Buy to let mortgage, rent to family-who insures the building?

adele123_2

Hi,

My dad is buying a property on a buy to let mortgage for me and my partner to live in, with a view to selling it to us in a few years once I build up my credit rating. My partner and I will be covering all costs associated with the property (during the purchase and while living there), including insurance. I understand we insure our own contents. Can we also insure the building in one joined policy? Or do we need to get a separate insurance policy in my dads name for the building as a rented property?

I have noticed online that for landlords insurance its asked if there is a tenancy agreement in place. We dont plan on having a formal one as you would if it was an outsider as the tenant-do we need to get one in place from an insurance (and mortgage if anyone can advise on this) point of view?

Thanks in advance.

lovinituk

I would have thought the mortgage lender would want to see a tenancy agreement but I might be wrong.

InsideInsurance

In theory your tenancy agreement can make you legally liable for the building which gives you an insurable interest. Unfortunately most insurers dont give tenants the option of insuring the building but a local broker may be able to arrange appropriate cover.

Cross compare that price then with simply getting a landlords policy in your fathers name and standard contents insurance in your name.

k100danny

If the property is bought on a mortgage then the provider will insist the owner insures the property, there is nothing to stop you reimbursing your dad for this.

uknokianut

This info was taken from Virgin Mortgages web page



Although Buy to Let mortgages are not regulated, scenarios where the tenant of the property is the customer's immediate family (e.g. parent, grandparent, child, grandchild, brother, sister) are regarded as regulated loans therefore they must proceed on a standard residential product.

The following restrictions must be met:

Maximum LTV 75%
Affordability will be assessed as per residential lending policy. The customer must be able to afford the repayments (including any other mortgage payments) without taking into account any rent received Repayment vehicles for Interest Only mortgages must follow residential lending policy







i don't think you are allowed to let to family .

uknokianut

google

intermediaries.virginmoney.com/lending-policy

magpiecottage

If 40 per cent or more of a property is occupied by a close relation of the borrower then the mortgage is regulated by the Financial Conduct Authority.

However, regardless of this, the lender will require the building to be insured. They MAY allow this to be in the name of the tenant but you will need to ask them. As the property is the security for the loan, it is the lender's call.

jonesMUFCforever

Surely the owner has to take out buildings cover - nobody else including close family as tenants would have an insurable risk?

kingstreet

The landlord/owner should insure the property. The premiums for the insurance are an allowable expense for tax purposes, so they can be offset against the rental income of the business, reducing the taxable element remaining, along with the other similar expenses.

EmmyLou30

He can take out landlord insurance and say he isrenting to a family member as oposed to strangers, this will bring the premium down slightly (my Dad rents to his Mother in Law, my gran, but there's no mortgage in place).

Your Dad will have to insure the property himself as it's his. If you reimburse him for this, that is up to you. I would check that he actually has consent to let from his mortgage company though as regardless of who is renting, and what's 'officially' on paper, he's still not living at the property as his mortgage will no doubt stipulate he should be.

Mojisola

adele123 wrote: »

My dad is buying a property on a buy to let mortgage for me and my partner to live in

We dont plan on having a formal one as you would if it was an outsider as the tenant-do we need to get one in place from an insurance (and mortgage if anyone can advise on this) point of view?

Whether it's formal or not, your Dad will be a LL and will have to comply with all the LL legislation.