Consent to let refused - what are the options?

Waterside

My husband owns a flat that he lived in until last year when we got married and he moved into my property. We have asked our Mortgage lender (Halifax) for permission to let, and have a tennant lined up already. However, they have refused our request, unless we come up with £35K to increase the deposit.

Ultimately, we want to sell the flat, but now is not the right time to do so. Admittedly, we have little equity in the property as my husband bought it after his previous divorce, where his ex wife got the old house. However, we are not short of cash on a monthly basis (our annual joint earnings are close to £200K, the flat in question is worth £140K, and both mortgages take up less than 1/3 of our net income). However, we can't just magic £35K out of thin air...

It seems a bit strange that Halifax would rather us either leave the flat empty and we continue to pay the mortgage ourselves or sell at a loss, when we could be getting £550 a month rent to pay the mortgage. I appreciate that its not a perfect situation, but we didn't want to be landlords! However, given the current state of the market we would rather not sell, and my husband owned this property long before we met so we weren't doing anything we shouldn't.

Any thoughts gratefully received! Thanks...

N79

Your have outlined your options in your post. Sell or leave the property empty. The alternative would be to find a BTL mortgage although it sounds like you do not have enough of a deposit.

ILW

Why not just sell it, it is unlikely that prices are going to rise much above inflation in the medium term, but interest rates probably will.

chewmylegoff

presume you have no equity in the place you're living in at the moment which you could withdraw?

if not you might be able to raise an unsecured loan to get the £35k.

personally i would just sell it, so as not to have to put up with the hassle of being a landlord.

Waterside

Thanks for the obvious answer in the first response? Perhaps you could also answer why a bank would refuse this, when there is clearly no risk to them and renting for us for a while is the better answer? In some cases (luckily not ours...) this must put people at serious risk of defaulting on payments whilst they are waiting to sell?? Seems crazy to me, that's all and I was hoping to find some common sense...

IWL - the main reason we don't want to sell right now is because properties in that area are not shifting. As in most built up areas, its been hit hard by the recession and there is a surplus of new flats on the market. I watch the market closely, and I know we would either have to slash the price, potentially putting it in negative equity, or let it sit on the market for months. If its the only answer, then we will sell, but as I stated earlier, I was hoping for some common sense from the banks ...

BitterAndTwisted

Convert to a Buy-To-Let mortgage

Waterside

Thanks chewmylegoff, but I am unprepared to take out 10% from the value of my property as our family home which would then mean we are at a LTV of 80% with the banks behaving as they are...

Waterside

We offered to do buy to let, but they are refusing unless we give them the £35K.... Oh, and the other reason for not taking it out of our family home is that we are on a fixed rate and term, so would have to pay a penalty.

sequence

Just sell it. If you're earning 200k a year between you 20K or so loss isn't going to hurt that much. Don't let it if you plan on selling it withing 6 months - 1 year.

kaych

save? shouldn't take you too long to save that amount with a total income of 200k!?

seraphina

Waterside wrote: »

Thanks for the obvious answer in the first response? Perhaps you could also answer why a bank would refuse this, when there is clearly no risk to them and renting for us for a while is the better answer? In some cases (luckily not ours...) this must put people at serious risk of defaulting on payments whilst they are waiting to sell?? Seems crazy to me, that's all and I was hoping to find some common sense...

IWL - the main reason we don't want to sell right now is because properties in that area are not shifting. As in most built up areas, its been hit hard by the recession and there is a surplus of new flats on the market. I watch the market closely, and I know we would either have to slash the price, potentially putting it in negative equity, or let it sit on the market for months. If its the only answer, then we will sell, but as I stated earlier, I was hoping for some common sense from the banks ...

The risk profile changes massively for the lender once the place is let out - the contract is no longer just between you and the lender, but the lender now has to take into account rights the tenant is granted to the property through the tenancy agreement. So the bank no longer has straightforward access to the collateral against which the mortgage was made - if they go for repossession they'll have to get a court to evict the tenant.

If I were you I'd sell - it's a liability at the moment.