When is family not family for BuyToLet mortgage purposes?Make Text Bigger
I received an email today from one of the Financial Advisers we have a close working relationship with. I’ve decided to share it with you on the basis that we know several people invest into BuyToLet properties with a view to letting them to family members.
I was asked by one of my clients last week whether he could buy a property to let out and rent it to his niece. That should have been a fairly straightforward question to answer with my knowledge and experience, but I had a niggle at the back of my mind so I thought I would check it out …. and what a mix of answers I got!
I sent the ‘letting to a family member’ query to a number of BuyToLet and specialist lenders and it’s confusing how they all see this same issue differently. For example, The Mortgage Works say “TMW are more than happy to provide a BuyToLet mortgage for a family member, yes this will make it a regulated loan and there is a tick box on the online application to confirm this. TMW offer the same rates and criteria and the only difference you should see is that there will be a special condition on the offer letter confirming the mortgage is regulated.”
Aldermore Bank say “unfortunately we won’t consider any family member for tenancy on our BuyToLet product range.” The person I spoke to went on to say ” I must admit, I’m unsure personally what the definition of ‘immediate family’ is as far as the FSA regulation is concerned, but our policy is that we can’t accept ‘any’ family members” (!!)
I also sent the query to our compliance department and they replied as follows;
“We have referred to the FSA glossary to answer your query – The definition of a ‘regulated mortgage contract’ makes reference to the following:
• a spouse or civil partner,
• a person (whether or not of the opposite sex) whose relationship with that person has the characteristics of the relationship between husband and wife; or
• a person’s parent, brother, sister, child, grandparent or grandchild
It therefore follows that the examples you have identified fall outside this definition.”
Abbey agree with the FSA completely. To add to the confusion though, even the FSA’s own BuyToLet leaflet isn’t specific at all (they just say ‘family member’ hence why I had to ask the main providers and compliance officers for their own interpretation.
Yet another reason why clients need ‘face to face’ advice – even today’s ‘Treating Customers Fairly’ / transparent world is still full of idiosyncrasies, confusion and ‘left hand not knowing what the right hand is doing’, even amongst the regulators and providers too.
In summary though – yes, I have found lenders (eg TMW, Abbey etc) who would provide BuyToLet mortgages to investors who wish to rent out to nieces (and you could include nephews, cousins, aunts and uncles), without any problem (subject to credit status, valuation etc, of course!) and as an FSA regulated adviser of course I have access to all options to help Clients set up their arrangements ‘properly’.
I wonder though how many un/mis-advised deals are in situ but fall foul of the rules?!
Thought you might find this to be of interest.
Best regards – Howard
If you have a borrowing requirement and would prefer face to face advice on the whole of the market please contact me and I will put you in touch with a Broker / Financial Adviser who is also a landlord. There are two ways to reach me; telephone Neil patterson on 01603 489118 or email firstname.lastname@example.org
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