Permission to Let

manchestermike_2

I've just been into the Halifax today to fill in a permission to let form. They have informed me that I may be forced to change my mortgage at my cost to a buy-to-let mortgage... the ins and outs are below, does anyone know information about permission to lets they could let me know before I speak to Halifax on Friday?

Basically, I moved into my house as a new build in August 2002, I am currently on a tracker with Halifax expiring in October 09 with about a £2500 redemption penalty. I have just bought a new property and move in next week and as the buying market is quiet I want to rent my current property until I can sell it.

My mortgage is a repayment mortgage and I'd be looking to cover the interest part with the rental and keep paying the repayment section myself, this would pitch it about right for rental in my area.

Can Halifax refuse my permission to let? Can they force me to change my mortgage at my cost if I want to let? Is there anything else I should know?

Thanks in advance

mat2113

manchestermike wrote: »

I've just been into the Halifax today to fill in a permission to let form. They have informed me that I may be forced to change my mortgage at my cost to a buy-to-let mortgage... the ins and outs are below, does anyone know information about permission to lets they could let me know before I speak to Halifax on Friday?

Basically, I moved into my house as a new build in August 2002, I am currently on a tracker with Halifax expiring in October 09 with about a £2500 redemption penalty. I have just bought a new property and move in next week and as the buying market is quiet I want to rent my current property until I can sell it.

My mortgage is a repayment mortgage and I'd be looking to cover the interest part with the rental and keep paying the repayment section myself, this would pitch it about right for rental in my area.

Can Halifax refuse my permission to let? Can they force me to change my mortgage at my cost if I want to let? Is there anything else I should know?

Thanks in advance

I went into barclays this morning to ask about this, the manager said that i could let on my house with no problem at all. He said that it would cost me £100 as a fee and when my deal is up ( june 09 ) that i would have to go on to the svr , i couldn't go on to a fixed deal. The rent that i would get would more than cover the mortagage.

gauly

In general a buy-to-let mortgage is more risky for the bank, therefore you will need a different (and more expensive) mortgage. I think some banks do make an exception if there are exceptional reasons for wanting to let out your home such as being required to work away from home for a short time. Since this is a proper buy-to-let property and is not going to be your only house I think they will force you to change mortgage.

To qualify for a buy-to-let mortgage at the moment you will generally need quite a bit of equity in the house (15-20%? depending on the lender). You will also need the rent on the property to cover considerably more than the interest on the loan - in general the rent needs to be 125% of the interest.

On another point, if you do manage to qualify for a buy-to-let mortgage then it may be best for tax reasons to make it interest only and use any extra cash to pay off the mortgage on your main property. This is because you can subtract the interest from any rent before you work out income tax.

karenj

Strange. If you had a 'normal' mortgage, i.e. not a buy to let one, then they surely would have agreed for you to rent the property, without changing it to a buy to let mortgage. We have rented our property for the last 3 years, asked permission from the lender, no problem, no charge, no increase in interest rate and also asked permission to whom we pay the ground rent to - again no problem. However, the situation with lenders at the mo, it may be that this is what they require. Hope you can sort it.

hethmar

Nationwide just gave consent over the phone for this to happen - not heard about any charges as yet.

manchestermike_2

gauly wrote: »

In general a buy-to-let mortgage is more risky for the bank, therefore you will need a different (and more expensive) mortgage. I think some banks do make an exception if there are exceptional reasons for wanting to let out your home such as being required to work away from home for a short time. Since this is a proper buy-to-let property and is not going to be your only house I think they will force you to change mortgage.

To qualify for a buy-to-let mortgage at the moment you will generally need quite a bit of equity in the house (15-20%? depending on the lender). You will also need the rent on the property to cover considerably more than the interest on the loan - in general the rent needs to be 125% of the interest.

On another point, if you do manage to qualify for a buy-to-let mortgage then it may be best for tax reasons to make it interest only and use any extra cash to pay off the mortgage on your main property. This is because you can subtract the interest from any rent before you work out income tax.

How can they force you into changing your mortgage product though? The house wasn't bought as a buy to let, it was my main residence for 6 years until I bought the new place.

Will have to see when they call me, but as everyone else seems to be having no problems I'm hopeful there won't be this end and the woman in the branch didn't know what she was talking about :rolleyes:

Otherwise they'll lose the mortgage altogether

tbs624

manchestermike wrote: »

I've just been into the Halifax today to fill in a permission to let form. They have informed me that I may be forced to change my mortgage at my cost to a buy-to-let mortgage... the ins and outs are below, does anyone know information about permission to lets they could let me know before I speak to Halifax on Friday?

my underlining -that's "may" , not "we definitely will.

manchestermike wrote: »

... Can Halifax refuse my permission to let? Can they force me to change my mortgage at my cost if I want to let?

Yes, and yes. The decision is subject to the Halifax's agreement, it's not a unilateral choice on your part.

manchestermike wrote: »

How can they force you into changing your mortgage product though? The house wasn't bought as a buy to let, it was my main residence for 6 years until I bought the new place.

