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  • FIRST POST
    paulhutch
    Do I get consent to let from lender to rent out my house?
    • #1
    • 25th Aug 10, 5:44 PM
    Do I get consent to let from lender to rent out my house? 25th Aug 10 at 5:44 PM
    Hi
    My wife and I have had a residential mortgage for 4 years with a perfect payment history. We are moving to Hong Kong for approx 2-3 years. Some very good friends of ours are going to rent our house. The agreed rent is considerably lower than the mortgage payments which is fine by us as we have somewhere to store our things and also have someone we can trust 100% in the house. The mortgage lender is Northern Rock. They say they, to get a consent to let,
    - must have 30% equity
    (we have no where near)
    -the incoming rent must be 120% of the mortgage payment

    We intend to set out a tennancy agreement, get gas safety certs and get land lords insurance. We are also extremely confident of NOT failing the mortgage payments.
    Do we really need to get consent to let from the lender?
    How could the lender find out?
    What would be the reprocusions for landlord and tennent?
    Advice please, many thanks.
Page 1
    • leitmotif
    • By leitmotif 25th Aug 10, 6:00 PM
    • 243 Posts
    • 140 Thanks
    leitmotif
    • #2
    • 25th Aug 10, 6:00 PM
    • #2
    • 25th Aug 10, 6:00 PM
    Yes, you absolutely do need consent to let from your lender. Be aware that the lender will probably put you on a buy-to-let mortgage, which will have a higher interest rate. At the end of the day, they're perfectly entitled to do so, as you're effectively making money on what they've lent you, so they want a cut. Also be aware that if you don't get permission, you could get in trouble.
    • NEH
    • By NEH 25th Aug 10, 6:17 PM
    • 2,411 Posts
    • 1,896 Thanks
    NEH
    • #3
    • 25th Aug 10, 6:17 PM
    • #3
    • 25th Aug 10, 6:17 PM
    Hi
    My wife and I have had a residential mortgage for 4 years with a perfect payment history. We are moving to Hong Kong for approx 2-3 years. Some very good friends of ours are going to rent our house. The agreed rent is considerably lower than the mortgage payments which is fine by us as we have somewhere to store our things and also have someone we can trust 100% in the house. The mortgage lender is Northern Rock. They say they, to get a consent to let,
    - must have 30% equity
    (we have no where near)
    -the incoming rent must be 120% of the mortgage payment

    We intend to set out a tennancy agreement, get gas safety certs and get land lords insurance. We are also extremely confident of NOT failing the mortgage payments.
    Do we really need to get consent to let from the lender?
    How could the lender find out?
    What would be the reprocusions for landlord and tennent?
    Advice please, many thanks.
    Originally posted by paulhutch

    We're with Northern Rock and looked into renting, fortunately for us we can meet those two criteria. It was going to cost approx £200 odd and a form or two.. So the good news is you didn't have to transfer to a buy to let mortgage....

    However if you are certain you can't meet that criteria then no you can't rent it's as simple as that...If you do a search on here you will find plenty of stories of people who have had done what you are suggesting only for it go horribly wrong....Your insurance will also probably be invalid...
  • paulhutch
    • #4
    • 25th Aug 10, 7:21 PM
    • #4
    • 25th Aug 10, 7:21 PM
    thanks for that.
    Regarding making money, as i said. the rent comes no where near the mortgage payment,we stand to be out of pocket, its more of a house sitting arrangement,as we have pets that need looking after, very convenient for both parties. What kind of trouble are we talking, and HOW would the lender find out?
    • NEH
    • By NEH 25th Aug 10, 7:26 PM
    • 2,411 Posts
    • 1,896 Thanks
    NEH
    • #5
    • 25th Aug 10, 7:26 PM
    • #5
    • 25th Aug 10, 7:26 PM
    thanks for that.
    Regarding making money, as i said. the rent comes no where near the mortgage payment,we stand to be out of pocket, its more of a house sitting arrangement,as we have pets that need looking after, very convenient for both parties. What kind of trouble are we talking, and HOW would the lender find out?
    Originally posted by paulhutch
    Check the sticky at the top of the fourm and do a search for permission to let...there will be a number of stories there

    It will still be counted as renting and your insurance probably won't be valid anymore meaning if there is a fire then you won't have any insurance to rebuild the house for example.

