Great opportunity to work in Oz but mortgage company won't let me lease property

dangerousdodo

I have received interest from a couple of companies to work in Australia, they are great opportunities and the money on offer would be signifcantly more than what I earn in the UK.
I made an enquiry to my mortgage company ,First Direct about the options with letting my property whilst abroad they have advised me that they don't allow it and they don't do buy to let mortgages.:(

I may have been ignorant but I expressed surprise that they deem this situation to be a "buy to let", and informed them that the move is not necessarily a permanent move and that I may be back in a year or so . They went on to say that they would only ever consider giving permission in exceptional circumstances for the short term this would be providing the vendor was working for the same company.

My concern is that we may have to transfer to another mortgage, this may be difficult as we have a number of other credit committments.

I don't wish to sell the house in case it doesnt work out in Australia and we come home and have trouble getting another mortgage.

Are the mortgage company stringing me a line or are they entitled to do this? I find it very dissapointing as I have been with FD for a number of years and they have provided pretty good service in the past- how things have changed!:mad:

Any advice would be appreciated.

Thanks
ddd

G_M

Are the mortgage company stringing me a line or are they entitled to do this?

No and yes.

You took out a domestic mortgage, and agreed the property would be owner-occupied. Rented properties are higher risk, hence different lending criteria and higher interest rates.

Many lenders will grant temporary 'Consent to Let' to owners in situations like yours, but it is up to the individual lender to decide their policy on this. If they decline, you have several (unappealing) choices:
1) switch mortgage lender.
2) rent out the property without telling them, thus breaching the terms of your mortgage
3) leave the property empty (watch out for your insurance!)
4) Stay in the UK

Annisele

They're entitled to refuse consent to let I'm afraid. When you took out your mortgage, one of its conditions will (almost certainly) have been that it was a residential mortgage and you were going to live there yourself. Now you want to change one of the conditions - and they don't have to agree to let you.

dangerousdodo

G_M wrote: »

No and yes.

You took out a domestic mortgage, and agreed the property would be owner-occupied. Rented properties are higher risk, hence different lending criteria and higher interest rates.

Many lenders will grant temporary 'Consent to Let' to owners in situations like yours, but it is up to the individual lender to decide their policy on this. If they decline, you have several (unappealing) choices:
1) switch mortgage lender.
2) rent out the property without telling them, thus breaching the terms of your mortgage
3) leave the property empty (watch out for your insurance!)
4) Stay in the UK

Thanks for your comments, if I was to rent without telling them what could go wrong? is it illegal? would I have problems insuring the property with a tenant? could they repossess the house if they got wind of the situation?

silvercar

dangerousdodo wrote: »

Thanks for your comments, if I was to rent without telling them what could go wrong?if your tenant doesn't pay the rent what will you do? you will need agents and they will need to pay tax on the rent as you are overseas. factor these costs. is it illegal? It is not a criminal offence but it is a breach of your mortgage conditions. would I have problems insuring the property with a tenant?Get the correct insurance ie one that allows for tenants and you have to register the lenders interest in the property. So you will need to choose a compnay that offers residential and landlords insurance eg direct line or your lender is going to choke over a name like landlordsinsurance Ltd could they repossess the house if they got wind of the situation?Theoretically they could take you to court for breaching the mortgage conditions and ask for repossession. In practice paying the mortgage is the key thing. No-one has got repossessed for keeping up with their repayments, it is only when the letting situation turns bad do people get into difficulties, so make sure money is set aside to cover voids and repairs.

Whatever you do make sure you fulfil all landlord obligations like, registering the deposit, gas safety certificates, insurance etc

franklee

dangerousdodo wrote: »

Thanks for your comments, if I was to rent without telling them what could go wrong? is it illegal? would I have problems insuring the property with a tenant? could they repossess the house if they got wind of the situation?

There's a whole sticky thread devoted to this very subject, be aware that it puts any tenants in an unfavourable position so they may well not be that happy when they find out ^^^^

franklee

silvercar wrote: »

Thanks for your comments, if I was to rent without telling them what could go wrong?if your tenant doesn't pay the rent what will you do? you will need agents and they will need to pay tax on the rent as you are overseas. factor these costs. is it illegal? It is not a criminal offence but it is a breach of your mortgage conditions. would I have problems insuring the property with a tenant?Get the correct insurance ie one that allows for tenants and you have to register the lenders interest in the property. So you will need to choose a compnay that offers residential and landlords insurance eg direct line or your lender is going to choke over a name like landlordsinsurance Ltd could they repossess the house if they got wind of the situation?Theoretically they could take you to court for breaching the mortgage conditions and ask for repossession. In practice paying the mortgage is the key thing. No-one has got repossessed for keeping up with their repayments, it is only when the letting situation turns bad do people get into difficulties, so make sure money is set aside to cover voids and repairs.

