With the general rise in house prices making it more difficult for people across the board to get onto the housing ladder, there has been a rise in recent years of borrowers with greater resources acquiring properties for their immediate family members to live in and rent from them – maybe at a more favourable family rate.
If you need to take out a mortgage for a property that will be let to a family member, then the necessary Buy-to-Let mortgage falls within regulations set out by the Financial Conduct Authority (FCA), hence it is known as ‘regulated’, and a Regulated Buy-to-Let mortgage will be the most suitable loan for your situation.
The most frequent cases are parents buying houses or flats for their children to occupy, often while they are studying at university, but there are also many instances of people helping parents or grandparents with new homes as they move to be closer to family or downsize from a larger property once children have flown the nest. In other cases, it could be that an established landlord is simply allowing an immediate family member to rent from them out of convenience, or that you are buying a home for yourself and will let out rooms within it to family members.
Letting to family members can come with many upsides and is generally very convenient for all involved, but having immediate family as tenants does unfortunately sometimes carry its own risks. Problems can mainly stem from a lower rental yield due to a ‘family rate’, family members assuming that letting rules should be laxer in their case, being regularly late or defaulting on rent payments, or simple family politics.
Many lenders tend to avoid Regulated Buy-to-Let mortgages due to the added risks associated with them, so getting advice from an experienced mortgage broker at an early stage will help you find exactly the right lender and deal to suit your circumstances, saving you a lot of time and potentially money as well.