Regulated Buy to Let Mortgages

What is a Regulated Buy to Let Mortgage?

A regulated buy to let mortgage is required when a property is to be rented to an immediate family member. The term ‘regulated’ is used because a conventional buy to let mortgage is not regulated. If a buy to let property it to be occupied by a family member and the mortgage is regulated, it falls under stricter guidelines than a regular buy to let mortgage.

what is the difference between regulated and unregulated buy to let mortgages?

The decision on whether a Buy to Let mortgage application is a regulated transaction is made at the time of the application based upon your intentions for the property at that time.

If it is intended that a close relative will reside at the property any time after purchase then it is processed as a regulated transaction. It is also a regulated transaction where the property was not purchased for the intention of Buy to Let.

what are the criteria for a regulated buy to let mortgage?

The requirements of a lender in relation to the value, minimum deposit and rental yield is generally the same for buy to let mortgages regardless of being regulated or unregulated.

There are two main reasons why an application for a mortgage will need to be treated as a regulated loan;

If it is your intention to live in the property yourself at any point in the future, thereby becoming an owner occupier, the mortgage will be treated as regulated and must be administered in the same way as a residential loan. Although many people have moved into their buy to let properties following unexpected changes in their circumstances, as this was not their intention from the outset, they are not breaking any rules as long as their lender is informed and happy for them to do so.

The second and usually the primary reason for a buy to let mortgage to be treated as regulated is when there is the intention that a close relative will occupy the property. A close relative is defined by the vertical family tree going upwards to parents and grandparents or downwards to children or grandchildren and also by horizontally such as brothers and sisters.

can any relatives ever live in a regulated buy to let?

Regulated buy to let mortgages will only apply to occupation of the property by immediate family and do not apply to cousins, uncles, aunties and more distant relatives. If you rent to any family member that isn’t your direct sibling, parent, child or grandparent, then a conventional buy to let mortgage should be sufficient.

who can get a regulated buy to let mortgage?

In the same way as a conventional “non regulated” buy to let mortgage, anyone may be eligible to apply for a regulated buy to let mortgage subject to the usual lender requirements around the proposed rental yield, valuation of the property, minimum deposit requirements and in some cases an assessment of personal income and expenditure to satisfy affordability.

If you choose to let to a family member and are using a mortgage to do so, then you will more than likely require a regulated buy to let mortgage. Having family as tenants can have advantages but it can also carry some risks, especially from the perspective of a mortgage. For this reason, the majority of lenders tend to avoid properties which are let to family members, simply because of the risks involved. It can be difficult when you need a mortgage in these circumstances, but it certainly isn’t impossible and a detailed discussion with one of our experts will guide you through the process with a view to a suitable recommendation.

how much deposit do I need for a regulated buy to let?

The majority of lenders will expect a deposit or equity of at least 25%, therefore lending up to 75% of the property value. However, every lender will have their own risk approach to this type of business and it may vary. Because of the regulated status of the mortgage, lenders will have less flexibility on terms and conditions.

However, as with any type of mortgage, a larger deposit will result in a lower risk to the lender and should lead to lower rates of interest.

Can I change from a regulated to an unregulated buy to let mortgage?

If you already have a regulated buy to let mortgage and circumstances change resulting in the property no longer being occupied by a family member, there is no reason why a switch to a standard buy to let mortgage should not be considered. By changing to a standard buy to let from a regulated buy to let may be beneficial, opening up options for better rates of interest from a much wider marketplace. it may also be possible to increase the borrowing in order to release funds for other purposes, such as additional investment property purchase.

I have bad credit, can I get a regulated buy to let mortgage

A standard buy to let mortgage may not be suitable for investors with poor credit. It is likely that the assistance of a specialist lender will be necessary depending on how severe your credit issues are.

Applying for a regulated buy to let product in these circumstances may be more difficult because of the limited number of lenders prepared to consider an application which has a combination of poor or adverse credit and a property to be occupied by a family member.

By undertaking a full discussion with one of our specialist team, options and requirements can be quickly established.

regulated buy to let mortgage rates

The Buy to Let mortgage market is constantly changing, with a variety of new lenders and different approaches being introduced on a regular basis. As a specialist area of borrowing, there may well be a number of mortgage deals and rates available through mortgage intermediaries which don’t usually appear on the high street.

This situation is exactly the same for the regulated buy to let mortgage market, albeit on a smaller scale because of the limited number of lenders.

To establish the most suitable lender and best rates for your circumstances, speak to one of our experts today.

mortgage lenders for a regulated buy to let mortgage

In order to establish the best lender for a regulated buy to let mortgage, it is important that we have a full understanding of your current financial situation and your objectives in relation to the specific transaction.

Lenders will take into account a variety of factors before deciding whether to offer a mortgage.  Income and expenditure analysis is normally carried out and a detailed look at any existing buy to let property performance will also be needed.

As each lender tends to adopt some specific and unique criteria to this kind of niche lending, a detailed discussion with one of our expert advisers will quickly determine any suitable lenders.

mortgage advice for regulated buy to lets

As an area of mortgage lending that is not routinely available on the high street, the need for specialist advice is essential to ensure your application is made in the correct way with the most suited lender.

At Just Mortgage Brokers we have a dedicated team of highly qualified advisers who between them have experienced most situations and requirements. Talk to one of the team in order to establish the way forward. Once a suitable solution has been agreed, the application is dealt with and we are on hand to guide you through the process.