RENTING? Check your LL has permission to let that property.

franklee

Rallan1984 wrote: »

Good day guys

Been reading avidly but really need some answers about something.

My wife and I have decided to rent our house out to good friends of ours, whilst we live in the family farm, running it till it gets sold.

We are using this time to overpay and save as much as possible.

Our mortgage is currently variable, 2.5%, repayment 550 a month on a 144k mortgage.

After reading this I informed chelt and Gloucester informing them of the situation, and they stated I will loose my variable, go to fixed and my mortgage will rise to 900 a month. I will also not be able to return to the fixed once I move back home.

With our tenants to be, we have agreed 575 PCM plus bills. So basically they are paying our mortgage to us.

Clearly we don't want to make a loss during this time, so then told the mortgage company I won't rent it out.

If ll and tenants are happy, mortgage company still gets paid I can't see how there is a problem?
What can legally happen if the mortgage firm find out somehow tenants are in?

Regards In advance.

The point is you are changing the risk associated with the 144k they have lent you. It's a substantial amount of money which they have lent you based criteria which you are now substantially changing.

I think the wost they can do is call in the loan which would mean you having to remortgage elsewhere. Other steps they may take is to charge you for letting out possibly along the lines in your post.

Thing is what do you do if the tenants are in-situ and your mortgage rises to the 900 a month, you can't just hike the rent up.

Also without consent to let the tenants have less rights if you get repossessed as the tenancy agreement isn't binding on the lender. Things are better since the Mortgage Repossessions (Protection of Tenants etc) Act 2010 the guidance to this has the background:
http://www.communities.gov.uk/publications/housing/mortgagerepossessionguidance

As for how they find out, electoral role, council tax, credit taken out at the address? We all have to register with so many companies these days we leave a paper trail at our address.

Do you have enough equity to be able to get a BTL mortgage, can you shop around?

tbs624

Rallan1984 wrote: »

My wife and I have decided to rent our house out to good friends of ours, whilst we live in the family farm, running it till it gets sold.

.....Our mortgage is currently variable, 2.5%, repayment 550 a month on a 144k mortgage.

....With our tenants to be, we have agreed 575 PCM plus bills. So basically they are paying our mortgage to us.

Clearly we don't want to make a loss during this time, so then told the mortgage company I won't rent it out.

Rallan1984 - even if you were able to stay on your current mortgage with no additional CTL costs you would very much be running this proposed tenancy at a loss, with that proposed rent of just 25 quid per month more than your mortgage repayments.

Have you not considered the additional letting costs of , for example, getting your EPC done ( unless you already have one), your gas safety check and certification, your LL insurance premium. What contingency fund do you have available for emergency repairs which may be required? What if your friends lose their jobs or are otherwise unable to pay the rent in full and on time?

Rallan1984 wrote: »

If ll and tenants are happy, mortgage company still gets paid I can't see how there is a problem?
What can legally happen if the mortgage firm find out somehow tenants are in?

It's a serious breach of your residential mortgage Ts and Cs - absolute worse case scenario is that lender can call in your mortgage.

There's so much cross referencing of databases these days. You will be obliged to let HMRC know that you are letting the property for a start - you have to declare the "unearned income" even if you make no profit. Note that you can only set down the interest part of any mortgage against the rental income. See here for further info and have a look at HMRC's PIM (property income manual) Search on this board for G_Ms frequently updated post on guidance for newbie LLs.

You have made your first letting mistake by agreeing a rent figure with these family friends before sitting down and working out what the true costs will be of your renting the property to anyone.

mchale

tbs624 wrote: »

It's a serious breach of your residential mortgage Ts and Cs - absolute worse case scenario is that lender can call in your mortgage.

Highly unlikely, I've yet to hear of a mort being called in when the lender has found out the property is let, and the payments are up to date and account is in good order.

OP I'd be more worried if property was burnt down and insurance company found out you had not informed lender it was rented out, that could be a BIG can of worms

silvercar

mchale wrote: »

.
OP I'd be more worried if property was burnt down and insurance company found out you had not informed lender it was rented out, that could be a BIG can of worms

That was discussed on another thread:

https://forums.moneysavingexpert.com/discussion/3686659

post 55:

silvercar wrote:

From my property renewal form:

"MATERIAL FACTS It is essential that you disclose all material facts at renewal, ie any fact which could influence an insurer's assessment of the risk. If you are in doubt about whether a fact is material please contact us [the broker] for guidance."

