Want to rent out but mortgage problems

Publicdomain

Hi all,

I am a newbie to the forum and hope you can help with a question I have :

A friend of mine has a flat they bought around 2 years ago with a 95% mortgage after a relationship break up they have been paying the mortgage on there own with an agreement written up so they could do so.

They are in a position where as the property has a shortfall of around £10k if they sold it at the market value and cleared the mortgage and lock-in fees.

They are finding it increasingly difficult to meet the mortgage repayments, and although difficult they have not as yet missed any mortgage repayments.

They have managed to find a someone to rent the property through a letting agent however the mortgage company has informed them that as the rent does not cover the mortgage and the fact is still at 95% they would have to pay 7k so they could let it out which they simply don't have.
They would make up the shortfall in rent vs mortgage repayments and this would take the financial strain off them.

Is there anything they can do to convince the mortgage company to allow them to rent it out ??

Sorry for long post thanks in advance for advice

Publicdomain

Bumpty bump

AverageJoe_4

error no 1 - informting the mortgage provider about letting it out.

Go to another letting agent, ask what rent you can get from your place - and put it on the rental market. You CAN let residential properties out - you do not need exclusive permission from the lender and it boils down to this anyway:

1 - the lender could not give a rats ar*se where the £££ comes from so long as it comes in full and on time.

2 - IF you go down the route of informating everything and everyone then these ppl will have to BE SEEN TO BE DOING the right things - the banks etc... Its called and a*rse covering proceedure.

3 - The letting agent will ask about the provider, maybe, but believe me, MOST will want to do what they can to secure you as a landlord, there are there to make money from you, they're not in the business or turning business down.

princeofpounds

Publicdomain wrote: »

Is there anything they can do to convince the mortgage company to allow them to rent it out ??

Yes. Pay 7k.

Now, i'm going to tell you about Option B. It is scummy, disrespectful and risky, and could deprive someone of their home, but it is an option.

Rent it out anyway.

A huge proportion of landlords do not have mortgages that permit letting but they do it anyway. It has serious consequences because if the landlord is repossessed the tenant cannot enforce their rental contract on the lender. Any money the tenant has paid in advance is lost, and they usually cannot get it back because the landlord is already bankrupt or close to it by that stage. In the old deposit regime, the deposit used to disappear too! (Which is why I supported TDS so much).

It's a disgusting practice, one that I think should perhaps even be a crime if it leaves a tenant homeless at short notice, but in reality there are few penalties and the mortgage companies have never cared. Maybe that will change in the new environment, but it hasn't really so far.

I myself was evicted from my previous rental thanks to this though I didn't lose any money.

You can mitigate some of the risks by being honest with the tenant, not accepting money up front, protecting the deposit properly, covering the mortgage with the rent. Also by getting a second job to start paying principal off.

But to be honest, if your mate is on a variable mortgage and anything happens to rates in the next few years or his job then he might as well declare bankruptcy anyway.

Publicdomain

Thanks for your replies. I was of the same opinion as option B. My parents did this for 7 years with no come back and that was a DSS rental paid directly into the bank account as the same person they had the mortgage with. :d

silvercar

If you do this without the lenders permission you should ensure that you comply with all tenant/ landlord legislation. Most important is to ensure that you have building insurance that allows tenants. You also need to declare the rental income and mortgage interest as an expense on your tax return.

AverageJoe_4

I wouldn't worry too much about anything mate, its one place rented for a bit - the FBI aint gonna come after you or anyone else for that matter - plus you are entitled to rent out your res.home if once you've bought for you own residnetial intentions, things change. If you bought it on a res.mortgage and rented it out 2 weeks later, that would be a cause for concern.

You gotta do what u gotta do - compare yourself to all those foreigners that are renting out squats in the backstreets of London - do you think they have "law books" and rent books and tax retirn sheets and filing systems and the like...????

socrates

AverageJoe wrote: »

I wouldn't worry too much about anything mate, its one place rented for a bit - the FBI aint gonna come after you or anyone else for that matter - plus you are entitled to rent out your res.home if once you've bought for you own residnetial intentions, things change. If you bought it on a res.mortgage and rented it out 2 weeks later, that would be a cause for concern.

You gotta do what u gotta do - compare yourself to all those foreigners that are renting out squats in the backstreets of London - do you think they have "law books" and rent books and tax retirn sheets and filing systems and the like...????

Oh dear!!!