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Regulated buy-to-let mortgages

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Aug 16, 2022

Regulated buy-to-let mortgages – Full guide on lenders, rates & regulations

A regulated buy-to-let mortgage is a good option if you want to rent your home to family members or live in the house you rented to tenants.

This article will explain a regulated mortgage deal, how it works, and the applicable rules and regulations.

Enquire below for mortgage advice from mortgage brokers. We have a few mortgage providers lending various types of mortgages depending on your deposit, etc.

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What is a regulated mortgage buy-to-let?

A regulated mortgage allows the borrower to buy a home that he or she can live in or rent out to relatives. Here are some examples of how regulated mortgages can be used:

  • Parents buy a house with two bedrooms for their child, while the other room is rented to tenants (such as university, work commitments, etc.).
  • You can live in the house but rent your spare rooms to tenants if you prefer. You could do this because you are looking for extra income, work from home and want to keep the property occupied.

Regulated BTL Mortgages fall under Financial Conduct Authority’s (FCA) jurisdiction and warrant appropriate protection.

Lenders must consider the buy-to-let mortgage regulated if the family member is a relative. This includes parents, grandparents, children, brothers or sisters, and siblings. Aunts, uncles and cousins are not included in the regulated criteria. Therefore, an unregulated BTL policy will apply.

What is the difference between unregulated and regulated?

The landlord intends to rent it to private tenants, not relatives, using an unregulated mortgage (also known as an investment loan).

The FCA is not regulating unregulated buy-to-let mortgages because they aren’t intended for landlords looking to move into the property.

Is it possible to rent out my property to a relative

A non-regulated buy-to-let mortgage is possible if family members occupy less than 40%. Suppose you rent your property as an HMO (house with multiple occupations).

In that case, your relative will only be allowed to occupy one room, not the entire property, under a separate tenancy agreement.

Most lenders will require that you take out a regulated loan if your relative(s) makes up more than 40% of the total occupancy.

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Can my relatives or I live in an unregulated property?

You could be subject to scrutiny by both your lender and the FCA if you take out an unregulated mortgage to buy-to-let but plan to become the owner-occupier in future or if the property is rented to a relative.

Although living in an unregulated BTL property is legal, you can violate the terms of the lender’s agreement. The policy may state that only tenants are allowed to occupy the property.

The lender might ask you to repay your mortgage in these cases, which is usually done by selling your property.

If your circumstances change and your desire to live in the property, you can remortgage unregulated BTLs and get a regulated one.

Although you can stay with the same lender, you may pay more in fees or other charges. This is why we recommend you consult an expert advisor like the ones we work alongside.

They have access to the entire financial market to find the best mortgage deal based on your needs.

Send an enquiry to begin.

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What should I do if a relative or I move out?

If you are moving out or your family members plan to, your lender will want to know. Refinances may require you to answer honest questions about current or new tenants.

You would need to refinance on a standard BTL mortgage at this point.

Can I sell my property to my family members?

You can apply for a standard mortgage if the tenant is a family member who wants to purchase the property.

You can offer a discount on your purchase price (a concessionary purchase mortgage), and some lenders might consider using the discount towards their deposit. This means they could borrow money without putting in as much (or even any) of their cash.

Is it possible to rent out my second home to my grown-up kids?

You can use your second home as much as you like if you own it. If you have a mortgage on your second property and want to rent it to your child or grandchild, a standard buy-to-let mortgage will not permit you to do so.

This is because many people who own property but rent it out to relatives won’t pay the total rental value. A standard buy-to-let is riskier for you as a borrower and your mortgage lender, particularly if you start with a small deposit.

You should instead take out a family or regulated buy-to-let mortgage. Most lenders will assess your mortgage application the same way a regular residential mortgage would. Lenders may require a higher deposit. In some cases, a repayment mortgage may be required.

Some lenders might require you to prove that you have enough income to pay the mortgage.

For more information, please send us an enquiry. We’ll connect with one of our mortgage brokers. They have the experience and tools to find the right mortgage at the best price.

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

For family buy-to-let loans, many lenders have specific requirements. Some lenders, but not all, may require applicants to meet these requirements:

  • Only for individual applicants
  • More than 25 years old at the time you apply
  • Salary for an applicant of more than PS25,000 per annum
  • There is a maximum number of properties you can have in your portfolio. Some lenders will allow for three properties, while others may qualify for ten properties.

Although some advisors will not accept first-time buyers’ applications, others will.

Requirements for deposits

The lender’s criteria and the property’s value will determine the total deposit required. Lenders may require a larger deposit to offset adverse history.

BTL mortgages are typically available up to a maximum loan to value (LTV) of 85%. However, there are fewer options for family buy-to-let lending. Most lenders will only lend up to 75% LTV, so a 25% deposit is required.

