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Renting with a residential mortgage

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My financial adviser has told me I can rent our existing property without converting to a buy to let mortgage. She says that lenders rarely check and don't do anything if they do.

My question is if we take her advice, keep the residential mortgage and let the property, what's likely to happen if the lender finds out? And what's the worst case scenario. The lender is one of the big five.

Thanks.
«1

Comments

  • GMS
    GMS Posts: 5,388 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    Your financial adviser needs to be reported.

    Telling you it is ok to ignore and go against the terms of your mortgage which you knowingly signed is shocking advice.

    You would need adequate landlord insurance which may result in the lender being informed anyway as they could be noted on the current policy. This would alert them.

    Were they to find out another way they could take action. What they do is their choice. May do nothing, may insit on a BTL product, or may call in the loan.

    If the property is not adequately insured for tenants and something were to happen you risk being uninsured.

    Not worth the risk in my opinion but others will disagree. Shocking that one of them is a financial adviser though
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • debtdesperado
    debtdesperado Posts: 379 Forumite
    I expect you'd find that in the small print somewhere the lender can change the rate or the product at any time... so what they would do is put you onto a BTL mortgage, so the costs of the mortgage would increase. You may or may not be able to meet these costs.

    As GMS says, you won't be insured. It's likely to be a term of your mortgage that you keep the building insured, so if anything did happen (ie the building is a smoking hole in the ground), because the insurance was invalid then the lender would pursue you for the costs of rebuilding, for example.

    Your FA is giving you weird advice... surely they would get the commission from sorting out a BTL deal for you? I would change FA asap, and report them to the FSA.
  • beecher2
    beecher2 Posts: 3,677 Forumite
    Tenth Anniversary 1,000 Posts Combo Breaker
    It is quite shocking that people are being given 'advice' such as this.
  • FraudBuster
    FraudBuster Posts: 931 Forumite
    RENTING? Check your LL has permission to let that property.

    https://forums.moneysavingexpert.com/discussion/1377883
  • Thanks guys - there's loads of information and opinions. Much appreciated.
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    My question is if we take her advice, keep the residential mortgage and let the property, what's likely to happen if the lender finds out?

    Bearing in mind the responses you have received. I would question whether you are receiving advice?

    As its you that will taking all the risk.
  • stylus360
    stylus360 Posts: 448 Forumite
    Part of the Furniture 100 Posts Name Dropper Combo Breaker
    I remortaged my property for a rental property, told Nationwide as well and they said no problem....
  • Thrugelmir wrote: »
    Bearing in mind the responses you have received. I would question whether you are receiving advice?

    As its you that will taking all the risk.

    Question away! I am...for the record.
  • holly_hobby
    holly_hobby Posts: 5,363 Forumite
    1,000 Posts Combo Breaker
    edited 2 June 2011 at 10:55PM
    Its been said, but it would be wise to tell your lender what you are considering - that way you are not in breach of your morgage contract.

    Breach of mortgage contract may result in the lender asking for immediate redemption of the mortgage - which would be their legal right as part of the mge contract (check the small print).

    Most lenders are quite flexible, but they may take you off any mge deal you are on and/or add a loading to the interest rate applied. (as technically this would now be semi-commercial lending).

    Your lender may also insist upon landlord buildings (& possible contents) insurance too - and may request a copy of the short hold tenancy agreement (and confirmation that the let is being managed by an ARLA letting agent).

    I am not saying they will agree, nor request all of the above - just giving details of what they may and have the rights to ask for ... but please don't let the above put you off or alarm you in any way - I'm just playing devils advocate to put the full picture of what can be requested.)

    Hope this helps

    Good luck

    Holly
  • Some lenders or insurers may also add terms to any permission to let - so may insist on quality of letting agents, duration of tenancy or that tenants are employed and professional.

    My insurers for example say no students or benefit claimants
    So many glitches, so little time...
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