Can Halifax insist on changing our mortgage?

Hughieboy

Hi Everybody

Three years ago my partner and I needed to move to a larger house, we had been sharing her smaller home. We tried to sell her house but due to the way the housing market was at the time we got little or no interest even though we were asking a reasonable price. We dropped the price several times but with no luck decided to rent it out (I was already renting out my property) and pool our resources to rent a bigger home.

We obtained 'permission' from Halifax with whom she has her mortgage (interest only, no tie in) and that was that. We moved, and obviously we use the difference between the incoming rent and outgoing costs (mortgage, letting costs etc) of both of our properties to help pay for the larger one in which we now live.

To cut to the chase, Halifax have written to us this morning stating that the 'permission to let' period is about to expire and that if we are still letting the property we need to re-apply and take out 'a new product more designed for the purpose'. This is, apparently to 'cover the extra risk that they take on by allowing us to let the property' as opposed to us living there ourselves. In short, after a lengthy chat with them, this means either;

A 3 year fixed rate mortgage at 5.49% with an arrangement fee of £999 (which can be added to the term!) which would cost us money we can ill afford plus put the monthly payments up substantially (we currently pay interest at about 3.5%) This would also come with penalties if we sold the property within the fixed term period of up to around £3500 - £4000, or

A tracker mortgage which runs at 1.5% above the base rate plus an arrangement fee of £549, or

Apparently, as the discussion got more heated I was told that if we refused to take on a new product they would 'freeze' our mortgage (ie disallow any future changes to it) and just bang on an extra 1% per month which equates to about £100 extra per month.

This all seems very stealth like and unfair, we are renting the property out purely because we couldn't sell it and a minimum of an extra £1200 outgoings per year at the moment is something we can do without (I'm self employed and work is dire at present as I'm sure you all know).

Can they do this? Do we have legal recourse of any kind? It would appear that if we still lived there they would be happy with the amount we're currently paying.

I apologise for going on but this is obviously of major concern in the house at the moment, if anyone who knows better than me could offer any advice I would be extremely grateful,

Thanks.

opinions4u

Your mortgage was set up on the basis that you would be living in the property.

Any agreement to allow you to let the property is completely at their discretion.

In other words, you have no legal recourse.

dunstonh

and just bang on an extra 1% per month which equates to about £100 extra per month.

Which is very common with lenders when you ask to break your contract and move from a residential mortgage to a commercial mortgage.

we can ill afford plus put the monthly payments up substantially

Is entering into a higher risk investment transaction a good idea if finances are that tight for you?

Can they do this? Do we have legal recourse of any kind? It would appear that if we still lived there they would be happy with the amount we're currently paying.

Yes they can and no you dont. You are the one breaking the contract and they are offering you their revised terms. if you dont like the terms you are being offered then you can move the mortgage to commercial buy to let one with another lender.

jamesd

Hughieboy wrote: »

(we currently pay interest at about 3.5%) ... if we refused to take on a new product they would 'freeze' our mortgage (ie disallow any future changes to it) and just bang on an extra 1% per month which equates to about £100 extra per month.

That looks like an excellent deal. I suggest that you let them know that you accept this. Adding 1% when giving permission to let is common and if you haven't been paying that before you were getting an exceptionally good deal.

Check that you can't get a better BTL deal with a mortgage broker. You can expect to need rental cover of 130% or so - that is rent that is 1.3 times the mortgage payment at the interest rate of the BTL deal - and a 60% maximum loan to value, though there may be a few deals available at higher rates that accept a higher LTV.

Hughieboy wrote: »

This all seems very stealth like and unfair

It's not stealthy, for you did tell them what was happening. A bit unfair but they were understanding and seem to have accepted the situation for a while.

Hughieboy wrote: »

we are renting the property out purely because we couldn't sell it

Of course you could sell it. You just didn't set a price that caught a buyer and were unwilling to set a realistic one for the market conditions at the time. If you want it sold, do that now and it'll sell at whatever price the market will bear.

Hughieboy wrote: »

It would appear that if we still lived there they would be happy with the amount we're currently paying.

Of course, the mortgage you applied for was one for people living in the property, so they would have no reason to be unhappy, you'd be using the correct product for what you're doing.

Hughieboy wrote: »

if anyone who knows better than me could offer any advice I would be extremely grateful

Take the 1% extra, it's the standard letting permission deal and probably better than a BTL deal. Or sell one of the houses, taking whatever price is required. You pick which one.

Thrugelmir

Hughieboy wrote: »

we are renting the property out purely because we couldn't sell it

You have had 3 years to sell the property.

Little point in getting upset when you have benefited from the arrangement during the intervening period. CTL has never ever been a long term arrangement. As such its totally at the lenders discretion.

Have you declared the profit on letting to the tax authorities?

getmore4less

A tracker mortgage which runs at 1.5% above the base rate plus an arrangement fee of £549,

If they are really offering that I would grab it before they change their mind.

It's cheaper than your urent deal.

dimbo61

Is the tracker deal 1.5% above the SVR so 5% or 1.5% above the BOE base rate IE 2% ?
Have you spoken to your accountant ? as you have 2 properties you rent out and what capital gains tax will you pay if you keep both properties more than 3 years ?

silvercar

I agree with what other posters have said. You have a residential mortgage and the CTL was temporary. BUT...

Given that you obtained tenants with permission from the lender, if the tenants are still there, I would be asking Halifax how they expect you to comply with legislation regarding landlord/ tenant law (notice periods/ fixed rental terms etc) if they withdraw the consent to let under current arrangements.

To cut to the chase, Halifax have written to us this morning stating that the 'permission to let' period is about to expire and that if we are still letting the property we need to re-apply ...

Re-applying implies they could turn you down or impose unacceptable conditions. Given your requirements as a landlord and your duties to your tenant, you could tell the Halifax that you will stop letting as soon as the law allows.

Thrugelmir

silvercar wrote: »

I would be asking Halifax how they expect you to comply with legislation regarding landlord/ tenant law (notice periods/ fixed rental terms etc) if they withdraw the consent to let under current arrangements.

The 3 year CTL period was a known fact. So the tenancy should have been timed to end prior to this date. The lender has no responsibility for the management of personal financial affairs.

DVardysShadow

While I can see where people are coming from, the answers being given are, IMO, too clear cut. What really matters is the bit which is not clarified before the OP 'cuts to the chase'. It all hangs on the terms of the permission which Halifax gave.

So if Halifax actually gave permission for a specific period - or with some sort of caveat about permission being revocable, then we have not been served well by the OP's explanation and I would go with the advice already given. But if Halifax gave open ended permission, it is a different ball game, there are acting unreasonably. Over to you, Hughieboy, for clarification.

opinions4u

But if Halifax gave open ended permission

Always used to be temporary and with the right to withdraw permission at any time.