Regulated Buy to Let

Firstly, if the occupiers of the property are paying or will pay rent and there is/will be a standard Assured Shorthold Tenancy (AST) agreement in place then we would treat the mortgage as a “Regulated Buy to Let”.

This, in effect, is a buy to let mortgage from a lender offering “regulated buy to let” mortgage products. A “regulated buy to let” mortgage is different to a standard buy to let mortgage in that it provides regulatory protections for the applicant(s) – such as access to the Financial Services Compensation Scheme (FSCS) and is designed to give additional protections to clients arranging a mortgage on a property occupied by Family Members.

A “regulated buy to let” mortgage would typically be available up to 75% loan to value on either a repayment or interest only basis. The mortgage would usually be assessed using the rental income to cover the mortgage payments, however some lenders can look at personal income to cover any shortfall.

Second Home for a Dependant Relative

Secondly, if the occupiers of the property are not paying or will not pay rent and there is not/will not be a standard Assured Shorthold Tenancy (AST) agreement in place then we would treat the mortgage as a “Second Home for Dependant Relative”.  This type of approach could also be suitable if the occupiers of the property are also making a contribution to bills such as council tax, electric, gas, water etc.

This, in effect, is a second home residential mortgage from a lender offering “second home residential” mortgage products. A “second home residential” mortgage is different to a standard residential mortgage in that the mortgage is arranged on a property occupied by family members and is not the applicant’s main residence.

Some lenders may also be comfortable with one or two rooms at the property being let out to lodgers. This scenario usually occurs where parents purchase a property for their son/daughter at university where one or two of the rooms are also let out to other students as lodgers. A number of our clients have opted for this approach and arranged the mortgage as “joint applicant sole proprietor” where their son/daughter owns the property as their main residence and takes advantage of any stamp duty/capital gains tax exemptions available to them on purchase/resale.

A second home residential mortgage would typically be available up to 75% loan to value – however some lenders can consider up to 90% loan to value. The mortgage is usually arranged on a repayment basis – but can be arranged on an interest only basis, usually up to 75% loan to value and subject to a suitable repayment vehicle being in place.

The mortgage would usually be assessed using the earned income of the applicant(s). Lenders will want to ensure that the applicant(s) are able to cover both their existing main residential mortgage and also the second home mortgage plus any associated property running costs.

Clients have told us that they may have approached their own Bank/Building Society for a family buy to let mortgage, only to have been declined or refused as their Bank/Building Society do not provide the specialist products they need.

Clients approaching us to arrange a buy to let mortgage for a family member are often frustrated, that although their plans make sense, they have spoken to a number of lenders who will simply not consider a mortgage because of the family members residing at the property.

At Rockhopper we understand that every case is different and that no clients are ever the same. That is why we apply a common sense approach to assessing whether we can assist.

If you would like to see whether we can help you raise a family buy to let mortgage, do get in touch for a free no obligation quotation.