Renting out to pay the mortgage!!!

bluenoseneil

I am pretty sure I am not alone in this, but I have recently relocated to the South West of England to work.

Problem is, I have a 2 bedroom flat in Suffolk which I cannot sell as it is in negative equity (surprise surprise!!)

The mortgage lender won't allow Consent To Rent, but if I DON'T rent it out privately I cannot afford to pay the mortgage AND rent somewhere myself too.

I have therefore been renting it out privately to a friend, but he is moving out in November because he cannot afford to stay there, and despite counter offers he won't stay put.

I have advertised on the web but am worried I will have little or no response.

What the hell do I do, people? !!!

Ideally I want to sell up and get the hell outta dodge. What are the permutations if I wanna do it?

Oh and by the way....it's a Northern Rock mortgage, so please avoid the tendancy to say "I told you so"....

princeofpounds

The problem is, none of your options are going to be any good. That is the pain of negative equity.

- drop the rent until you get a bite.
- offer to let to local housing authority clients; often easier to get someone in and a longer steady income stream if the person is not a bad apple. go direct to council to enquire, cuts out agent. Ask for maximum under LHA if you can get away with it.
- tell the mortgage company that it's a case of permission to let or they will have a default. They will not want a non-performing loan on their books so ask for restructuring. Lengthen the term, reduce the repayment component, ask for permission to sell and replace with an unsecured loan the difference.
- try an IVA or declare bankruptcy.

It is not right to let without permission, and unfair on tenants particularly in a potential repo place like this, you are in a corner here.

bluenoseneil

What's an IVA? !!!

I can pay the mortgage no problem as long as I have a tenant paying rent, so there's no issue there, even if SVR goes up.

Northern Rock won't offer Consent To Let unless you have 75% LTV, and who the hell has that at the moment?

Thoughts??

bassi_man

If you do manage to convince the lender to allow you to let the place out it might be worth changing the mortgage to interest only to maximise any income. However, any profit is subject to tax!

PasturesNew

If a friend is moving out, then that might indicate that in your area much better properties might be available cheaper.

How rentable is your flat at the amount you need compared to the competition? Everybody's got their eye on the pennies and so will be looking for the best deal they can get.

If you are reliant on the rent to pay the mortgage, then you also need to be aware of the LHA rates in your area. LHA is based on age/number of rooms. A 2 bed flat rate is paid to one person who is sharing the flat (nothing to do with the 2nd person), or somebody that has a child. A single person over 25 (or a couple), if unemployed would only get the LHA rate for 1 bedroom. This could create a shortfall in rent they receive ... and the claiming might cause up to a 2 month delay before money comes through - how can you cope with that?