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Letting to family


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Hi all, I’m thinking of buying a property and letting to my parents but I understand I will run into the regulated/unregulated issue which will make it difficult to buy with a mortgage. My question is how any btl lender would ever know I was letting to my parents?  Surely if I just buy with a normal btl mortgage and subsequently let to my orients they’d be none the wiser?  Or am I missing something? 

 

Thanks

John

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They can find out in 100s of ways and they will. It's mortgage fraud and you risk being blacklisted by every lender as a minimum.

There are legal ways to do it if your current mortgage and the new mortgage can be funded by your salary on a lender's affordability calculation. Suggest you talk to a broker who deals in regulated Buy to let.

 

Regards Simon

Searchlight Finance Ltd

T:01565 654005

 

Landlord and specialist property finance advisor only dealing with investors, landlords and developers throughout the UK and beyond.

Buy to Let - Commercial Finance - Bridging Loans - Development Finance - HMO Finance - Refurbishment Loans - Multi Let - Limited Company - Student Lets - Portfolio Finance

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I agree with Simon - it's ultimately mortgage fraud, if you knowingly take the wrong type of mortgage. People take risks and do illegal stuff, but is it really worth it?

There are plenty of lenders who offer regulated BTL mortgages, so a broker will just find the right lender for you. 

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Hi John,

Your scenario is not as rare as it might sound, so don't worry about it. All of us brokers would go through the case details and find suitable lenders based on the actual details - not just the fact that it's regulated BTL, but also property value/type, LTV, rental income, your income, credit history, etc. It's just what we do :)

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Worth bearing in mind also that regulated BTLs are usually assessed in the same way as a standard residential mortgage. A lender will take into account your existing residential mortgage and household expenses as well as costs of the new property, so you will need to meet affordability for both. Any rental income from the new property will be ignored.

Also if you wanted to go interest only, you would unlikely be able to use sale of the mortgaged property as the repayment vehicle. Therefore, you would need to provide evidence of a different method for repaying the mortgage in full at the end of the term, e.g. endowment, pension, equity in other property. If you were unable to do this then you would have to go capital and interest, which would result in much higher monthly payments.

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