{"id":179712,"date":"2019-03-20T11:56:37","date_gmt":"2019-03-20T11:56:37","guid":{"rendered":"https:\/\/www.finder.com\/uk\/?p=179712"},"modified":"2026-01-29T04:23:58","modified_gmt":"2026-01-29T04:23:58","slug":"renting-to-a-family-member-or-relative-a-comprehensive-guide","status":"publish","type":"post","link":"https:\/\/www.finder.com\/uk\/mortgages\/buy-to-let-mortgages\/renting-to-a-family-member-or-relative-a-comprehensive-guide","title":{"rendered":"Renting to a family members, children or relatives"},"content":{"rendered":"

If you\u2019re buying or already own a property you want to let out, renting to a member of your family might seem like a convenient option. Although this is possible, there are specific issues you need to be aware of, including when it comes to your mortgage.<\/p>

You may trust a family member more than other types of tenant, both to take good care of the property and pay their rent on time. On the other hand, you may charge them less than the market rent and be more lenient if they turn out not to be a model tenant, affecting your income from the property.<\/p>

As a result, mortgage lenders see this type of buy-to-let as higher risk than letting to non-family and apply different lending criteria. You are also still subject to the same rules and responsibilities as any landlord. <\/p>

Who counts as a family member for mortgage purposes?<\/h3>

Buy-to-let mortgages<\/a> are considered commercial transactions so they are not regulated by the Financial Conduct Authority. But if you let the property to immediate family \u2013 your children, parents, grandparents or siblings \u2013 the mortgage is regulated so tighter rules apply. This is known as \u201cregulated buy-to-let\u201d or sometimes \u201cfamily buy-to-let\u201d.<\/p>

So, if you need a mortgage to buy a property you are intending to let to close family you won\u2019t be able to use a conventional buy-to-let mortgage but will have to take out a mortgage specifically for this purpose, giving you less choice.<\/p>

It\u2019s not usually considered regulated buy-to-let if less than 40% of the property is rented to a family member though, and if you let to a more distant relative, like an aunt or cousin, you can use a regular buy-to-let mortgage.<\/p><\/div><\/div><\/div>

How do regulated buy-to-let mortgages work?<\/h3>

With a normal unregulated buy-to-let mortgage, you need to show that the rent on the property will be at least 125% to 145% of the mortgage interest. However, with a family buy-to-let mortgage lenders won\u2019t take the rent into account but will look at your income and outgoings to decide whether you can afford to pay back the loan, as they would with a standard residential mortgage.<\/p>

Lenders offering family buy-to-let mortgages tend to be building societies and include Furness, Mansfield, and Melton Mowbray Building Societies but it\u2019s a good idea to speak to a mortgage broker<\/a> to find the best deal as this is a niche area. You will normally pay a higher interest rate versus a standard buy-to-let mortgage and need at least a 25% deposit.<\/p>

Some lenders, such as Virgin Money and Saffron Building Society, don\u2019t offer specific products but will still accept borrowers letting to family members. Virgin Money lets you take out its standard residential mortgages to do this and Saffron will consider you for its regular buy-to-let mortgages but will assess you based on affordability rather than the rent you\u2019ll get.<\/p>

If you stop or start letting to a family member, you should let your lender know as you may have to switch to a different mortgage.<\/p><\/div><\/div><\/div><\/div>

Compare family buy-to-let mortgages with a broker<\/h3>

Is a tenancy agreement required?<\/h3>

Yes, you should still enter into a tenancy agreement so you can agree on the terms of the tenancy in writing and you know what is expected from each other. For example, are you happy for them to have pets in the property? This will help to avoid disagreements later. And if things do go wrong and you need to evict them, it will be harder without a tenancy agreement.<\/p>

You should also ask them for a deposit in case there is any damage to the property or rent not paid. If you do, you must protect it in one of three government-backed deposit schemes. This makes it easier for tenants to get their deposit back if they have stuck to the terms of the agreement.<\/p>

You may want to carry out tenant referencing, which would include a credit check, to make sure you will be able to rely on them to pay the rent.<\/p>

You can rent to a family member on housing benefit or universal credit as long as you don\u2019t live with them and you have a formal agreement.<\/p>

It\u2019s wise to discuss with your family member what would happen to the property if you died as this could mean they have to move out.<\/p><\/div><\/div><\/div><\/div>

Do you need insurance?<\/h3>

Although you might not be expecting problems, it\u2019s still a good idea to take out landlord insurance<\/a>, which covers you if there is damage to the building or its contents. You can also choose to add cover that protects you if your tenant is injured in the property, or if there is a legal dispute or unpaid rent.<\/p><\/div><\/div><\/div><\/div>

Making sure the property is legally let<\/h3>

As a landlord \u2013 whether you are letting to a family member or not \u2013 you must make sure that the property is safe, including having annual gas safety checks on any gas appliances, such as the boiler, making sure electrical appliances are safe, and installing smoke alarms on every floor.<\/p>

The property must also have an Energy Performance Certificate (EPC), which you need to give a copy of to the tenant when they move in.<\/p>

If your property is a \u201cHouse in Multiple Occupation\u201d (HMO) extra rules and safety checks apply. An HMO is a property where there are three or more tenants making up more than one household and there are shared bathroom and kitchen facilities. If there are five or more people living in it you need a licence.<\/p>

Do you have to pay tax on the rent you receive?<\/h3>

Yes, all landlords must pay income tax on the rent minus any expenses. You also have to pay Class 2 National Insurance contributions if your profits are above a certain amount and your property letting counts as a business \u2013 it\u2019s your main job, you have more than one property that you let and you are buying more to rent out.<\/p><\/div><\/div><\/div><\/div>

Renting to a family member: A summary<\/h4>