Q. I was admitted to a mortgage. It has always been my intention not to live on the property. I live in London and buy a property in my hometown further north. It turns out that my brother would like to live on the property. I know that family members are not allowed to be tenants under the terms of the mortgage. He pays rent, but at a reduced rate. What are the consequences for me if we pursue this plan? AT THE
ON If you violate the terms of your mortgage to buy for rent by letting the property to your brother (or another close relative), your lender has the right to demand the full repayment of the loan. If you do not tell your lender that a close family member will be your tenant, you will commit a mortgage fraud, which can also cause you to be asked to fully repay the mortgage. Even if your lender would have allowed you to rent to your brother, you might not pay a rent that covers 145% of the monthly mortgage payment. This would have been one of the conditions under which your mortgage application was approved.
The reason why most buy-to-let lenders do not allow you to close family members – including siblings, parents, grandparents, grandchildren and a spouse or partner – is that the sale of and advice on The mortgages would have to be regulated by the Financial Conduct Authority (FCA). This will require more work for the lender and a more detailed affordability assessment, as is required for normal home mortgage FCA regulations. Therefore, most lenders to lend only offer standard non-regulated mortgages.
However, if you are determined to leave your property to your brother, not everything is lost. According to independent mortgage advisor Niche Advice, there are lenders who offer regulated mortgages or "family mortgages", but these. After which?, They include Virgin Money, Melton Mowbray, Furness and Mansfield Building Societies. Mansfield is unique in the expectation that rental income will only cover 100% mortgage repayment, even though the other affordability requirements must be met. Therefore, if you do not want to risk being asked to fully repay your mortgage, you may need to look into switching lenders. By the way, if a cousin, an aunt, an uncle or another extended family wanted to rent your property, you would not have violated your mortgage terms.