Whatever you do make sure you fulfil all landlord obligations like, registering the deposit, gas safety certificates, insurance etc

Sigh, condoning this yet again, the fact is *you* don't know what the lender will do and why worry, talk is cheap and it's not you taking the risk. At the least there's scope for the lender to up the interest rate or impose fees, or invite the OP to find a suitable product elsewhere. As for insurance, the onus is on the OP to disclose all material facts, who knows for sure what effect an unauthorised let will have if it comes to a claim for damage? Besides which if the OP is in Australia then they'll need someone to manage the property locally and if they want a reputable letting agent they will be asked for proof of consent to let.

dangerousdodo

So are you advising not to take the risk of letting the property without informing?

franklee

dangerousdodo wrote: »

So are you advising not to take the risk of letting the property without informing?

The sure fire way to find out what your lender will do should they find out is to ask your lender anything else is speculation. However if you read the sticky thread you will see that the tenants are in a worse position if the tenancy isn't binding on their landlord's lender. This used to have pretty bad consequences (tenant chucked out with little or no notice should the landlord default which is more likely with an accidental landlord who can't afford the extra costs of consent to let). Even though the usual suspects on this forum were saying this matters not the law was changed to help protect tenants on this issue in October 2010, however it does still leave the tenants at a disadvantage (even though the usual suspects are still saying it matters not). The point is the letting agent will be asking about this, as will clued up tenants. ARLA certainly recommend their members check this as you will see from the sticky. Even if the tenant doesn't ask upfront letters from the lender arriving on their doormat gives it away. So yes, I'm saying an unauthorised let is not a good plan especially if you can't afford BTL business rates.

G_M

The OP is not asking about the risks/responsibilities inherant in renting. Yes, there are many but that is not the issue here. Presumably the OP will look at the renting issues seperately.

The question was about renting without getting consent from the mortgage lender. There are two issues:
1) breach of mortgage terms. Theoretically the lender could repossess. I have never heard of this happening unless the mortgage goes into arrears. Make sure you don't rely soley on the rent but have a contingency fund. The lender could also take you off your preferential product (ie are you on a fixed term rate? a discount rate?), or impose a penalty/force you onto a BTL product (which you say they don't offer!?) if they found out
2) IF they repossess (ie you default and build up arrears and they go to court), AND there is no consent to let, then your tenant has limited protection. Where consent to let has been granted, the mortgage lender has to honour the tenancy and becomes the landlord. Where there's no consent, the lender can evict the tenant (though last year limited - 2 months - protection was introduced to protect tenants from immediate eviction).

franklee

G_M wrote: »

The OP is not asking about the risks/responsibilities inherant in renting. Yes, there are many but that is not the issue here. Presumably the OP will look at the renting issues seperately.

The question was about renting without getting consent from the mortgage lender. There are two issues:
1) breach of mortgage terms. Theoretically the lender could repossess. I have never heard of this happening unless the mortgage goes into arrears. Make sure you don't rely soley on the rent but have a contingency fund. The lender could also take you off your preferential product (ie are you on a fixed term rate? a discount rate?), or impose a penalty/force you onto a BTL product (which you say they don't offer!?) if they found out

The issue of the lender's possible reaction has been well covered by a mortgage adviser on dangerousdodo's parallel thread on the mortgages board:

GMS wrote: »

Letting without permission is a breach of mortgage terms and likely to lead to further action by the lender. Even more of a problem when on the other side of the world.

Property would be uninsured as require landlord insurance to let, and any insurance companies need to notify the lender of any change generally so when FD are informed landlord insurance taken out OP is back to square one.

Big risk to take

G_M wrote: »

2) IF they repossess (ie you default and build up arrears and they go to court), AND there is no consent to let, then your tenant has limited protection. Where consent to let has been granted, the mortgage lender has to honour the tenancy and becomes the landlord. Where there's no consent, the lender can evict the tenant (though last year limited - 2 months - protection was introduced to protect tenants from immediate eviction).

It doesn't require the landlord to default for the agent or tenant to care about consent to let, it's something they ask upfront. (A bit like taking out contents insurance even though you hope there will be no fire). Therefore it affects which agents the OP can use and also increases the likelihood of the let getting back to the lender, e.g. when the tenant spots the lender's letters on the doormat addressed to the landlord and returns them marked no longer living at this address.

Edit: Also this from ARLA:

http://www.arla.co.uk/infosheets/list.aspx?id=3

"Landlords - Buildings Insurance

...

Consent. It is essential that you advise and obtain consent to let your property from your mortgage lender, existing insurer and head lessee (for leasehold properties). Failure to obtain written consent from these parties may render your insurance void in the event of a claim. Sadly there have been many instances where buildings claims have been totally rejected because the insurer and or mortgage lender was not advised the property was let."