Letting Out: Mortgage Restrictions... Need Help!

FireFly_3

I'm new to the forum so apologies if I don't manage to post this in the right place!

I really need some advice. I urgently have to relocate closer to home for family reasons which means that I'll need to let out my flat (I'm currently 400+ miles away so commuting isn't an option). When I spoke to my mortgage providers about this and explained the circumstances, they were very strict about this and stated that I could only do this for 12 months (I have 18 months left on my fixed rate) and couldn't switch to a buy-to-let until this term was up. I need to move in February 2009 but I have no current intention of returning (my plan to is let it out until the market picks up, then sell) and due to this restriction they've imposed, this would mean that I'd have six months of an empty flat following the 12 months.

I've sought private advice and the two options I've had are:

1) Tell the mortgage company that I'm letting it out BUT give them the wrong date (i.e. inform them that I'm moving in say June rather than Feb and just have my mail diverted until that time) or...

2) Don't tell them at all.

What to do? It's a difficult situation as I really can't change my moving date... circumstances beyond my control... and I also can't afford to have an empty flat for six months until I can change mortgages.

Can anyone help? Or even try and cheer me up a little?

Thanks

A Sad FireFly

feisty1

who is yr lender?

Paulgonnabedebtfree

FireFly wrote: »

I'm new to the forum so apologies if I don't manage to post this in the right place!

I really need some advice. I urgently have to relocate closer to home for family reasons which means that I'll need to let out my flat (I'm currently 400+ miles away so commuting isn't an option). When I spoke to my mortgage providers about this and explained the circumstances, they were very strict about this and stated that I could only do this for 12 months (I have 18 months left on my fixed rate) and couldn't switch to a buy-to-let until this term was up. I need to move in February 2009 but I have no current intention of returning (my plan to is let it out until the market picks up, then sell) and due to this restriction they've imposed, this would mean that I'd have six months of an empty flat following the 12 months.

I've sought private advice and the two options I've had are:

1) Tell the mortgage company that I'm letting it out BUT give them the wrong date (i.e. inform them that I'm moving in say June rather than Feb and just have my mail diverted until that time) or...

2) Don't tell them at all.

What to do? It's a difficult situation as I really can't change my moving date... circumstances beyond my control... and I also can't afford to have an empty flat for six months until I can change mortgages.

Can anyone help? Or even try and cheer me up a little?

Thanks

A Sad FireFly

A couple of things to note from someone who once let their flat out. There is a bit more involved with flats as you are supposed to tell the lender AND the freeholder. There is also the issue of insurance. Contents insurance is usually only available at a higher rate and a valid policy is only available at all if bought via a bona fides letting agency. Not sure about buildings insurance. My buildings insurance is paid with the service charges. Unlikely, but it could lead to big problems if, for instance, your unofficial tenant caused a fire and burnt the block down or if they caused other less dramatic damage. If you were to do unofficial letting, you would need to be certain that the tenant(s) could be totally trusted, that they wouldn't be claiming benefits from your address, and that they were not particularly traceable such as being on the electoral register. The whole thing could become a minefield - especially when you consider that the income (less expenditure) is subject to income tax. Also, if you do let out officially, your lender will probably insist that a bona fides letting agent is used inorder to avoid potential legal complications.
IMO, if you want to go the unofficial route (and if you have a spare bedroon) you would be better off leaving a bedroom free and classifying the tenant as a lodger (making it look as if you are still living there). Not sure but you MAY have to tell your mortgage company though they may be more willing to go with this scenario. It may mean the "lodger" signing something to say that they could be evicted more easily in the event of repossession. You would also be well advised to inform your contents insurer (maybe there will be no contents left but you don't say). Another benefit is that money from a lodger is tax free if below a certain level (maybe £4 grand to £5 grand a year - you will have to look that up yourself). Also, bear in mind that you may have to stump up for extra council tax if you are losing a lone occupancy discount (renting out fully to someone else means that THEY should pay the council tax I think).
I would say that going the "lodger" route is probably the simpler one - though it could get more complex if you have to register for electoral roll/council tax in another area. The records possibly won't cross-check if you are 400 miles away but you never know in this computer age. Anyay, this situation would only exist for a few months while you were sorting out something more permanent.

Another thing to consider is whether you and the lender correctly understood each other regarding the 12 month issue. My hunch is that they meant that the INITIAL let could only be for a 12 month period. I think they neglected to mention that this could be re-negotiated after the 12 months for ANOTHER 12 month period and so on or even revert to a rolling contract after the first 12 months. I say this because I understand (perhaps incorrectly) that tenants rights are within certain limits during a 12 month tenancy but increase vastly if the let is for more than 12 months (possibly to the level of sitting tenant?) - hence the need to renew or get a new tenant. Sitting tenants are much harder to evict legally which could have an impact on the value of your home and the lender's level of security.

DISCLAIMER: Please note. I'm not an expert or a legal eagle. Some of the above is a brief summary of issues that I needed to tackle when I let out my flat about 7 years ago. Laws may have changed since then. I may have got some of the above wrong. I take no responsibility for any errors as I'm just providing you with my (layman's) understanding of some of the issues that may be involved.