Regulated Family Buy-To-Let Mortgages
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Being able to trust that your property is in good hands while helping someone you care about is why renting to family members is quite common. But there can be implications when it comes to financing. For this type of home loan you’d need a regulated buy-to-let mortgage.
So, how does a regulated mortgage differ from a standard buy-to-let? The guide below provides this information for you and offers all the guidance you’ll need to get your application approved.
Can you rent to a family member under a buy-to-let mortgage?
Yes, but the family member would have to occupy less than 40% of the property if you want to use a standard buy-to-let mortgage; perhaps they just rent a room while other tenants live in the rest of the property, for example.
If they’ll occupy more than 40% – which would be the more typical scenario – you’d need to apply for a regulated mortgage, also known in these circumstances as a family buy-to-let mortgage.
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What is a regulated buy-to-let mortgage?
This is a specialist mortgage that allows a borrower to rent out the entirety of their property, or above 40%, to a relative. You, as the borrower, could also live in the property alongside other tenants.
The loan is regulated by the Financial Conduct Authority (FCA), just like a residential mortgage, but the number of lenders offering this type of loan is lower and the requirements tend to be stricter.
That’s because lenders are aware of the possibility that families may not charge one another as much in rent and could be more inclined to let missed payments slide. This could potentially lead to trouble with the mortgage repayments, which is why lenders tend to view them as a risker loan.
The differences between a regulated and unregulated buy-to-let mortgage
In short, when you apply for an unregulated buy-to-let mortgage you’re not planning to live in the property yourself or to rent it out to family whereas a regulated buy-to-let mortgage would allow for that to happen. The below table lists the other key differences.
|Unregulated buy-to-let||Regulated buy-to-let|
|Not regulated by the FCA||Regulated by the FCA|
|Approximate 25% deposit requirement||Will likely require a bigger deposit|
|Loan amount based more on perceived rental income||Loan amount based more on personal income|
|A relative cannot occupy more than 40% of the property||A relative can rent the whole property|
|The borrower cannot live in the property||A borrower can live in the property as long as there is also a paying tenant|
Potential scenarios for a family buy-to-let mortgage
It might make sense to get a buy-to-let mortgage for family if:
- You’re a parent who wants to buy a property for their child to rent out.
- You want to have your parents or grandparents move into a property you’re purchasing.
- You want to live in the house yourself alongside a tenant.
- Your sibling will rent out your property with a partner or friend.
Eligible family members
In order to apply for this type of mortgage, you have to already have the family member in mind and they should have agreed to this arrangement.
They also have to be a close family member, such as a:
Cousins, second cousins, aunts and uncles won’t meet the criteria for this loan type.
Buy-to-Let Mortgage Calculator
Our buy-to-let mortgage calculator can show you how much your mortgage could cost you each month and overall. Simply enter the rental property value, deposit, anticipated monthly rent, interest rate, mortgage term and our calculator will do the rest.
Capital and repayment:
Loan to Value ratio (LTV):
Most lenders won't offer buy-to-let mortgages over a LTV of 80%.
Interest Cover Ratio (ICR):
Most lenders require rental income to be at least 125%-145% of the interest repayments for a buy-to-let mortgage.
Get started with a specialist buy-to-let broker to find out how much they could help you save on your monthly mortgage repayments.
How a buy-to-let broker can help
Working out whether getting a buy-to-let mortgage with family tenants in mind is right for you and then applying for one comes with a whole host of complexities. An expert can help you navigate all of that.
The family buy-to-let mortgage brokers we work with:
- Understand the nuances of regulated and unregulated buy-to-let mortgages and can ensure you’re applying for the right one to suit your circumstances.
- Are familiar and have relationships with lenders that offer family buy-to-let mortgages, which means they know which lenders are more likely to approve your application.
- Can help in compiling a regulated buy-to-let mortgage application while also addressing any potential factors that a lender could perceive as risky.
If you get in touch we’ll arrange for a buy-to-let broker with experience of regulated mortgages to contact you straight away.
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As with all other regulated mortgages, a lender will be conducting a standard affordability assessment, rather than looking at the anticipated rental income the property will receive, which would be the key factor for traditional buy-to-let mortgages.
In addition, for this specific type of buy-to-let, certain lenders could have some other requirements. For example:
- Be an individual applicant rather than a joint applicant.
- Maximum loan-to-value (LTV) of 75%
- Applicants must be older than 25 but younger than 75
- Earnings (other than from rent) above £25,000 per annum to ensure you can afford the mortgage, during periods where the property is vacant
How much you can borrow
The amount you can borrow via a regulated buy-to-let mortgage will depend on your personal financial circumstances – your gross annual income, your outgoings, and potentially your age should you be an older borrower – and whether you meet the lender’s criteria. Differing to a standard buy-to-let, the main factor for consideration is your income rather than the projected rent the property will bring in.
As a guide, you can multiply your income by 4.5 or 5 to get an estimate. Take a look at our mortgage affordability calculator below to see how this may work out for you, based on your own annual income.