To meet the 75% loan to value ratio, you must deposit £35,000 to buy a £140,000 property for your child and their friends to rent.

What maximum amount can you borrow for a family buy-to-let mortgage?

It all depends on your personal circumstances and the criteria of the lender.

The lender will consider your projected rental income when determining the amount of a buy-to-let mortgage. In a regulated buy-to – on the other side, the lender will consider the applicant’s current income and not the projected rental income.

This is similar to a standard mortgage. The affordability models/income multiple limits will be applied – an average borrower can get around 4.5x annual income. However, some lenders may consider additional amounts, such as up to 5x in certain situations.

If you are employed, your gross annual income determines your personal income. This can be taken from payslips and contracts.

Providers of mortgages for family buy-to-let

Although regulated buy-to-let mortgages are more common nowadays, it is harder to find lenders that only offer standard mortgages. However, many mortgage lenders will still consider family BTL agreements. Take, for example…

  • Virgin Money may accept applicants who meet their affordability criteria through income verification.
  • Leeds Building Society may approve a mortgage based upon the borrower’s second home.
  • Vernon Building Society offers these mortgages as long as the debt can be financed based on the borrower’s income.
  • Buckinghamshire Building Society offer regulated mortgages, but rental income from family members can’t be used to finance

It is not recommended to approach regulated mortgage lenders directly. This approach doesn’t guarantee you will get the best rates or terms. You’d be limited to one product range.

While not all buy to let lenders offer family mortgages (although there are some), you will want to make sure you compare each before making a decision.

A broker specialising in buy-to-let mortgages is the best way to do so. They can reach all the markets because they have strong working relationships with each BTL mortgage provider family.

You can be sure that the broker you choose will help you find the best lender to provide the financing you need.

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

Although the process is similar to using for a buy-to-let mortgage standard, you need to tell the mortgage lender your plans for the property.

Our complete guide for buy-to-let mortgages provides a step-by guide to the application process.

The guide is available at the link. It will give you an idea of what documents you need and how to proceed.

Before you start your application, it is a good idea to speak with a mortgage broker who can provide bespoke advice, assist you in completing your paperwork, and help you obtain the best rates.

Enquire here.

Talk to an expert about regulated BTL mortgages

It’s not always easy to find regulated buy-to-let mortgages. Finding the best rates is even more difficult if you don’t know where to seek the right advice.

Our network includes experts who specialise in regulated buy-to-let mortgages. They know which lenders will offer the best deals to suit your circumstances and needs.

Our free broker-matching service can match you with the right buy-to-let broker. We will only recommend an advisor that we have thoroughly vetted. They can also vouch for their track records in helping customers like you.

We’re available to help you by enquiring below now:

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Can I still get a mortgage on a buy-to-let property if I am self-employed?

Some lenders will accept your application and evaluate your income if you are self-employed. They may not approve your application if you haven’t been employed for more than 12 months or your net income is less than three years.

Some lenders may be able to lend beyond these criteria. This is why speaking with an expert broker with market access is essential. Working with an expert can save you time, money, and hassle.


What will affect my eligibility based on the type of property?

Lenders may be more likely to approve a mortgage application for a buy-to-let regulated property if the property is of a particular type.

Some lenders do not prefer ex-local authority properties (especially flats). A leasehold property is also not chosen, and others reject HMO houses. Some lenders have issues with listed buildings and thatched roofs, concrete-built properties and other constructions that are not standard.

This is a case-by-case situation, so you should bring it up with your advisor. They can help you find the best lender to finance the property. Send us an enquiry, and we’ll get back to you shortly.

What if I have poor credit and want to get a mortgage for a buy-to-let?

You can obtain a mortgage with poor credit. It all depends on the type and severity of the issue (size or number of late payments) and when the case was registered.

Lenders may require a minimum deposit, but the higher the deposit, the better. This shows that you are serious about the purchase and can save. You will be less at risk.

Keep in mind, however, that not all lenders will make the same assessment of different credit reference agencies.

The UK’s three major credit reference agencies are Experian and Equifax. Some lenders might only work with one agency, while others may have multiple agencies.

If you have a Callcredit report that shows you defaulted four years ago, you might be able to approach a lender who uses Equifax and Experian.

What lenders offer mortgages that are regulated for buy-to-let?

Although regulated buy-to-let mortgages are more common nowadays, it is harder to find providers that only offer standard buy-to-let options. However, this is not to say that all lenders can lend for this type of mortgage.

Virgin may accept applicants who meet their income verification requirements. Leeds Building Society, however, could approve a mortgage based on the borrower’s second home.

Enquire here today to speak with a specialist broker.

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