is a consumer buy to let, let to a standard tenant, some lenders have no minimum income requirement.
Are consumer buy to let mortgages regulated and what does this mean?
Consumer buy to let mortgages are also regulated but they differ from buy to let mortgages that are designed to be let to family members.
Consumer buy to let mortgages are mortgage products that are for ‘accidental landlords’.
For example, with a let to buy mortgage, some landlords never had any intention to turn their property into an investment property.
Instead, it may have been a way of keeping the property to generate a pension in the future or as a result of finding it difficult to sell it at the wrong time.
Lenders referred to transactions like these as consumer buy to lets. These are for borrowers that only have one buy to let property and it was never an investment or business purchase.
The financial conduct authority believes that these people deserve the same protection as a standard mortgage borrower as the transaction was not centred around the commercial gain.
With a consumer buy to let, it is still forbidden to allow your family to live in the property with most of the lender’s products.
Your mortgage adviser would need to confirm if there are any consumer buy to let mortgage products available to you that allow your family to reside in a property.
What do I need to earn to get a consumer buy to let mortgage?
Different lenders have different rules on what a person needs to earn to qualify for a consumer buy to let mortgage.
Some lenders have a minimum income threshold, for example, a common one being £25000.
In this scenario, an applicant would need to have an earned income of this amount before they would qualify for the buy to let mortgage.
This is not the case for all consumer buy to let lenders, some even have no minimum income criteria to qualify for a mortgage.
The lender would need to know full details of your income and outgoings to ensure that they are comfortable with the application.
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Do I need a special type of mortgage advisor for a regulated buy to let mortgage?
You do not necessarily need a special type of mortgage adviser to arrange a regulated buy to let mortgage.
It is, however, recommended to find a mortgage adviser with a background in buy to let mortgages with knowledge of the regulated market.
You can ask your mortgage adviser whether they have experience in arranging transactions that are similar to your own.
They should be able to give you a free consultation to tell you what your options are.
Conclusion
It is certainly possible to get regulated buy to let mortgages that allow your family to live in the property.
With these types of mortgage products, lenders may require more affordability checks to qualify for the product.
In addition to regulated buy to let mortgages allowing family use, there are also consumer buy to let products available for the accidental landlord.
If you would like to know what lenders may be available to you on the basis that you might wish to allow your family to live in the property, you should look for a qualified mortgage adviser who can tell you your options.
If you would like I NEED ADVICE to match you with an experienced mortgage adviser who can give you a free mortgage consultation, please complete the contact form.
They are experienced, which can boost your chances of being approved.
