4 things you need to know about regulated buy to let mortgages
4 mins read

4 things you need to know about regulated buy to let mortgages

Many investors aren’t aware that if your tenant is a family member, then you’ll need a regulated buy to let mortgage. A standard mortgage simply won’t be approved. We’ve put this guide together to explain the right buy to let mortgages depending on the situation you’re in.

  1. Understand the differences between buy to let mortgages

Property investment is at an all time high throughout the UK despite attempts from the government to slow this market down. This is because the government is attempting to get more first time buyers on the housing ladder. With interest rates still relatively low, it may make sense to invest in property to get better returns on surplus funds. 

You may think that a standard buy to let mortgage may be the product you need, but you could be wrong.

If your tenant is going to be a direct family member, then you will need a regulated buy to let mortgage. This is because buy to let mortgages are generally unregulated. Within a regulated buy to let market, conditions of lending become a lot more restricted. For example there are ample buy to let lenders in comparison with the lenders available when choosing a regulated buy to let.

It’s vital to understand the various options available to you, as it may sway your plans on whether to keep a family member as a tenant, or decide to rent to the open public. You can get a normal buy to let mortgage if your family members are cousins or relatives, etc, but if the tenant is a parent, sibling or child, then you will need a regulated mortgage.

  1. Are regulated buy to let mortgages difficult to obtain?

In all honesty, regulated mortgages are always going to be more difficult to gain approval on when compared to unregulated mortgages. 

This is because lenders have a lot more flexibility in unregulated markets, such as buy to let. Regulated buy to let is only available with certain lenders and is isn’t something that is widely available.

If you do require a regulated buy to let then you need to be prepared. 

Applications generally take a lot longer than unregulated mortgages and you may need to provide more evidence in terms of income and affordability.

  1. Consider your options

Renting to a family member has several advantages. You already know the said tenant, you have a close relationship and may have a guarantee of rental income. Lenders don’t actually see it from this point of view. As your tenant is close family, you may be more lenient in letting the miss rental payments and tenancies can somewhat involve ‘family politics’. This is one of the reasons why lenders tend to stay away from regulated buy to let.

Renting to a stranger may seem risky, but the majority of the UK buy to let market is operated in this way. You can use companies and letting agents to vet and even find you credible tenants who have a track record of paying their rent on time. It may be easier to get a normal buy to let mortgage, so it’s definitely an avenue to consider.

  1. Utilise a mortgage broker

Utilising the advice of a professional is invaluable, especially when it comes to mortgages. With so much money at stake, it really doesn’t make sense not to consult a specialist. For example, if you applied with a lender because they had the best rates, but needed a regulated buy to let, the chances are you’d be declined. This can then have a detrimental effect on your credit rating and chances of mortgage approval in the future.

You can utilise specialists such as expert mortgage advisor. No matter where you’re based in the UK, the brokers can provide you with advice and handle the entire mortgage for you.

For more tips and advise on property investments visit: ExpertMortgageAdvisor.