Mortgage Affordability Calculator
Our affordability calculator can tell you how much you can potentially borrow from a mortgage lender. Simply enter your total household income below and our calculator will do the rest.
You could borrow up to
Most lenders would consider letting you borrow
This is based on 4.5 times your household income, the standard calculation used by the majority of mortgage providers. To borrow more than this, you will need to use a mortgage broker to access specialist lenders.
Some lenders would consider letting you borrow
This is based on 5 times your household income, a salary multiple you might struggle to qualify for without the help of a broker. This income multiple is not widely available to customers who are applying directly with a lender.
A minority of lenders would consider letting you borrow
This is based on 6 times your household income, a salary multiple you will struggle to get without a broker. Six-times salary mortgages are usually only available under very specific circumstances.
Get Started with an expert broker to find out exactly how much you could borrow.
For a more concrete figure, consult a broker. They’ll be able to factor in all the elements of your specific situation to share what loan amount is more likely.
Our broker got in touch really quickly
Our broker got in touch really quickly. They understood the situation and what we needed to get both mortgages over the line, and kept me up to date with the options available. They quickly set up a deal with another lender for the buy to let and that went through easily, meaning we didn’t lose any time or sleep in the process!
Family buy-to-let mortgage providers
As a slightly more niche product, the pool of lenders offering family buy-to-let mortgages is a little smaller. Many of the high street banks – Metro Bank, NatWest, Bank of Ireland, HSBC, Santander and TSB – for example, don’t offer regulated buy-to-let mortgages.
Some of the lenders that have been known to consider such applications include:
- Virgin Money
- Saffron for Intermediaries
- Bluestone Mortgages
- Vernon Building Society
Often lenders won’t engage with an individual directly but prefer to work via an intermediary. This is where a broker can help. Having such a specialist in your corner will also help in sifting through the market to find the best rates and terms currently being offered by lenders.
Which lenders have you already tried?
Select the tiles below to find out how we can help you:
Typical rates for these mortgages
The table below provides an illustration of the interest rates available at the moment.
Looking for more rates and deals?
We can match you with a mortgage broker who can provide you with up-to-date bespoke rates and deals from across the entire market.
Last updated October 2023
The rates quoted above were correct at the time of writing and are subject to change at any time at the lender’s discretion. Speaking to a mortgage broker is the best way to keep track of the rates available at any given time.
Help with my second mortgage
Our broker got in touch really quickly. They understood the situation and what we needed to get both mortgages over the line, and kept me up to date with the options. They quickly set up a deal with another lender for the BTL and that went through easily we didn't lose any time in the process!
Ben was Fantastic!!!!
Ben Atkinson was outstanding, we cant thank him enough! He was fantastic and did an amazing job getting us our first time mortgage! He dealt with us perfectly every step of the way, just a pleasure to deal with! Highly recommend 100%
First Time Buyer but definitely going back for my BTL
Graham Turner and Lizzie Teale were fantastic! 2 hour response times, informative market knowledge and professional attitudes! First time buyer but definitely going back to them for my Buy to let!
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What happens if you’re caught living in an unregulated buy-to-let?
If you or a family member opt to live in your property with an unregulated buy-to-let mortgage and take up more than 40% of the property, it wouldn’t be illegal but you’d be opening yourself up to potential problems.
For example, if it states in your lender agreement that only tenants can reside in the home then your mortgage provider would be within their rights to request the mortgage be repaid right away. If you didn’t have the assets to pay the mortgage off in full, you’d have to consider selling the property.
Switching from unregulated to regulated
If your circumstances do change and you or a family member want to live in the property rather than a tenant, talk to your lender to see whether they’d allow you to remortgage onto a regulated version.
It would also be worth talking to a family buy-to-let mortgage specialist who’d be able to share whether the rates and terms your current lender can offer are the best you’d find. If there is a better deal out there, you could remortgage with a different lender.
Speak to a broker experienced in family buy-to-let mortgages
With a mortgage so niche, expert advice is a must. The brokers in our database have specific family buy-to-let mortgage knowledge, which means they wouldn’t be advising you on how to get a generic mortgage but ensuring your application is built specifically with a family buy-to-let loan in mind and identify lenders who offer such mortgages.
Reach out today for your first and free consultation with a broker matched to your situation. Just call 0808 189 2301 or fill out our short enquiry form.
Get started with a buy to let mortgage expert
Maximise your chance of approval with a specialist in family buy to lets
Having bad credit doesn’t mean an automatic no to an application but it will depend on the type of issue, the size of debt involved and the date it was registered. Putting down a larger deposit can offset the particular bad credit issue but this is something you should talk to a broker about.
It depends. Will they have more than 40% occupancy? If so, you’ll need to apply for a regulated buy-to-let mortgage.
Regardless of who you’re renting to, it’s best to have an agreement in place so that there can be no disputes and everyone is protected. Don’t forget to also purchase landlord insurance and put the rental deposit into a protection scheme.
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We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in Buy to Let Mortgages
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Make an enquiry and we'll arrange for an experienced mortgage broker we work with to contact you straight away.