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Ltd company BTL mortgage for family of director


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So a BTL mortgage for a property rented to a family member would be regulated. Does the situation change if it’s a Ltd company taking out a mortgage for a property that will be rented to a family member of the sole director? Still regulated?

Thanks

John

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Hi John,

Just double checked it and yes, it is still regulated.

To note, whilst there are plenty of lenders who do regulated BTL when the property is owned in your personal name, a quick search in one of our systems shows only 1 lender who can do regulated BTL in the name of a Ltd company. Without doing more research, I wouldn't state it categorically that there is only 1 potential lender, but it doesn't appear like you'd have many options...

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Thanks Lilla, that’s very helpful. I’ve previously posted about using a personal mortgage for family and was warned about lenders finding out and being blacklisted etc (which I take seriously).  I do wonder how lenders would find out the identity of tenants and their relationship with a director of a Ltd company. Don’t they have better things to do with their time?

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Well, let me tackle this in two separate points:

- mortgage for a property where family would live - it's entirely possible, if the mortgage is in your personal name, but when it's in the name of a Ltd company, that's when we have an issue, i.e. lender restrictions. A lot of lenders who offer BTL deals have the permission to do regulated mortgages, which includes letting to family. However, they don't necessarily offer mortgages via Ltd companies. Those who do, are often smaller or specialist lenders without a permission for regulated mortgages, which is why they can't help.

- lenders finding out about who lives in the property - lenders don't go investigating who the tenants are and if there is any relationship between you and the tenant. However, if a broker or the solicitor is aware of the relationship, then we have to declare it, otherwise we would be committing fraud knowingly arranging a mortgage against lending criteria. Even if we are not made aware of the relationship by the client, but then the client, the estate agent or the tenants make a passing comment to the broker, the solicitor, the valuer or the lender, then we are back to the point where we have to declare it.

Having said the above, when it comes to remortgaging time, lenders often ask for a copy of the tenancy agreement and if the surname is the same for the landlord and the tenant, then it would raise questions about the relationship. It could be claimed that it's just a coincidence (e.g. Smith, Taylor, Khan...), but knowingly providing false information is a criminal offence.

So yes, we all have to take black listing seriously, because a broker/solicitor can lose their livelihood and/or face prosecution, while a client caught committing fraud would also face black listing as an absolute minimum.

On this jolly note, I would recommend that if you intend to use a Ltd company for the mortgage and intend to rent it to family, you declare it, speak to a broker to check your options and worst case scenario just do it in your own name with a lender who allows regulated BTL.

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