Mortgage for renting to relative

Peikeron

Hi, my sister and I are falling foul of trying to get a mortgage on a property that we rent to our dad.

The current situation is that we have a 3 person mortgage where I own 50% and my sister and ex-partner had 25% each. My sister split up from ex a few years ago and solicitors have been involved recently to amicably remove the ex from the deeds and mortgage of the house in return for a financial settlement. To do this we need to remortgage.

For several years, my Dad and sister were sharing this same house and my Dad has been paying me rent for half of the house, and he actually receives Housing Benefit which covers this (he is 80). A year ago, my sister moved out and we also started the process of changing the tenancy arrangement so my Dad would be now effectively renting the whole house (from both of us).

So the situation we are trying to achieve is for my dad to rent the property from my sister and I (his housing benefit covers his rent, and the rent covers about two thirds of the mortgage). The outstanding mortgage is less than 90K, we can easily pass affordability test even without the rent. We just don’t seem to find any lender that will offer us a mortgage for this situation. I understand that relative tenants are seen as higher risks because we are less likely to evict. But don’t understand the following:

We can get a dependent relative mortgage (based on affordability) as long as we don’t receive any rent. If this is the case and we have proven that we can afford the mortgage even without receiving any rent where is the risk to the bank/building society such that the want us not to have this income (which in turn makes it more affordable)?

Does anyone out there know of any banks/building societies that will lend in this scenario. A further wrinkle is I don’t currently have a mortgage on my main property (sold my house, moved into partners, we will move together into a joint property in about a year’s time).

Hope someone has some advice!

glosoli

It is a regulated Buy to Let mortgage you require as the property is rented out to family members, and whilst they are few and far between there certainly are lenders who do this. Maybe try a mortgage broker if you are struggling to find one.

Peikeron

Thanks for the reply glosoli. My IFA has been looking for a suitable mortgage provider for about 7 months so far and hasn't found a single lender willing to even entertain this situation. Have you come across a lender recently that you know to still provide this kind of mortgage?

amnblog

7 months?

How can it take 7 months to establish you can't do a case?