"Renting" to relative at special rate

[Sarsfield]

I asked a similar question a while back, but circumstances have changed somewhat since then (both for me and the financial world in general!)

If I were to buy a property for a parent who would be paying 'rent' to me at well below the market rate, how would a lender view this in terms of the type & size (and term) of loan they would advance?

If it's relevant, I'm already a homeowner with a mortgage of about 50% of the value of my home.

 

[PM1234]

Why not just say you are buying an investment property?

If you advise your lender that there is a shortfall in the expected rental income, this will affect your NDI. If you advise them of the market rental income and service the difference yourself, it should not make any difference to your multiples provided you are eligible for the mortgage itself and able to service the mortgage repayments yourself.

 

[Ravima]

Don't.

What if they do not pay, or circumstances change or relationship changes? Can you afford t opay the mortgage in full yourself from own funds?

 

[Mommah]

I don't think the bank need to know about your special rate at all.
I'm renting to a family member with a disability and she is on rent allowance...I get about 33% less from her than I would from a market tenant. Thems the breaks

 

[Trustmeh]

Last I checked the banks dont take into account any rent you hope to get...they look at what you have already at your disposal. Renting to a family member in this way is not that bad a deal - you can claim a rental loss when it comes time to do the tax. Probably best to consilt an accountant the first year if you dont get all the info you need off this site

Best to get interest only in this case as well...no point payng down the capital...it will only compund your losses.