Stuck between a rock and a hard place.....

desperate4help_2

I bought my house a year ago and have (along with the rest of the country) lost 20% of its value. It was a 97% mortgage LTV and so am in considerable negative equity now.
I have to relocate due to work and so thought the process of renting would be relatively straight forward.....wrong! I had looked into a local agent and all the gas/electric/hip checks I would need to arrange and established that the rental would cover the mortgage payment, just.
Why I left it till last I dont know, I guess I thought it would be quite straightforward, but I went to the Halifax today to explain my predicament and ask for permission to lease, thinking I'd have to take a bit of an interest increase on the chin. Worse than that, they have refused! I was told because of being in negative equity there was no product that would allow me to lease that they would be able to switch me to.
I just dont know what to do. I have to move because of work, I cant sell as I would be in about 30k of debt (not an option!). I am so tempted to just rent it anyway. The Letting agent is confident they will fill it - but then they always are I suppose. My main problem if I went down that road is the buildings insurance. Obviously Id need landlords insurance instead....is there any insurance company out there that wouldnt inform the bank that i could go with? This is a nightmare!! Any ideas.....?

socrates

Why would an Insurance Company inform the bank of anything?

The only mistake you have made is letting the lender know of your possible intentions. You are now on their radar - any inkling that you have let it out without consent and they might call the loan in.

It's a tough one I agree.

silvercar

allanboswell.com or directlineforbusiness.com

I know allan boswell now do residential home building insurance, so if they are named on your insurance document it won't automatically indicate you are letting the property.

Its a tough one, as socrates says, but your negative equity works in your favour. If the lender calls in the loan they will have to repossess to get their money, leaving them short. Whereas if they allowed you to let (or turned a blind eye) they still get the monthly mortgage payments.

desperate4help_2

I thought the insurance company had to send details to the bank? If they dont that would be fantastic news....but what if there was a claim - if there was a flood or fire or something, would they still payout do you think?

Yep as soon as I walked out of the bank I thought - that was a stupid thing to do!!! Was trying to be honest but may well have created myself a bigger problem!

desperate4help_2

Thank you - will look into allan boswell!

Will be keeping my eye out for passing Halifax spies now :0)

silvercar

The whole point of getting insurance that allows tenants, is that you have declared the true risk when you have taken out the insurance. The insurer registers the lender's interest in the property so acknowledging that they too have a financial interest in the property. The claim risk doesn't increase because of whether the lender knows there are tenants, the claims risk increases because there are tenants; and you have declared this.

socrates

Before long the "holier than thou" possee will be in telling you what an evil person you are for doing what you intend to do.

In my opinion HBOS bosses should be banned from ever running a company again for the way they have run that organisation.

PasturesNew

Don't forget to forward your own mail. Your lender will write to you at your address and your tenant might open those letters in error.

puddy

im not holier than thou, but doesnt it leave your tenants at risk if the let is not authorised by your lender?

desperate4help_2

Thanks socrates - I had kind of expected that response already so am pleasantly surprised.

Quite honestly if a company cant apply a bit of common sense and leniency in difficult times, especially if it doesnt impact on the repayments they will receive, then I hope they go under!!!

desperate4help_2

I do worry about the tenants and would intend on being a responsible landlord - I wouldnt want anyone to come out of this badly hence asking before proceeding.