Lender creates specialist 'family buy to let' mortgage product

A mortgage lender has created a special buy to let product aimed at landlords who let a property to a close family member - and who, as a result, do not have to meet the usual stringent borrowing criteria.

Which?, the consumer group that has analysed the mortgage market for ‘family friendly’ products, says that normally, to get finance on an investment property, landlords must prove the property has an interest cover ratio of between 125 and 145 per cent.

However, the new Family Buy To Let mortgage from Mansfield Building Society allows landlords to let a property to a close family member with an interest cover ratio of 100 per cent, so that rent just has to cover payments. 

Landlords can instead use their earnings to make up the ICR shortfall. 

Mansfield says the new product allows landlords to ‘choose a property that is appropriate for their family needs without having to charge excessive rental payments purely to meet strict ICR calculations’. 

David Blake of Which? Mortgage Advisers says: “There are a few lenders that consider this type of situation, with Virgin being the most well known.”

However, unlike the Mansfield product, most family-friendly mortgages will be considered for the wider residential market rather than specifically for buy to let landlords.

“Often with these cases, lenders treat the application like a residential property, as they understand the tenant will be paying a reduced rent. They therefore like applicants to have income of their own to sustain the mortgage” says Blake.