    Your landlord insurance will be dependent on having permission to rent from your lender so you won't be able to get that either.
  • ninky
    • #6
    • 25th Aug 10, 7:31 PM
    • #6
    • 25th Aug 10, 7:31 PM
    far be it from me to suggest something not strickly but as they are good friends why not just come to an agreement by which they are housesitting (i don't think you need permission for this). then your friends can kindly agree to gift you some money.....conveniently. you might need to inform the lender (check your mortgage details) but tell them they are house sitters not tenants.

    however, i'd make sure you cover all the sensible precautions like getting a gas safety check, having smoke and carbon monoxide alarms etc and discuss with your friends the contents insurance (what happens if the house burns down and their stuff goes up with it?).
    Those who will not reason, are bigots, those who cannot, are fools, and those who dare not, are slaves. - Lord Byron
  • paulhutch
    • #7
    • 25th Aug 10, 7:32 PM
    • #7
    • 25th Aug 10, 7:32 PM
    good point on the insurance
  • tbs624
    • #8
    • 25th Aug 10, 7:34 PM
    • #8
    • 25th Aug 10, 7:34 PM
    If you are planning to let at a figure way under the market rent then HMRC may have a comment on the arrangement
  • paulhutch
    • #9
    • 25th Aug 10, 7:34 PM
    • #9
    • 25th Aug 10, 7:34 PM
    now that sounds like the answer im looking for, providing my lender plays ball, thanks
  • paulhutch
    If you are planning to let at a figure way under the market rent then HMRC may have a comment on the arrangement

    please explain this
  • wodgerdodger
    There are of course also Income tax implications, I can't be certain but believe a letting agent is duty bound to notify Inland Revenue however in your case any payment from your friends/tenants should be declared.
    As you would be Non resident , if you havent/dont apply for Non Resident Landlord status then tax should be deducted by the "tenant" and paid by them to IR.
    Gets very mucky but as far as I know IR do not cross reference with the Lender whether permission to let was sought/granted.
  • paulhutch
    but do insurance companies check with lenders that consent to let has been sought?
    or if they dont, do they notify lenders that landlords insurance has been purchased on the property?
    • nembot
    • By nembot 25th Aug 10, 8:23 PM
    • 1,200 Posts
    • 2,218 Thanks
    nembot
    Changing my residential mortgage to BLT was a one off £95 fee, interest rate remained the same (Abbey, now Santander).

    Insurance (buildings + 10k white goods) was cheaper too - which suprised me.

    You will however have to comply with legal requirements, gas certificate etc.

    This site was invaluable to me when starting off >> http://www.landlordzone.co.uk/
    Last edited by nembot; 25-08-2010 at 8:29 PM.
    • NEH
    • By NEH 25th Aug 10, 8:25 PM
    • 2,411 Posts
    • 1,896 Thanks
    NEH
    but do insurance companies check with lenders that consent to let has been sought?
    or if they dont, do they notify lenders that landlords insurance has been purchased on the property?
    Originally posted by paulhutch

    I'm not sure how it works but certainly it would come out if you were to make a claim as they would check then....