In the policy document:
There is a section headed "change of circumstances" with a list of changes that would require notification, but none of them relate to the mortgage.

In fact I can't find any mention of a mortgage in the documents other than "3rd parties noted to have an interest: [name of lender]"

If anyone wants to read the whole policy it is here:

http://www.mma-insurance.com/a/pdf/R...rs_Wording.pdf

post 56:

kingstreet wrote:

I went through another insurer's online documentation earlier and I could find no reference either.

It looks like I was being unduly cautious. Apologies folks.

I am a Mortgage Adviser. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice

mchale

Thats providing the OP gets LL insurance, if he/she is cutting corners then the chances are they will only have "normal" insurance.

tbs624

mchale wrote: »

Highly unlikely, I've yet to hear of a mort being called in when the lender has found out the property is let, and the payments are up to date and account is in good order.

note that I said "absolute worse case scenario". However there is the possibility that the Lender, having discovered that the mortgagee has been letting without their consent, may alternatively decide to levy a nice fat fee and insist that the mortgage product is switched.

The fact that you personally have no knowledge of it happening shouldn't really allay any worries that the OP may now have on either score..

See http://forum.moneysavingexpert.com/showthread.php?p=49384655

Rallan1984

Thanks guys, I will have a good sit down and read all the replies in the morning.

Regarding insurance I have organised LL insurance and is all I place ready to go.

It may seem strange that I'm not in this for the money, to cover the cost of the house, and overpay myself whilst living elsewhere.

Will have a good read later, thanks for your efforts. I will also look elsewhere for a btl mortgage if I need to switch. Hopefully a better deal than chelt and glos are offering.

House is valued at 165, with 144 mortgage remaining.

Regards

MissMoneypenny

silvercar wrote: »

That was discussed on another thread:

https://forums.moneysavingexpert.com/discussion/3686659

post 55:

I see from that thread that you have been looking at your insurance policy guidelines, but have you never written to your broker and asked if they will still pay out on a claim if your don't have consent to let? As I have said before, when you listed their details previously, I wrote to them and asked them to confirm this in writing but all their reply said was that they may have to inform the lender.

From the Association of Residential Letting Agents website:-

http://www.arla.co.uk/information/in...ngs-insurance/

"Consent. It is essential that you advise and obtain consent to let your property from your mortgage lender, existing insurer and head lessee (for leasehold properties). Failure to obtain written consent from these parties may render your insurance void in the event of a claim. Sadly there have been many instances where buildings claims have been totally rejected because the insurer and or mortgage lender was not advised the property was let."

silvercar

MissMoneypenny wrote: »

I see from that thread that you have been looking at your insurance policy guidelines, but have you never written to your broker and asked if they will still pay out on a claim if your don't have consent to let? As I have said before, when you listed their details previously, I wrote to them and asked them to confirm this in writing but all their reply said was that they may have to inform the lender.

I've never linked to my insurance details previously, though I may have named my broker. As it happens the broker changed underwriters last year.

I find it rather creepy that you write to my insurance broker.

But you now have your answer - they may inform the lender. That is normal practice in a large claim as the lender is named as having an interest in the policy.

MissMoneypenny

silvercar wrote: »

I've never linked to my insurance details previously, though I may have named my broker. As it happens the broker changed underwriters last year.

I find it rather creepy that you write to my insurance broker.

I told you at the time that I was doing it and I gave their reply, as I was concerned that you seem to be telling people they would still be covered by their insurances even if they lender didnt give consent to let. You claimed something along the lines that your insurers would still pay out. It's always better to check yourself than to believe what others write on an internet site.

Are you going to pay people if their insurers won't pay out?

silvercar wrote: »

But you now have your answer - they may inform the lender. That is normal practice in a large claim as the lender is named as having an interest in the policy.

You have missed the point: I asked them to confirm in writing that they would still pay out if a landlord didn't have consent to let from their mortgage lender; they didn't do this.

As posted many times on this site, ARLA have a warning on their website

http://www.arla.co.uk/information/in...ngs-insurance/

"Consent. It is essential that you advise and obtain consent to let your property from your mortgage lender, existing insurer and head lessee (for leasehold properties). Failure to obtain written consent from these parties may render your insurance void in the event of a claim. Sadly there have been many instances where buildings claims have been totally rejected because the insurer and or mortgage lender was not advised the property was let."

My bold.