Many potential landlords find renting to family members or relatives they trust attractive. However, it can be more difficult from a mortgage perspective. A standard mortgage won’t work. This is where a specialist or regulated mortgage can be used.
This article will explain what a family buy-to-let (BTL) mortgage looks like, how you can get one, and the additional eligibility requirements that come with this type.
Why would you need a regulated BTL loan?
You will need a specialist mortgage to rent your property to a relative or family member. This is called a family or registered mortgage.
Lenders have stricter requirements when renting to families. This is because you are more likely to charge your family less than the average rate or be more accommodating if they have financial difficulties and can’t pay the rent on schedule. Lenders view this as a less risky option. Therefore, they have established regulated buy to let mortgages to meet their affordability criteria.
This type of mortgage is not available to you if your property is rented to immediate family members, such as parents, siblings, children, or grandparents. You can rent out your property to other family members, such as cousins and friends.
Who oversees family buy-to-let mortgages
The Financial Conduct Authority (FCA) regulates them. However, they are not as regulated as residential mortgages. A standard BTL mortgage may be available if the rent is less than 40%.
A larger deposit is likely to be required. Most lenders will lend on capital- and repayment basis rather than just interest.
Your family BTLs play a greater role in affordability assessments than the total rental income.
These types of mortgages are offered by which lenders?
Family buy-to-let mortgages are a special mortgage product that is not offered by most high-street BTL mortgage lenders. This means that they are more difficult to find. This can lead to higher interest rates than a standard BTL mortgage if you are not careful.
It’s about understanding the market and finding the right lender for you. You can trust a mortgage broker that specializes in buy-to-let to help you find the best rate and provide peace of mind.
How to get a mortgage for a family buy-to–let
These are the steps you need to follow to ensure your application is as successful as possible.
Step 1: Assess your credit score, affordability, and other factors
Although the process of applying for a family BTL mortgage will be similar to a buy-to-let standard mortgage, you will need to inform your lender about your plans and prepare to submit a strict affordability assessment. It is now more important than ever that you have a good credit rating and gather all evidence of income and assets.
Although the process is similar to applying for a buy-to-let mortgage standard, you need to tell the mortgage lender your plans for the property. You will need to inform the mortgage lender if you intend to let it to your family members.
Step 2: Get your paperwork ready
The standard documents, such as proofs of income or proof of address, will be required. If you are already the owner of the property, you will need to provide papers to prove ownership.
Step 3: Talk to a family mortgage broker for buy-to-let
Family BTL mortgages, which are highly specialized products, are not offered by all lenders. If you don’t take precautions you could be charged higher interest rates. A specialist broker will be able to help you find the best mortgage offer for you.