    My hubby believes that when he got a quote for landlord's insurance with Direct Line they asked him if he had permission to let....
  • tbs624
    If you are planning to let at a figure way under the market rent then HMRC may have a comment on the arrangement

    please explain this
    Originally posted by paulhutch

    See this link on the HMRC webpages, on
    PIM2220 - Deductions: specific items: properties not let at a commercial rent
    • Owain Moneysaver
    • By Owain Moneysaver 25th Aug 10, 10:51 PM
    • 7,507 Posts
    • 7,923 Thanks
    Owain Moneysaver
    If you fail to tell your lender you are renting out the property, and so evade paying a buy-to-let mortgage rate, you run the risk of prosecution for fraud. You will be in breach of your mortgage agreement, which might be recorded on your credit history.
    • leitmotif
    • By leitmotif 25th Aug 10, 11:41 PM
    • 243 Posts
    • 140 Thanks
    leitmotif
    If you fail to tell your lender you are renting out the property, and so evade paying a buy-to-let mortgage rate, you run the risk of prosecution for fraud. You will be in breach of your mortgage agreement, which might be recorded on your credit history.
    Originally posted by Owain Moneysaver
    Moreover, any breach of a mortgage agreement can be used by the lender as a reason to demand payment of the outstanding balance in full within a relatively short space of time. I'm not saying they would do this, but it's certainly not out of the question. If this scenario did materialise and, as you say yourself, you 'own' less than 30%, then unless you were able to sell your house incredibly quickly you could find yourself facing repossession and subsequent credit blacklisting for a couple of decades, which would even make it hard to pass a credit check prior to just renting a house.
  • wodgerdodger
    If you fail to tell your lender you are renting out the property, and so evade paying a buy-to-let mortgage rate, you run the risk of prosecution for fraud. You will be in breach of your mortgage agreement, which might be recorded on your credit history.
    Originally posted by Owain Moneysaver
    Not all Lenders would automaticaly switch the loan to a BTL rated basis. WE moved abroad in 2008 for 18 months and our Lender , A&L now santander, gave mermission to let and allowed us to stay on the existing products,They needed to see sight of the AST and confirmation that the proposed rent would cover the mortgage.

    I appreciate things have changed over the last 2 years and perhaps even Santander would not be so generous today but if it is the intention to return being a job posting not all Lenders willl react like NR.

    However, failure to gain permission puts you in a very serious position for all the reasons given. I am not convinced legal action for fraud would be instigated but is the ultimate potential.

    Provided mortgage is paid, and that is a big proviso, Lender may not discover infingment of the mortgage conditions but you are taking an enormous risk and so many things could go wrong with your "friends" own circumstances, buildings insurance etc etc it would be ,for me, far too high a risk to take.
    • Blackpool_Saver
    • By Blackpool_Saver 25th Aug 10, 11:47 PM
    • 5,843 Posts
    • 7,458 Thanks
    Blackpool_Saver
    Does a buy to let mortgage require a 120% equity also ?
    Blackpool_Saver is female


  • clutton
    ""If you do a search on here you will find plenty of stories of people who have had done what you are suggesting only for it go horribly wrong"


    show us just one link please ? There has never been ANY repossessions in the last 11 years for not having consent to let.... Lenders dont care to spend time and money on pointless court cases to repossess.. all they care about is getting their money every month....

    Tenants on this forum get quite hysterical about "consent to let" and the truth is that there is no link between insurers and lenders.... The LL has separate contracts with each.

    Lenders insist that landlords have the property insured.. and yet... with all the properties i own... only ONE lender annually asks me to provide annual proof that i have their property insured.... i do, of course i do, but the other lenders don't know if i am insured or not, as the dont ask after the first year.

    When i have had claims on my insurance, claims-adjusters who have come to look at the problem dont ak "have you got consent" they just crack on and sort it out.

    OP has been given good advice about the rent and tax tho... you need to contact HMRC to sort this out..

    Finally, even tho they are friends, what will you do if the tenancy goes wrong ? There have been stories, and they crop up fairly regularly here, of friends taking the mick and if that happens- how are you going to manage court action if you have to evict them from half way round the world ? If the freinds circumstances change and they want to leave after a year, what will you do then ?

    If you then decided to do this anyway, and got a lettings agent involved, the cost to you of their fees, might wipe out any house price increase gain which you are hoping to rely on...

    I let my home to friends years ago when i was abroad and they did not pay the rent at all !!!

    There is a lot to think about
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