Renting your buy to let to a family member can be more complex than you may think.
Your buy to let mortgage options reduce if you chose to let your buy to let to a family member.
You may be surprised to learn that majority of the UK buy to let lenders will not allow you to let your buy to let to a family member. Why? Well you might think it’s because you may offer non-commercial terms and therefore might be concerns over the self financing aspect of the buy to let – but you’d be barking up the wrong tree. It is to do with the extra rules and obligations imposed on both the buy to let lender and the buy to let advisor – as buy to lets to a family members fall into jurisdiction of the Financial Conduct Authority. And, this extra layer of extra bureaucracy and redress puts the lenders off.
How do I find out if a buy to let lender will allow me to let my buy to let to a family member?
Well you could start by calling around. According to Moneyfacts* as at September 2013 there are 55 active UK buy to let lenders so it could take a while. The most efficient way would be to call a Specialist Buy to Let Mortgage Broker in London such as Niche Advice Limited.
Are the rates on a buy to let mortgages let to a family more expensive?
Not necessarily. The choice is more limited but the buy to let lender that offers the lowest buy to let rates might also allow buy to lets to family members.
How can I compare buy to let mortgages let to a family member?
I have never seen any buy to let mortgage comparison website cover this level of detail as a filter. It is best to call a Specialist Buy to Let Mortgage Broker in London such as Niche Advice Limited.
Could I lie about letting my buy to let to a family member and say it’s someone else?
No, this would constitute ‘fraud’ and there could be legal redress from the State and the lender, if found guilty your credit file would be tarnished to such an extent it could affect your future job prospects and credit. The buy to let mortgage would also need to be cancelled if the buy to let mortgage lender does not have the FCA permissions to transaction buy to lets to a family member.
My family member has asked me to take out a buy to let mortgage in my name on their behalf is this ok?
There is absolutely nothing wring with taking out a buy to let mortgage and letting it to a family member. However, you need to ask yourself whether this something you wish to do or have you been pushed into it? The buy to let mortgage lender would also need to know that you were committed fully to the venture, and as such, the full deposit must come from your own resources and not from the family member you intend to let the property to.
When is a buy to let regulated by the FCA?
If the prospective landlord decided to let to a family member the buy to let mortgage will be regulated by the Financial Conduct Authority (FCA). The following constitutes a ‘family member’: spouse, civil partner, parent, brother, sister, child, grandparent or grandchild.
Therefore if you intend to let to a cousin, uncle, aunt, nephew or niece you can have a pick from all the lowest buy to let rates on the market.
For more information on buy to let mortgages let to a family member please complete the enquiry form on the right-hand side of this page or alternatively contact us on T: (020) 7993 2044.
* Source Business Moneyfacts September 2013 Issue 217
Payam Azadi is a partner at Niche Advice Ltd who are Independent Financial and Mortgage Advisers in London.