Struggling with Halifax mortgage

BabyBlue27

Hi everyone, this is my first post after a few days lurking, so please be gentle!

I am trying to find some information to help a young family member. The short version is that this person bought a house in 2006/7 with 100% mortgage for £80k, for a 40 year term at approx 5 times their annual wage. :eek: (Something I personally disagreed with but it wasn't my money to lend or borrow!) Anyway, the house is now valued at around £65k. The person in question has realised that they cannot continue in this position, and wants to rent the house out and live with family for a few months, the twist being that a new job with live in accomodation is on the cards.

The ideal solution would be to rent the house out and keep the mortgage on, but Halifax won't allow this due to the LTV being less than 75% (and then some!) I'm unsure if this is because they would need 75% LTV to go on a BTL mortgage or not.

It appears that the only option is repossession and then bankruptcy?

It's been suggested by several people to suggest renting it out anyway and not telling Halifax, which I know is illegal, so is this the only option?

I also can't see it being a good idea to leave it empty so the only amount to pay is the mortgage as I'm pretty sure this is frowned on?
Also, Halifax have said initally a lodger wouldn't be permitted, then another adviser suggested this option, so I'm unsure about this too?

Sorry to be asking for help on a first post but this person is very important to me and I'd really like to help them out (although I promise not to take credit for any help found on here!)

Also want to say what a brilliant site this is! Something for everyone no matter your financial situation!

Baby x

Athlete

If you left it empty you'd still have to pay house insurance and the standing charges for gas, electric, water etc

If you rent it out you would need gas safety certificates etc

opinions4u

BabyBlue27 wrote: »

I am trying to find some information to help a young family member. The short version is that this person bought a house in 2006/7 with 100% mortgage for £80k, for a 40 year term at approx 5 times their annual wage.

At that time Halifax insisted on a 3% minimum deposit.

The ideal solution would be to rent the house out and keep the mortgage on, but Halifax won't allow this due to the LTV being less than 75% (and then some!) I'm unsure if this is because they would need 75% LTV to go on a BTL mortgage or not.

Sounds like BTL criteria to me. Have they asked about a short-term tenancy? I can understand a lender not being keen on a long term arrangement, but a consent to lease should be a possibility.

It appears that the only option is repossession and then bankruptcy?

It is a possible outcome. Seeking advice from CAB or Shelter at an early stage would be a good idea.

The ramifications of bankruptcy and repossession go well beyond property ownership and can blight lives for over a decade.

It's been suggested by several people to suggest renting it out anyway and not telling Halifax, which I know is illegal, so is this the only option?

It's not illegal. It's a breach of mortgage conditions though (a civil matter) which could potentially lead to repossession. That said, as long as the mortgage payments are made this is unlikely.

I also can't see it being a good idea to leave it empty so the only amount to pay is the mortgage as I'm pretty sure this is frowned on?

Not to forget about council tax, insurances, water rates, standing charges, background heating and electricity etc.

Also, Halifax have said initally a lodger wouldn't be permitted, then another adviser suggested this option, so I'm unsure about this too?

Speak to somebody who knows what they're talking about! I'd suggest a phone call and asking for a supervisor straight away.

Hope that helps a little.

MarsdenCuckoo

Haven't actually a clue about all this but - logically speaking - how would anyone know if you moved into the house i.e. paid the mortgage and, if necessary, rented out your own house? Logistically am guessing that's not an option but so long as the Halifax mortgage is paid, would they know/care?

BabyBlue27

Thanks for the replies, really appreciate you taking the time to read and respond.

I've been doing some digging on this and other sites, the general consensus appears to be to let it out and not tell the bank...IF they did find out, (does anyone have examples/links to cases of this happening? I'm guessing quite a lot of people are doing this in the present climate?)
they can force you onto BTL (which would be fine and what the individual concerned wants anyway!) or remortgage elsewhere...but if you are 20k in NE surely no-one would lend to you anyway?! And if that's the case, is it just that they insist on immediate repayment, which obviously wouldn't be possible, and you then get repossessed?

Apologies for all the questions!

Baby x

Ditto

Have you got a trustworthy friend/relative who will rent it?

If you rent it to someone else and they wreck it how would you make a claim against them seeing as you haven't got a btl mortgage?

SouthCoast

What about the security of tenure for the hard working family and their young children?

Your landlord's lender may try to repossess the property you are renting if your landlord does not keep up with their mortgage payments. If this happens, you may have some protection from eviction if your tenancy is binding on the landlord's lender. If not, your options will be more limited.

http://england.shelter.org.uk/get_advice/repossession/repossession_by_a_landlords_lender

BabyBlue27

Hi

there are apparently a few people already interested in renting the property, and obviously she would rather it was done with support of the bank, but it's looking unlikely at present.

Ditto - My concern is that this type of situation is likely to attract, for want of a better expression 'unscrupulous types' of tenants and all the security problems etc that come with this.

I'm assuming it's not possible to do it all with a Tenancy Agreement etc without the bank finding out?

As the option of a lodger has been mentioned, is there a difference between taking in a lodger and renting a room out? They're separate on HMRC website but I don't understand the difference?

Many Thanks

Baby x