letting my property to a relative - without declaring to mortgage lender.

rendymion

Hi all, nice to finally join the forum, i have read regularly but only just decided to join.

Reason being, i was wondering if i could ask for some friendly advice from you, as i have seen how helpful some of you have been to others in the past!

My situation is this. My wife and i own a 1 bedroom flat which we pay a mortgage on. We are expecting our first child (scary) and now need a larger space. We cant sell as the market isnt great right now, so would like to rent out our flat, while we rent a 2 bedroom flat.

I contacted our mortgage lender (halifax), and they provisionally approved an application to change our mortgage to BTL, which would mean an initial admin fee of £1400, and an additional £200 to our montly payments. We were going through with this and had our flat advertised.

However, my brother contacted me yesterday, and he is moving out of his current rented accomodation, and would like to rent our flat from us. He basically will pay the mortgage and bills each month by way of a bank transfer to our account.

So my question is, am i safe to do this without allerting the bank? We are not making a profit of any kind, he will just be paying the existing payments for us and living here, whilst we rent another property? I just dont want to put myself at any risk of the mortgage lender getting wind of it and demanding more money, or worse.

Has anybody done this before? I know in a typical situation you would simply get a BTL mortgage, but thought this could be different given that its just a direct rlative staying here?

Many thanks in advance for your time and thoughts.

Looking forward to hearing from you!!

Werdnal

Your mortgage is given on the terms and conditions the YOU are resident. So is your house insurance. If this is no longer the case both would be void.

Do it properly or not at all!

By the way, is it Leasehold? If so, you would also need freeholder's permission.

Also, even though your brother would only be covering bills and mortgage costs, he will be paying you a "rental income" and by rights, this should be declared to HMRC. There probably wouldn't be any tax to pay, but if they later find out, you would have some explaining to do!

theartfullodger

As werdnal says..

btw

a) Experian run a service (for about a year now) used by most big lenders see..
http://propertytalklive.co.uk/technology/4125-experian-offers-new-property-move-alert-service-
which will mean your lender will almost certainly know what you've done, charge you those fees (and maybe more..) and quite likely bung you on some mortgage black-list...

b) IMHO rent to ANYONE else (referenced, checked etc) but a close relo... Only rent to someone who you are quite prepared to evict, through the courts, with bailiffs & local press looking on... otherwise you're writing a very very very big blank cheque...

c) If & when he looses his job (family crisis, fired, illness, can't be arsed.. etc etc...) he'll apply for HB/LHA. There are strict rules on
getting HB/LHA if renting from relos.. be careful...

Cheers!

rendymion

Hi Werdnall, thanks for your response.

it isnt leasehold no, so that wouldnt be an issue.

I agree with you, i wouldnt want to invalidate my insurance in any way.

So that being the case, can you advise what my possible options may be here? Basically the £1400 admin fee and additional £200 a month will put a strain on us financially. Do you think there is a way of having my brother live here, informing the bank, but also keeing our costs down maybe switching to an interest only mortgage for the duration that he is here or something?

Werdnal

Only one option really, ask the bank what they think about your suggestions! Members give very good well rounded advice here, but none of us have crystal balls!

You could change lender altogether to someone who might allow letting, but if equity is low, this might not be an option. Would your brother be in a position to pay a portion of the bank admin fee?

I know you may feel obliged to offer him a low rent as he is family, but if this is to work, you should set a realistic rent similar to that for a non-related tenant, to cover your costs. If you let to someone else, would you be able to cover some of these costs by charging the monthly going rate?

theartfullodger

If £1,600 will put you under financial strain you won't be able to cope with the financial and/or emotional strain for renting to the "tenant from hell" or through the "agent from hell".. where you get nothing in rent for 7 months whilst you still pay the mortgage, plus legal fees to get you out of the 'ole, and the tenant then 'phones up at 10:37 Saturday evening "toilet's leaking innit", "sorry by good man, I'll have my maintenance chappie call on you Monday am" ,, "nah, nah, ceilings stained, carpets growing mushrooms, gorra fixit nah.." - and you know you must fix it or that nice judge at the possession hearing will decide you've been harassing the tenant..and allow him to stay a few more months ...

What, a close relo would never do that?? Trawl this forum - there's more than enough sad, tragic, examples of wonderful, close relos ripping off the special kind relatives...

Cheers!

rendymion

Werdnal wrote: »

Only one option really, ask the bank what they think about your suggestions! Members give very good well rounded advice here, but none of us have crystal balls!

Of course. But i thought someone may have had a similar experience or have heard of his situation before. However i will speak to the bank as soon as they open tomorrow. If not then i will have to pay the extra £200 a month and my wife will have to cut back on her annual shoes allowance

rendymion

theartfullodger wrote: »

If £1,600 will put you under financial strain you won't be able to cope with the financial and/or emotional strain for renting to the "tenant from hell" or through the "agent from hell".. where you get nothing in rent for 7 months whilst you still pay the mortgage, plus legal fees to get you out of the 'ole, and the tenant then 'phones up at 10:37 Saturday evening "toilet's leaking innit", "sorry by good man, I'll have my maintenance chappie call on you Monday am" ,, "nah, nah, ceilings stained, carpets growing mushrooms, gorra fixit nah.." - and you know you must fix it or that nice judge at the possession hearing will decide you've been harassing the tenant..and allow him to stay a few more months ...

What, a close relo would never do that?? Trawl this forum - there's more than enough sad, tragic, examples of wonderful, close relos ripping off the special kind relatives...

Cheers!

haha, ok ok ok ok ok i get it. Dont do it. I'm sold. (ive also read some of these stories and they are truly horrific)

now to just try and get the best possible rate with the lender. I have a friend who said they had a mortgage with the same lender about 10 years ago and they didnt charge them any extra to let a relative rent from them. Who knows, i could just get lucky...?

BitterAndTwisted

Instead of being forced to convert to a Buy-To-Let mortgage have you asked your lender for Consent To Let instead? Some charge a fee for giving consent but not anywhere near £1400

G_M

1) Never let to friends or family unless you are willing a) to evict them if necessary and b) to lose their love or friendship.
2) letting to family as opposed to starngers does not mak avoiding getting lender's consent any different. You're renting out the property.

Read here.

hazyjo

If this is a long term arrangement, which presumably it is, how does £200 a month stack up against any losses you might make by selling the flat? Have you tried selling? Are you in negative equity? Have you had it valued? Do you really want to be LLs? More to it than just paying more on the mortgage. Gas certificates, protected deposits, tax, etc...

Jx