Regulated Buy to Let Mortgages

Regulated Buy to Let Mortgages

Most Buy to Lets are not regulated by the Financial Conduct Authority as they are seen as a commercial or business asset, set up for investment purposes. However, there are certain exceptions whereby a BTL does become regulated.

What is a Regulated Buy to Let?

A regulated Buy to Let mortgage is required if you plan on renting out your property to an immediate family member. Immediately family may be parents, children, siblings, grandparents and grandchildren. They are classed as regulated as they offer more protection and fall under stricter guidelines and requirements by the Financial Conduct Authority than conventional Buy to Lets.

Buying a property to rent out to a family member is not uncommon and there can be great advantages to doing so. However, these kind of mortgages are viewed as higher risk by lenders and therefore many lenders don’t offer them making them, more difficult to obtain. Getting the correct advice in these circumstances is key as lending options are limited and approaching the wrong lender may lead to your application being declined.

What are Common Examples of Regulated Buy to Lets?

• Parents renting a property to their child

• Landlords renting their property out to their parents

• A landlord renting their property out to a sibling.

• A Grandparent renting their property out to their grandchild.

It is worth noting that Buy to Lets are only regulated where immediate family members are involved. If you plan on renting to an auntie, uncle or cousin for example, a conventional buy to Let should be sufficient- although it’s always worth being upfront with your lender regarding your intentions to avoid any issues in the mortgage process.

What is the Criteria for Consumer Buy to Let Mortgage?

Generally speaking, the criteria for a Consumer BTL is very similar to that of a conventional BTL but due to being regulated, the checks are more comprehensive when it comes to assessing your affordability.

Each lender has their own set of criteria and requirements but in the majority of Buy To Lets, lenders are most concerned about the rental income being enough to cover the mortgage payments and any voids and maintenance. However, for a regulated BTL they will are more likely to assess your personal income too, to ensure that you have the ability to pay the mortgage should the rent not be paid.

What deposit is needed for a Buy to Let Mortgage?

Like a conventional Buy to Let, most lenders will require a minimum of 25% deposit. However, the higher the deposit, the more options you will have available and the better the rates you will have access to.

Can I get a Regulated Buy to Let with bad credit?

It is possible to get a Regulated Buy to Let mortgage with bad credit but it may affect the rates you have access to and limit your options even further. The extent of your poor credit may influence the rates, for example if you have a small blip such as missed payment, it’s unlikely to impact your application as negatively as if you have a County Court Judgement (CCJ).

Getting an up to date copy of your credit file as early as possible in the mortgage process can help to prevent issues further down the line with your mortgage application.

What happens if my family member moves out?

If you have Regulated Buy to Let in place and your family member moves out, it is important to notify your lender of the change in circumstances. Generally speaking, you should be able to transition to a standard buy to let mortgage which in turn may bring with it’s own advantages. Advantages may include access to a wider range of lenders which may give you access to better rates resulting in increased cash flow.

What if only part of my property is rented out to a family member?

With the majority of lenders, if less than 40% of a property is occupied by a family member, a standard Buy to Let Mortgage would be required. If more than 40% is occupied by a family member, a Regulated Buy to Let would be required. Here at The Mortgage Masters, we are experienced in both regulated and unregulated buy to lets and can advise you on which you require based on your circumstances.

If you are considering getting a Regulated Buy to Let, get in touch with out team of experts who can guide you through the process and find the best solution for your