Family Buy to Let Mortgage

A family buy to let mortgage allows you to purchase a property and rent it to a close family member. It works differently from a standard buy to let because the tenant is someone you are related to, which changes the regulatory treatment, the lending criteria, and in some cases the tax position.

This page explains how family buy to let mortgages work, which lenders offer them, what concessionary rent means, and who this type of mortgage is designed for.

What Is a Family Buy to Let Mortgage?

A family buy to let mortgage is a product designed for borrowers who want to buy a property and let it to a close relative. Close relatives typically include children, parents, siblings, grandparents, and in some cases in-laws. Cousins, second cousins, aunts, and uncles usually fall outside the definition most lenders use.

The key difference from a standard buy to let is that the tenant is not a third party found on the open market. Because the landlord and tenant are related, the FCA treats this as a regulated mortgage. That means the lender must carry out a full affordability assessment, just as they would for a residential mortgage, rather than relying solely on projected rental income.

How It Differs from a Standard Buy to Let

A standard buy to let mortgage is typically unregulated. The lender assesses the deal primarily on the expected rental income covering the mortgage payment by a set percentage, usually 125% to 145% at a stress rate. Your personal income is secondary.

A family buy to let is regulated by the FCA because the property will be occupied by a family member as their main home. This means:

• The lender must assess your personal income and expenditure, not just the rent.
• You receive the same consumer protections as a residential borrower.
• Fewer lenders offer this product because of the additional regulatory requirements.
• Interest rates may be slightly higher than standard buy to let, reflecting the smaller pool of lenders and the perceived risk.

Concessionary Rent Explained

Concessionary rent is rent charged at below the market rate. If you are letting a property to your son or daughter at university, for example, you may not charge full market rent. You might charge just enough to cover the mortgage payment, or even less.

Lenders that offer family buy to let mortgages understand this. Some require the rental income to cover at least 100% of the monthly mortgage payment at the pay rate, rather than the higher stress test percentages used in standard buy to let. Mansfield Building Society, for example, uses this approach alongside a top slicing method, where your personal income is used to make up any shortfall between the rent and the required coverage.

Concessionary rent also has a potential tax advantage. If you charge below market rent to a family member, HMRC may treat the arrangement differently from a commercial let. You should take professional tax advice, but in some cases this can simplify the income tax position compared with a fully commercial tenancy.

Which Lenders Offer Family Buy to Let Mortgages?

The market for family buy to let mortgages is smaller than the standard buy to let market. Most high street banks do not offer this product. Building societies and specialist lenders are more likely to have it on their range. Current options include:

• Mansfield Building Society offers a regulated family buy to let with individual underwriting, currently with a 2 year discounted variable rate and a maximum 75% loan to value.
• Furness Building Society offers regulated buy to let products specifically for family lets, with case by case assessment.
• Family Building Society provides buy to let products and has relaunched fixed rate options including 5 year terms.

A mortgage broker with access to the whole market can identify which lenders are currently lending in this space, as product availability changes regularly.

Deposit Requirements

Most family buy to let mortgages require a deposit of at least 25%. Some lenders may require up to 40% depending on the property, the rental income, and the borrower’s overall financial position. A 75% loan to value is the most common maximum, which means you need a 25% deposit.

If you already own your home and have equity, some lenders will allow you to use that equity as security rather than putting down a cash deposit, though this is assessed on a case by case basis.

Tax Implications

The tax treatment of a family buy to let depends on how the tenancy is structured.

Section 24 mortgage interest restriction. Since April 2020, individual landlords in England can no longer deduct mortgage interest from rental income before calculating tax. Instead, you receive a 20% basic rate tax credit on finance costs. This applies to family buy to let arrangements where you charge rent commercially. If you hold the property through a limited company, Section 24 does not apply and full mortgage interest relief is available.

Stamp Duty Land Tax. If the family buy to let is not your only property, you will pay the higher rate of SDLT, which adds a 5% surcharge on top of the standard rates (as of April 2025 onwards).

Capital Gains Tax. When you sell the property, you will pay CGT on any gain. The property will not qualify for Private Residence Relief because it is not your main home.

Who Is a Family Buy to Let Mortgage For?

This mortgage suits several common situations:

• Parents buying for children at university. Rather than paying rent to a private landlord, you buy a property near the university and let your child live there. Other students can also rent rooms, helping to cover costs.
• Housing elderly parents. If your parents need to downsize or move closer to you, buying a property and letting them live there at a concessionary rent can be more practical and affordable than care home fees or private renting.
• Helping adult children onto the ladder. If your child cannot yet afford to buy, purchasing a property for them to rent gives them a stable home while you build equity in an asset.
• Keeping property in the family. Some borrowers use family buy to let to retain a family home that would otherwise need to be sold, letting a sibling or parent continue living there.

Risks to Consider

Family buy to let mortgages carry risks beyond those of a standard investment property.

• Relationship strain. If your family member falls behind on rent, you still need to make the mortgage payment. Enforcing payment or possession against a relative is emotionally and legally difficult.
• Regulatory obligations. As a regulated mortgage, you cannot simply treat this as an informal arrangement. The lender expects formal tenancy documentation and proper management.
• Fewer exit options. If you need to sell, your family member may need to find alternative housing at short notice, which can create pressure on both sides.
• Void periods. If your relative moves out, you may need to either find a new tenant on the open market (which could change the regulatory status of the mortgage) or cover the payments yourself.

Frequently Asked Questions

Can I let to any family member?

Most lenders define close family as children, parents, siblings, grandparents, and in-laws. Extended family such as cousins or aunts typically do not qualify.

Do I need a specific type of tenancy agreement?

Yes. Even though the tenant is family, you need a formal tenancy agreement in place. The lender will require this as part of the mortgage conditions.

Can I charge below market rent?

Yes, this is known as concessionary rent. The lender will still need the rent to meet their minimum coverage requirement, which is typically at least 100% of the monthly mortgage payment.

Is a family buy to let mortgage more expensive?

Rates may be slightly higher than standard buy to let due to fewer lenders competing in this space. However, the difference is often modest, particularly through building societies that specialise in this area.

Can I convert a standard buy to let to a family buy to let?

Not without your lender’s consent. If you have a standard buy to let mortgage and want to let the property to a family member, you must inform your lender. They may require you to switch to a regulated product.

If you want to explore family buy to let options, a broker can compare the full range of lenders and find the best fit for your situation.

Related pages: Buy to Let Mortgages | Limited Company Buy to Let Mortgage

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