Consent to let & other hairy issues

Msmer1973

Hi

I'm hoping someone on here can help me.

I own a flat (in my name only) which I share with my husband. We are remortgaging this flat to help us pay for a new house as we need more space. We don't want to sell the flat just yet as the 4 estate agents we have had round to value the place have said it's not a great time to be selling. We are going through the process of drawing equity out of the flat via a home owner's loan with our existing mortgagee (HSBC) and then getting consent to let.

At the same time we are also applying for a new mortgage for the house we've made an offer on. This mortgage application was meant to be in joint names. As my husband is self-employed and doesn't have 3 years of accounts (but does have other evidence of income including bank statements, tax returns and a statement of income from his accountants) the lender (Post Office/Bank of Ireland) initially refused to take his income into account. This was disappointing but ok as my income was sufficient to secure the mortgage required. I was advised by one of the mortgage centre staff at Post Office that I could still submit a joint application so my husband's name was at least on the title deed for the new house, but I needed to note on the application that his income and credit commitments shouldn't be taken into account when assessing the application.

Then the BoI found out that I already have an existing mortgage (well, I actually told them up front) so they deducted 10% of the outstanding mortgage balance from my annual earnings. They did this even though I have made clear to them that we are proposing to rent out the existing property and will be seeking consent to let from HSBC if and when the top up home owner loan goes through. HSBC actually have my intentions re: letting noted on their files and I've told the PO/BoI that they are welcome to contact HSBC directly if they want to clarify this. They haven't done so and are now concerned that we are seeking 2 residential mortgages when one should in theory be a Buy to Let, so rather than taking the likely monthly rental income into account when looking at affordability, they have deducted the existing mortgage commitment from my salary. This means we canno longer borrow as much as we need for the house. Can anyone help me with ideas for proving to the BoI that the property will be rented if and when the purchase of the new house goes through?

Their underwriter has now also told me that because the application is in joint names, they will need to take my husband's credit commitments into account (which are only £3,500, and he has an excellent credit history).

I have asked them to remove him from the application (husband is ok with this, by the way) so it is assessed solely on my income and credit commitments (which are zero and I also have an excellent credit history). They have said they can't do this. I'm outraged that they have advised me to put him on there in the first place and now by following their advice we can't get the mortgage funds required. Can they refuse to take him off the application? They have also said that even if they did take his name off the app his debt would still affect the morgage application as we are associated financially (by virtue of the fact that we have one joint bank account, which isn't used for any mortgage purposes, and the credit card with the £3k debt is also solely in his name). Does this sound right? It's grossly unfair that they won't take his income into account yet are quite prepared to take the paltry debt against his name into consideration!

Sorry for such a long and unwieldy first post!

Vincenzo

Firstly be aware that (to the best of my knowledge) HSBC generally only allow consent to let for 1 year after which you need to switch to a BTL product. You will need to pay early repayment charges if any apply when you do this. Have you spoken to HSBC about the options they might be able to offer for both properties?

The rest is really down to the lender you have chosen. Remember they are entitled to underwrite the loan as they see fit.

Speak to a broker as you are effectively doing a 'let to buy' and not all lenders will want to get involved. A good broker will steer you clear of the problems you are encountering.

Cannon_Fodder

Strange how the 4 EAs haven't told the place you want to buy that it is the wrong time to sell...?

Lots of Lenders won't like extending borrowing followed by an immediate demand for consent-to-let. If you know you want to rent it out, you should pick the right product, now. Let-to-buy may apply...

Having both products with the same Lender may overcome some of the problems ?

Being self-employed is not the problem. Not having accounts is. That would ring alarm bells with any financial organisation. If he doesn't have proper books, he may have a huge tax bill about to come his way, preventing him from paying the mortgage.

Go for LTB/BTL upfront, so you can count the rental income.

Thrugelmir

You are the customer. Lenders can set the terms under which they will advance money. Maybe simplfy the situation and sell your flat. Clear your husbands debts. Then start a fresh.

Msmer1973

Thanks all.

Thrugelmir - my husband's debt is only £3500!!! Selling our flat to pay that off seems quite disproportionate, particularly when my pension has been slashed and the flat is looking like it will be what I will be living off in my old age.

Thrugelmir

Msmer1973 wrote: »

Thrugelmir - my husband's debt is only £3500!!! Selling our flat to pay that off seems quite disproportionate, particularly when my pension has been slashed and the flat is looking like it will be what I will be living off in my old age.

I not judging you. Merely looking at the financial facts as presented and making observations. Lenders can afford to cherry pick their business. Customers aren't in a position to demand. In the current economic climate good financial management is becoming an increasing necessity. The inability to clear a debt is an obvious concern to an underwriter.

Msmer1973

Point taken, but finding an extra £3500 at a time when you are already forking out over £50k in deposit and £10k in stamp duty is stretching us a bit. Guess we could always lower the deposit but we will also pay for that in a higher interest rate. Six of one, half a dozen of the other...

Thrugelmir

Msmer1973 wrote: »

Point taken, but finding an extra £3500 at a time when you are already forking out over £50k in deposit and £10k in stamp duty is stretching us a bit.

Underwriters are human as well. So will know this.......

VT82

Taking your husband's commitments into account when you have decided not to have him on the mortgage doesn't seem fair.

Not taking into account rental income on your flat on which you have a residential mortgage is standard practise. It's what stopped me getting a second mortgage. I'm with Cannon Fodder's: 'Go for BTL upfront, so you can count the rental income.' The BTL mortgage will be more expensive, so it might be worth having a higher LTV on the new property than remortgaging your flat. If you haven't got a deposit for the new place without remortgaging the flat .... hmmm ..........

Thrugelmir

VT82 wrote: »

Taking your husband's commitments into account when you have decided not to have him on the mortgage doesn't seem fair.

Very obviously this creates a huge loop hole in any mortgage application.

Msmer1973

VT82 - I'm not sure if you intended to sound judgmental - "If you haven't got a deposit for the new place without remortgaging the flat .... hmmm .........." - but effectively 'borrowing' your deposit from the value of the existing property is very common, and there are specific products on the market called Let to Buy which expressly envisage releasing value in your existing property in order to help you purchase a new one. You don't know what someone's financial circumstances are. Perhaps you wouldn't be so judgmental if you were buying property in central london and were trying to achieve a 60% LTV and needed to top up your saved deposit with the release of some equity. But perhaps you are a rolling in it and have over £100,000 just sitting in the bank waiting for a house to come along and spend it on... :-)