remortgage and consent to let: advice please

RVF400

Hi

My husband and I are planning to purchase a new property and rent out our current property, and I am looking for some advice for how to proceed.

Firstly, our financial advisor is based at the estate agents: is this a good or bad sign?, i don't know. I am wondering if we are being lead down the garden path.

The FA is recommending that we remortgage our current property (which we need to do to purchase the 2nd) on a residential mortgage to get the best rate, and then to get consent to let once it has been remortgaged. She insists there are plenty of lenders who will do this (her current fave seems to be Natwest) and who will also accept us having 2 residential mortgages (as we will then need another mortgage for the new property). We are somewhat fortunate to be in a position where we can stay below 75% LTV on both properties and our joint income is sufficient to pay both mortgages even without the rental income. This is the reason why the FA says it is OK to go for a residential mortgage rather than a BTL.

My major concern is what would happen if the lender refused to give us consent to let once we had remortgaged. Looking at threads on this forum, it seems that most lenders are starting to clamp down on consent to let and forcing people onto rates that are similar to the BTL rates. TBH, the BTL rates are so unattractive at the moment that I think we would rather sell up than take one on.

Is there any way a lender can guarantee that we will be given consent to let? Or is that just asking them to tell us to go and apply for a BTL like we really should? I am worried that the FA just wants to sell us the mortgage and couldn't give a monkeys what happens after that, which would leave us high and dry. Would we have any recourse against her if the worst happened and consent to let was refused?

many thanks in advance for your comments,

Caroline

GMS

Estate Agent brokers are generally not recommended. Search this forum for opinions.

Main one is they know what you COULD borrow and MAY use this to assist the purchase of the property for which they are acting for the vendor.

Recommending remortgaging and then applying for consent to let is in my opinion dangerous. You have pointed out the potential pitfalls.

Even if consent was granted it may be for a set period only, maybe 12 months after which time you would be back to square one and may need a BTL remortgage.

Why not look into doing it correctly in the first place meaning no worries about consent being revoked.

Cannot guarantee consent, and unlikely to have any recourse to the adviser if refused.

Speak to a 'Whole of Market' broker for an idea of what may be possible

RVF400

thanks, this kind of reflects what i was thinking. i'm no expert in this game, can you tell me where to find a "whole of market" FA? pls excuse my ignorance, i have only ever taken out 1 mortgage b4 and that was straightforward.

betmunch

I personally dont think there isnt a problem with EA advisors, if they are good they could be employed by and EA or they could run their own show. Equally if they are dodgy they the could be employed by and EA or run their own show. I'm afraid its the person that matters, not the sign above the door.

In my opinion the one you have been talking to is at best optimistic, at worst, working in their own interests.

You know for a fact your intention is rent out you current home when you move, yes? If so its a LTB mortgage all the way.

You may get away with doing it on a residential basis, but each consent to let is given on an individual basis, what if NatWest say no? Then when you apply for your next mortgage for the purchase, what if the underwriter requests sight of the consent to let?

I'm sorry, but I think you need to leave them well alone. In my opinion, unless they can guarentee CTL will be given with no time restrictions (which they cant as it is not their decision) then they have given you bad advice and you were right to double check it here

herbiesjp

Not true on BTL rates - there are some good deals out there.

It simply depends on the figures you are looking at. The higher the LTV, the higher the rate, but that is the same with residential mortgages anyway.

What the adviser has told you top do is wrong, as you know from day 1 that you will be letting it out.

The adviser sounds like they are happy to bend the rules in order for the sale to go through for the estate agent.

Get a second opinion from a good whole of market adviser - one who would not have a conflict of interest, and one who would explain clearly how the 2 applications should go.

You do not state any figures for the first property or the second property, or anything else about the scenario, so not possible to say whether or not it would go ahead easily.

eventallerpaul

Be warned! I've been to talking abot getting consent to let from my current lender, Halifax.

To give me consent to let, they offered to increase my mortgage payments by 80% (yes, EIGHTY PERCENT) and, in an avalanche of generosity, so stick a 3% repayment penalty onto the new rate should I decide to sell my home in the next 3 years.

Over the 3 year period of the new rate, I would incur another £30,000 of debt and the repayment penalty would be about £14,000. Which is nice.

They said they make exceptions for people who already have an early repayment penalty on their loan, although when that period comes to an end, they would put you on a new rate with another early repayment penalty.

Thanks Halifax. The taxpayer well have bailed you out, but you sure don't let it show.

nicolascowen

You should always be totally honest when apply for any type of credit what your broker is encouraging you to do may work 99 times out of 100 but as previous posters have said lenders have the right to change the terms of the mortgage if you change the terms under which it is borrowed.
Not telling the lender is not a way to enter into a transaction you will be filling in a form and having to not tell the truth a dangerous game. Oh and have been in financial advice for 25 years and at one stage was an estate agents mortgage broker as other posters have said it depends on the person not where they are sitting but do find a whole of market broker to make sure that you get the best deals

Thrugelmir

eventallerpaul wrote: »

Be warned! I've been to talking abot getting consent to let from my current lender, Halifax.


Thanks Halifax. The taxpayer well have bailed you out, but you sure don't let it show.

What has that to do with Halifax lending on profitable commercial terms.

Aren't you trying to borrow the additional money in order to make a profit yourself?

RVF400

Thanks everyone for your comments. I will do as most of you have suggested and speak to another FA to get a second opinion. I agree the whole thing feels shady.

i am slightly annoyed that I only found out about the implications of using a residential mortgage for this transaction because the FA fell ill and was temporarily replaced by another who made some comments that made me take a second look. Perhaps I am a bit of a dunce at all this mortgage lark, but I had not realised that there was any risk of the lender not agreeing to us letting when the 1st FA was explaining things to us. She just sketched out some rates with LTVs and gave me a KFI sheet that looked very attractive. Here are the figures if you're interested:

house value 130k
mortgage needed 97k
(LTV around 75%)

The KFI quoted a 2 yr fixed rate of 3.09% with a £1900 arr fee. I thought this looked pretty sweet for a rental property, but she never actually explained that it was a residential mortgage. When she was off ill, one of her colleagues took over and sent me a KFI for a LTB mortgage, the figures were 4.6% and £3400 so I nearly fell off my chair. I checked with him and he said that it was categorically the best 2yr deal he could get for a 75% LTV on a LTB. It was only then that I checked myself and worked out what was going on.

Anyway, original FA is now back from sick leave and still pushing us to agree on the 1st deal (actually I think it is slightly different but the same idea). But we are much more reluctant now we have the bigger picture.

We've been looking into selling instead as we don't want to get wrapped up into some sort of mortgage nightmare. An agent is coming round on Sat to view the property with a view to selling. The only problem is that we have already found a new house we want to buy, and had agreed an offer on it on the basis that we didn't need to sell our current place. We have told the vendors (in the interests of honesty, and let's be realistic, it could take months to sell in this climate) but it looks like they are probably going to put their house back on the market while we sort ourselves out. boo hoo.

I feel like a bit of an idiot for having made the offer on the basis of dodgy information. And the fact that we might have gone ahead without ever realising what we were doing (if she hadn't taken time off ill) scares me.

betmunch

I'd be inclined to go back to the same firm, but insist on having the second advisor process your two cases.

That will really show up the first advisor as the charlatan they are!