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Getting a Family Buy to Let Mortgage

Read our Guide on Regulated Family Buy to let Mortgages and how to secure the best rate

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Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: June 20, 2022

If you wish to let out a property to a family member or want to live in a home that you also rented out to tenants, a regulated buy-to-let mortgage could be ideal. In this article, we look at what a regulated mortgage is, the rules involved and how you can get one. Plus, in our FAQ section, we tackle the questions we hear most often about consumer buy to let.

What is a regulated buy-to-let mortgage?

regulated buy-to-let mortgage (also known as a family mortgage) allows the borrower to purchase a home to live in now or in the future with other tenants or to be let out to family members. Common examples of how regulated mortgages could be used include:

  • Parents purchasing a two-bedroom house for their child to live in while the other room is let out to a tenant (such as university, work commitments, etc).
  • If you want to live in the house yourself but also let your spare room(s) out to tenants. This could be because you want the extra income because you work away from home a lot and don’t want the property unoccupied, or both.

Regulated BTL mortgages fall under Financial Conduct Authority (FCA) jurisdiction and therefore warrant the appropriate protection that comes with it.

In order for lenders to consider the buy-to-let mortgage as being regulated, the family member must be a close relative, including parents, grandparents, children, brother or sister. However, aunts, uncles, cousins or any other extended family members do not fall under the regulated criteria, so an unregulated BTL policy would apply.

What’s the difference between regulated and unregulated?

With an unregulated buy-to-let mortgage (also known as an investment property loan), the landlord has the intent of renting it out to private tenants and not family members.

Because unregulated buy-to-let mortgages aren’t designed for landlords looking to move into the property themselves, they are not regulated by the FCA.

Did you know… You only have access to one third of the Buy-To-Let mortgages available unless you use a specialist broker! Get Started with an OMA-Expert to unlock the entire market.

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Can I rent my property to a relative?

Yes, if less than 40% of the property is occupied by a family member, then a non-regulated buy-to-let mortgage may be possible. For example, if you rent out your property as an HMO (house of multiple occupation), your relative would only occupy one room and not the entire property on a separate tenancy agreement.

However, for anything over 40% of the total occupancy is made up by your relative(s), most lenders would require you to take out a regulated mortgage.

Can I (or relatives) ever live in my unregulated property?

If you take out an unregulated buy-to-let mortgage but intend on becoming the owner-occupier in the future, or if you decide to let out the property to a relative, you could come under scrutiny from both the FCA and your lender.

While it isn’t illegal for you to live in your unregulated BTL property, you could be breaking the terms of your lender’s agreement if the policy states that only tenants can occupy the property and not yourself. In these circumstances, the lender may ask you to repay the mortgage, usually with the sale of your property.

However, if your circumstances change and you would like to live in the property, you can remortgage your unregulated BTL and take out a regulated one instead.

You could stick with the same lender, though you could end up paying a lot more in fees and other charges, which is why we recommend that you speak with an expert advisor, like the ones we work with.

They have access to the entire financial market, so they can find you the best deals based on your requirements. Make an enquiry to get started.

What do I do if I or a family member moves out?

If you or your family member(s) plan to move out and you want non-relative tenants to move in, then again your lender would want to know about this, and if you come to refinance you’ll need to answer questions about the new or current tenants truthfully.

At this point, you would likely need to refinance onto a standard BTL mortgage.

Can I sell the property to my family?

If the current family member tenant wants to buy the property from you, then they would simply apply for a standard mortgage.

It’s possible for you to offer a discount on the purchase price if you wish (a concessionary purchase), and some lenders would consider using the discount toward their deposit, meaning that they can potentially borrow without putting as much (or indeed any with some lenders) of their own cash in to do so.

Can I rent my second home to my grown-up children?

If you have a second home and you own it outright, you are free to use the property as you wish. However, if you have a mortgage on your second home and wish to rent it out to your son or daughter, a standard buy-to-let mortgage will not allow you to rent your property to a family member.

This is due to the fact that many people owning property and renting it out to a relative won’t charge the full rental value to their family member. This makes a standard buy-to-let a bigger risk for both you, as a borrower, and your mortgage lender, especially if you started out with a small deposit.

Instead, you should take out a family, or regulated, buy-to-let. Lenders will usually assess your mortgage application in the same way as they would for a normal residential mortgage. Some lenders may require a larger deposit and, in some cases, you may have to take a repayment mortgage rather than an interest-only one.

Because you’re likely to be renting your property out for below market value, some lenders may need you to prove you have sufficient income to cover the mortgage without taking any rent into consideration.

To find out more, make an enquiry and we’ll connect you with one of the expert buy to let mortgage brokers we work with. They have the tools and experience to help find you the right mortgage for the best available price for you.

Who can get a family buy-to-let mortgage?

Many lenders apply certain restrictions for family buy-to-let loans. Some lenders (though not all) may wish an applicant to meet the following:

  • Individual applicants only
  • Over 25-years-old at the time of application
  • Applicant’s salary of over £25,000 p.a.
  • A maximum number of properties in your portfolio – for some lenders it will be 3, others could be 10, etc.

Some advisors won’t accept applications from first-time buyers, though there are others who will.

Deposit requirements

The total deposit you need to put down will depend on the lender’s criteria, and how much the property is worth. If you have a history of adverse, then a lender may require a higher deposit to offset the risk.

Standard BTL mortgages can typically be obtained up to a maximum loan-to-value (LTV) ratio of 85%, though there tend to be fewer options for family buy-to-let lending and, as a result, most lenders will lend up to a maximum of 75% LTV, so require a 25% deposit.