You've answered your own question there, I think.

manchestermike wrote: »

Will have to see when they call me, but as everyone else seems to be having no problems I'm hopeful there won't be this end and the woman in the branch didn't know what she was talking about :rolleyes:

Otherwise they'll lose the mortgage altogether

...and you'll get to pay a fat redemption fee to them and a hiked rate on a BTL with someone else anyway or sell at a loss.The woman in the branch was in effect covering herself - the final decision is unlikely to be made at branch level. You'll need to see a Halifax Mortgage Reviewer to discuss the fine detail of what their requirements are before they'll agree.

Get some proper rental forecasts gathered together before you go in , and you'll need to show how you'd cope with a rental void. If you are already stretched on a new mortgage you have got to ensure that you have some kind of contingency fund.
Get yourself over to Landlordzone and check out the set-up costs involved in letting property out.

manchestermike_2

tbs624 wrote: »

my underlining -that's "may" , not "we definitely will.

Yes, and yes. The decision is subject to the Halifax's agreement, it's not a unilateral choice on your part.

You've answered your own question there, I think.

...and you'll get to pay a fat redemption fee to them and a hiked rate on a BTL with someone else anyway or sell at a loss.The woman in the branch was in effect covering herself - the final decision is unlikely to be made at branch level. You'll need to see a Halifax Mortgage Reviewer to discuss the fine detail of what their requirements are before they'll agree.

Get some proper rental forecasts gathered together before you go in , and you'll need to show how you'd cope with a rental void. If you are already stretched on a new mortgage you have got to ensure that you have some kind of contingency fund.
Get yourself over to Landlordzone and check out the set-up costs involved in letting property out.

I'm not too stretched, I can cope with the two mortgages if I have to, but would rather have the interest paid off on one of them by letting it. The plan is to hopefully let to a friend who is looking for somewhere rather than strangers as I still want to try and sell the house while letting it out. I've already fallen out with Halifax about my new mortgage - they refused to lend me the amount even though I could afford it - so I wonder if that's on file

Premier_2

manchestermike wrote: »

How can they force you into changing your mortgage product though? The house wasn't bought as a buy to let, it was my main residence for 6 years until I bought the new place.

Will have to see when they call me, but as everyone else seems to be having no problems I'm hopeful there won't be this end and the woman in the branch didn't know what she was talking about :rolleyes:

Otherwise they'll lose the mortgage altogether

Refer to the terms of your loan agreement. Normally residential mortgages are offered on the basis they are secured against the property the borrower uses as their main residential home.

If you are no longer using the property for that purpose, you will be in breach of that loan agreement.

If you want to let your property, you will need some form of consent to let either as a variation to your current loan agreement or by transferring the loan to a more appropriate product i.e. a BTL mortgage.

There is no obligation on the lender to provide you with a consent to let vartaition on your current loan agreement, no ob;ligation for them to offer you an alternative product and no obligation from your side to continue to give them your business.

Some lenders do not provide a consent to let under their normal residential mortgage terms, some do. Most that do will have their own specific eleigibility criteria e.g. limited to a certain period, not available if the owner is buying another property, etc

Don't cut off your nose to spite your face. Remortgaging with a current lender will probably result in lower fees than remortgaging with a different lender e.g. if you are not requesting any more money, there should be no need to have a new valuation survey carried out if you keep the loan with the Halifax. However, there may be better overall terms available elsewhere. Seek advice from an IFA if necessary.

manchestermike_2

Premier wrote: »

Refer to the terms of your loan agreement. Normally residential mortgages are offered on the basis they are secured against the property the borrower uses as their main residential home.

If you are no longer using the property for that purpose, you will be in breach of that loan agreement.

If you want to let your property, you will need some form of consent to let either as a variation to your current loan agreement or by transferring the loan to a more appropriate product i.e. a BTL mortgage.

There is no obligation on the lender to provide you with a consent to let vartaition on your current loan agreement, no ob;ligation for them to offer you an alternative product and no obligation from your side to continue to give them your business.

Some lenders do not provide a consent to let under their normal residential mortgage terms, some do. Most that do will have their own specific eleigibility criteria e.g. limited to a certain period, not available if the owner is buying another property, etc

Don't cut off your nose to spite your face. Remortgaging with a current lender will probably result in lower fees than remortgaging with a different lender e.g. if you are not requesting any more money, there should be no need to have a new valuation survey carried out if you keep the loan with the Halifax. However, there may be better overall terms available elsewhere. Seek advice from an IFA if necessary.

Thanks Premier for the advice.

I'll have an issue with Halifax as due to the way I take my salary etc they won't give me a mortgage for anything like the property value. So I'd have to move it.

That's the problem with companies that are pretend banks

Premier_2

manchestermike wrote:

...I'll have an issue with Halifax as due to the way I take my salary etc they won't give me a mortgage for anything like the property value...

Different lenders offer different criteria for lending on a BTL mortgage.
Halifax base theirs solely on the anticipated achieveable rental value i.e. Annual rental income must equate to a minimum of 125% of the annual (interest only) mortgage payments based on the current initial rate for the mortgage deal you choose.

The only income they require is that you earn a minimum £25k per year to be considered eligible to apply for a BTL mortgage.


Edit: from your OP, it sounds as through the anticipated rental income will not be sufficient for the loan you require. I suggest you think very carefully about your intention to let the property as it doesn't seem like a very good business proposition if the rental doesn't at least meet their lending criteria. You may end up earning more by selling the property and putting your money in the bank.