Buy To Let

Buy to let mortgages are for landlords who want to buy property to rent it out. The rules around buy to let mortgages are similar to those around regular mortgages, but there are some key differences. These differences include the amount you could borrow and how much deposit you will need.

Most buy to let mortgage lending is not regulated by the Financial Conduct Authority (FCA). There are exceptions, for example, if you wish to let the property to a close family member (e.g. spouse, civil partner, child, grandparent, parent or sibling). These are often referred to as a consumer buy to let mortgages and are assessed according to the same strict affordability rules as a residential mortgage.

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Standard Buy to Let applies to new and or existing landlords who wish to purchase properties for a buy to let portfolio business.

The purchase may be in the individual’s name or through a Special Purpose Vehicle (SPV) Limited Company (a non-trading company that exists solely for buying, selling, and letting property).

An SPV is a limited company specifically created to own, buy, sell, or let property.  This is considered to be less complicated and easier to underwrite than a trading limited company, so potentially there are more options when it comes to looking for a new mortgage.  Setting up as a limited company could offer a number of benefits, however,  independent tax advice should be obtained.

In these circumstances, the mortgage is not regulated by the Financial Conduct Authority (FCA).

A regulated family buy to let mortgage is where the property is let to a close relative (i.e. spouse or civil partner, children, parents, brothers, and sisters) or the borrower intends to occupy the property at a future date.

If a buy to let is regulated it falls under tighter guidelines as opposed to standard buy to let. Regulated buy to let mortgages are regulated by the FCA.

Common examples of regulated buy to let can be found below:

• A landlord is renting a property to a sibling/siblings
• Parents are renting a property to their child/children
• A landlord is renting a property to parents
• Grandparents renting from their sons/daughters

Important: Regulated buy to let only applies to immediate family and does not apply to cousins, relatives, uncles and aunties. If you rent to a cousin or relative, or any family member that isn’t your direct sibling, parent, child or grandparent, then a conventional buy to let mortgage should be sufficient.

Consumer buy to let mortgages are regulated as residential mortgages, aimed at ‘accidental landlords’ and non-professional landlords. They offer protection to people renting out their homes, but not as a business or investment.

In 2016, The Mortgage Credit Directive introduced a legislative framework to regulate the mortgage market. Consumer buy to let mortgages were part of this new change and offered consumer protection to individual landlords.

Consumer buy to let mortgages are regulated by the Financial Conduct Authority (FCA) in the same way as residential mortgages. The real reason for their existence is to offer additional protection to customers who find themselves running a property for income, by providing them with the same insurances all FCA regulated mortgages cover.

For more information about our buy to let mortgage services or to arrange a consultation, please contact us by telephone, email, or by completing the callback form.

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The Financial Conduct Authority (FCA) does not regulate most buy to let mortgages