Can I be a tenant if my daughter takes out a buy-to-let loan?

Question

Is it possible for my daughter to get a buy-to-let mortgage and have me as her tenant?

MC/Kent

Answer

There are a couple of possible approaches when a child is looking to help their parent.

Firstly, there may be the possibility of taking a standard mortgage on a dependant relative basis and the child buys the property for their parent to live in.

This is likely to require a bigger deposit than if buying a property as the main residence. Lenders may therefore be looking for a 20 to 25% deposit and will require the child's income to cover the new mortgage as well as any existing commitments, based on the usual affordability criteria. For example, Santander and NatWest can lend up to 80% of the purchase price in such a case and requires there to be no tenancy agreement in place.

The second option is to treat the property as a rental property. Most buy-to-let mortgages are unregulated but where the property will be let to a family member, it is a regulated sale. Most buy-to-let lenders have never offered regulated mortgages and others, such as NatWest, have more recently withdrawn from this niche market. Therefore the options to structure the purchase on this basis will be limited.

Lenders that might consider it, such as Leeds BS and Virgin Money, will also want to see that affordability can be evidenced based on the purchaser's earned income, rather than only looking at the rental income covering the mortgage.

David Hollingworth

David Hollingworth

is a mortgage expert at London & Country Mortgages in Bath.