What are the rules for letting your property to a family member
Do you have a buy to let property and a family member who needs somewhere to live, and then this is the rules lenders have for letting your rent a property to a family member. You would think renting to a relative would be simple but is often more complicated than renting to a verified stranger.
Most lenders will not allow a family member to let the property from you if they are the owner of the mortgage on the buy to let . The reasons are as soon as a family member is allowed to live in the buy to let it then becomes under the roof of FCA regulations and the buy to let then becomes more difficult to pass lending criteria of the buy to let .
Some of the reasons it is difficult is when family is involved so are personal feelings and the property is often rented below the market rental amount the property can achieve, nearly all buy to let lenders lend on the market rent that the surveyor gives to the property when valuing the property it is a carefully thought out equation that gives enough rent to cover the mortgage payments and have some spare to give the landlord profit and enough to cover any rental voids. So if the property is rented below this amount it would put the lending at risk. Another issue is the issue off evicting the tenants if the family members could no longer afford the rent, this would be more difficult as you would have a personal relationship with the tenant and you would have the issue of causing a problem within the family , this could then lead to mortgage arrears and eventually repossession this is something the lender wants to avoid at all costs .
What happens if you don’t inform your lender about plans to let to family?
The
consequences of not telling your lender that a close relative is also going to
be your tenant could be severe. You would, in effect, be committing mortgage
fraud, which could lead to a request for you to repay your mortgage in full – a
considerable financial outlay that very few people would be able to afford at
short notice.
Even if you have sought permission and your lender has allowed you to let to a
family member, they may not be too pleased if the arrangement is on a
‘mates/family rates’ basis, where the rent is not at or close to market value.
If the rent doesn’t cover 125%-145% of the monthly mortgage payment – which is
likely to have been one of the requirements when your mortgage application was
approved – this could cause you issues with repaying your mortgage in the
appropriate way.
Certain lenders do provide options
Fear not, while the majority of lenders do not offer mortgages allowing you to let to close relatives, some do.So, if you’re desperate to let to a family member, it is achievable if you look in the right places. Niche Advice, a mortgage broker which offers expert advice on buy-to-let mortgages, says there are lenders offering regulated or ‘family’ buy-to-let mortgages, even if these are very rare.