For example, if you purchase a property at £140,000 for your child and their friend(s) to rent from you, you’ll need to put down a £35,000 deposit to meet the 75% loan-to-value ratio.

How much can you borrow on a family buy-to-let mortgage?

This entirely depends on the lender’s criteria as well as your own personal circumstances. With a standard buy-to-let mortgage, the lender will take the projected rental income into account before they can offer you a figure. A regulated buy-to-let, on the other hand, is assessed using the applicant’s income rather than the projected rental income, similar to a typical mortgage. So the affordability models/income multiple limits will apply – the average borrower can obtain around 4.5x income, but some lenders will consider more than this, up to 5x in certain scenarios.

Personal income is usually assessed by your gross annual income if you’re employed, taken from payslips or a contract.

Did you know… You only have access to one third of the Buy-To-Let mortgages available unless you use a specialist broker! Get Started with an OMA-Expert to unlock the entire market.

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Family buy-to-let mortgage providers

While regulated buy-to-let mortgages are easier to come by nowadays, there is a far larger number of lenders who only offer standard buy-to-let mortgages. That said, there are still a number of mortgage lenders who will consider family BTL agremeens. For example…

  • Virgin Money can potentially accept applicants who pass their affordability criteria via income verification
  • Leeds Building Society could approve a mortgage based on the borrower’s second home
  • Vernon Building Society offers these mortgages as long as the debt is affordable based on the borrower’s personal income
  • Buckinghamshire Building Society offer regulated buy-to-let mortgages but rental income from family members cannot be used for affordability

The most important thing to keep in mind about regulated buy-to-let mortgage lenders is that approaching one directly isn’t recommended. Taking this approach means there’s no guarantee you’ll end up with the best rates and terms, since you’d be limiting yourself to just one range of products.

Although not all buy-to-let lenders offer family mortgages, there are a good few options to choose from, but you’ll want to compare every one of them before making a decision, and the best way to do this is through a broker who specialises in buy-to-let mortgages. They will have deep working relationships with every family BTL mortgage provider and can offer you a true comparison of the entire market.

With the help of the right broker, you can rest assured that you’ll end up finding the lender who’s best placed to offer you the finance you’re looking for.

How to apply for a family buy-to-let mortgage

The process isn’t any different to applying for a standard buy-to-let mortgage, but you will need to be upfront with the mortgage lender about your plans for the property. If you plan on letting it to family members, they’ll need to know about this.

You can find a step-by-step guide to the application process in our complete guide to buy-to-let mortgages.

If you read over the guide through the link above, you’ll get an idea of the documents you’ll need and the process you have to go through. But before, you actually begin your application, speaking to a buy-to-let mortgage broker is recommended as they can offer you bespoke advice, help you get the best rates and give you a hand with your paperwork.

Speak to an expert

Regulated buy-to-let mortgages aren’t always easy to come by and securing the best rates on one is even trickier, unless you know where to turn for the right advice. We work with a network of experts who specialise in regulated buy-to-let mortgages and they know exactly which lenders are best positioned to offer the best deal to customers with your needs and circumstances.

We offer a free broker-matching service that can pair you with the ideal buy-to-let mortgage broker for you. This will be an advisor we have fully vetted and can vouch for their track record when it comes to helping customers just like you.

Call us on 0808 189 2301 or make an enquiry and we’ll arrange a free, no-obligation chat between you and your ideal buy-t0-let mortgage broker today.


Can I get a regulated buy-to-let mortgage if I’m self-employed?

If you’re self-employed and want to get a regulated buy-to-let mortgage, some lenders will consider your application and assess your net income. They may not lend if you have been in a job for less than 12 months, or if you’ve been self-employed for under 3 years.

However, there are some lenders who may be able to lend outside of these factors, which is why speaking with an expert broker who has whole market access is so important. You could save time, money and hassle by working with an expert instead of finding a lender that may not be suitable.

Will the property type affect my eligibility?

The type of property can have an impact on which lenders will consider the application for a regulated buy-to-let mortgage.

Certain lenders don’t like properties that are ex-local authority (especially flats), others don’t like leasehold property, and others refuse to lend on houses of multiple occupancy (HMO). Listed buildings and thatched roofs also cause issues with some lenders, as do concrete built properties and others that are classed as a ‘non-standard’ construction.

As this is case-by-case it’s something to bring to the attention of your advisor who can find a lender most likely to approve the property you own. Make an enquiry and we’ll match you with an expert shortly.

Can I get a regulated buy-to-let mortgage with poor credit?

Yes, you can get a mortgage with bad credit, though it depends on the type of adverse, the date the issue was registered (older the better), and the severity of the issue (size of the debt on the defaulted account, or the number of late payments, for example).

Many lenders require a minimum deposit amount, though the more deposit you can put down the better – this shows the lender that you’re serious about the purchase and that you have the ability to save, so you will become less of a risk to them.

Also bear in mind that not all lenders will go to the same credit reference agencies to make their assessment.

The three main credit reference agencies in the UK are: Experian, Equifax, and Callcredit. Some lenders may only work with one agency, while others two or all three.

For example, if you defaulted on a loan 4 years ago that only appears on your Callcredit report, you could approach a lender who only uses Experian and Equifax.

Which lenders offer regulated buy-to-let mortgages?

While regulated buy-to-let mortgages are easier to come by nowadays, there is a far larger number of providers who only offer standard buy-to-let mortgage providers. That being said, there are still a number of lenders who can lend for this mortgage type.

For example, Virgin can potentially accept applicants who pass their affordability criteria via income verification, whereas Leeds Building Society could approve a mortgage based on the borrower’s second home.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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