Mortgage company will not allow me to rent my house out

Hazel756

First time on this site and I am hoping someone can help me.

My partner and I purchased our first house 3 years ago on a fixed rate for 5 years. It was self certified as my partner has been self employed for many years. He has recently decided to change careers and will be away from home for most of the year, and on a much lower salary (doing a job he has always dreamed of). As I will not be able to afford all the bills and mortgage on my own, I wish to move back to my parents house and rent our house out.

We already have a couple interested in renting our house, but our mortgage company are saying we have to pay £38,000.00 to do so. This is due to the outstanding amount on our mortgage.

Even if we sell the house, we are looking at again thousands of pounds just to opt out of our fixed mortgage.

I am in desperate need of some advise as to where to go from here. I can not rent my house out, as the mortgage company have said they have the right to reposses our home.

Would be great if anyone in the same or similar situation could advise me of where to go from here.

The only option I can see is me getting another job (or 2) just to pay for everything.

Pring

Who's your lender? You should stress with them that you're moving out of necessity and not personal choice.

Hazel756

It's Northern Rock and I will be calling them tomorrow as they are closed for today.

Do you think they will consider the application to let again if I advise them of this?

I was never advised of these terms when applying for the origional mortgage...

PasturesNew

Hazel756 wrote: »

I was never advised of these terms when applying for the origional mortgage...

When you buy a house to live in, this is a residential mortgage.
When you let it out, it's a commercial mortgage.

There are more risks associated with lending money on a property that is rented out than if you're living in it yourself.

So you won't have been told about that in the original mortgage as you were applying for a residential mortgage and now you're effectively asking to change that to a commercial mortgage.

And ... in the last 3 years the world became a completely different place. Northern Rock nearly went to the wall. Lenders have little money to lend and they NEED to minimise their risk.

Everything they do is based on a mathematical formula. For renting out they probably want to ensure you "own" 25% of the property at its value today. Another formula is to require that the rent you are receiving is 125% of the mortgage interest. These rules were relaxed a few years ago, but from necessity they have had to tighten them now to stop themselves from going under.

In asking the bank, you are sending out a signal: I can't afford this property, I want to put a stranger into it and hope they can afford it and hope they pay me the rent on time and don't wreck it. For that reason the RISK has increased to NR and they are asking you to contribute towards that risk by investing some of your own cash in it, so you've more of a vested interest in clinging onto it and continuing to make the repayments.

looby-loo_2

Just a thought but if they really wont change their minds, could you get a lodger to help with the bills for a while? You would still live there and wouldn't loose the house.

silvercar

I am in desperate need of some advise as to where to go from here. I can not rent my house out, as the mortgage company have said they have the right to reposses our home.

Technically they do have the right to repossess, as you would be in breach of the terms of your mortgage. To repossess they would have to go to court and persuade a judge. Having said that I have never, ever heard of a case where a judge has granted possession where the borrower did keep up with repayments and didn't have arrears.

Your problem is that can you afford the mortgage if the tenant fell behind with the rent, or a major repair was needed?

If you do think of letting without consent, it is important that you insure the building for tenants, that you comply with deposit legislation and gas certificates etc.

Gorgeous_George

They won't grant permission so don't ask. Doing so increases the impact on them should you default and they cannot allow that to happen. You don't qualify for a BTL mortgage.

Pay your mortgage on time, look after your tenants and you'll be fine. If NR repossess, it's not the end of the world. Pay on time and they probably won't care.

If it all goes wrong, it's not my fault.

GG

Fire_Fox

looby-loo wrote: »

Just a thought but if they really wont change their minds, could you get a lodger to help with the bills for a while? You would still live there and wouldn't loose the house.

I agree: move into the smallest bedroom and let the larger bedroom(s). If you are lucky it will be more fun than living at your parents and cheaper than living with your partner!!