Letting my mortgaged property to friends

jamiematt

Hi, I'm new to the forum, and would be really appreciate any advice regarding my current situation

I own a property, mortgaged with Coventry building society (5 years), and wish to let this property to a good friend of mine based on an informal agreement.

I am trying to find out what action I need to take with regards to my lender, and have just read that I must obtain consent to let from Coventry and obtain appropriate landlords insurance. I was wondering if anyone is aware of Coventry's rules around obtaining consent to let, and how likely it is that they may refuse to consent? Also, do I have to apply for a buy-to-let mortgage with them, or can they just alter my current terms?

Sorry for all the questions! Just really confused with all this

Many thanks
J

BitterAndTwisted

I know nothing about Coventry's position on giving Consent To Let but if they decline said consent they could insist that you convert to a BTL mortgage. BTL mortgages generally require you to have at least 25% of equity in the property and the interest-rates are higher.

I would warn you against letting to friends or family in the strongest terms possible. These sorts of arrangements carry a far higher risk of ending in misery for all parties concerned as many, many threads on this forum will confirm if you do a bit of searching. There is no such thing as an "informal arrangement": as soon as you accept a penny in rent the occupants acquire all of the rights of tenants in a legally-binding contract and you acquire all of the responsibilities in being a landlord.

G_M

jamiematt wrote: »

Hi, I'm new to the forum, and would be really appreciate any advice regarding my current situation

I own a property, mortgaged with Coventry building society (5 years), and wish to let this property to a good friend of mine based on an informal agreement.

I am trying to find out what action I need to take with regards to my lender, and have just read that I must obtain consent to let from Coventry and obtain appropriate landlords insurance. I was wondering if anyone is aware of Coventry's rules around obtaining consent to let, and how likely it is that they may refuse to consent? Also, do I have to apply for a buy-to-let mortgage with them, or can they just alter my current terms?

Sorry for all the questions! Just really confused with all this

Many thanks
J

The title to your thread is wrong. It should read "Letting my mortgaged property". Who you let to is irrelevant. You are letting.

But letting to friends is anyway a bad idea.

Letting 'informally' is an even worse idea!

Read this post.

Werdnal

Friends you let to can soon become ex-friends when things go wrong.

You must do everything officially and in writing. Don't cut corners just because they are friends as this is a recipe for disaster. You are trusting them with the largest asset you will ever own. Do it properly or not at all. Read the post G_M linked to and set it up legally.

Re: CTL, the mortgage lenders usually take every case on its merits, depending on what you owe, your credit history with them, how long your term etc. They may agree, they may add extra clauses and costs (either a setup fee, or additional monthly charges, or sometimes both), they may refuse. Don't be tempted to continue if they do refuse permission - repo may follow!

And remember, you must declare your rental income for tax!

jamiematt

Hi, Thanks for the advice. Have read the info on the link supplied by G_M - really informative, thanks.

I have a quote for LL insurance, and will look into the tax issues. Also intend to contact coventry on Monday to see where they stand with regards to giving consent to let.

Would I need to have a contract drawn up by a solicitor, or can we put something in writing between ourselves? Whilst I am aware that business arrangements with friends can go badly wrong, I have known this person all my life and doubt he would cross me.

Many thanks,
J

poppysarah

You are asking for trouble. You do not know how things will pan out.

If he stops paying the rent what will you do?

googler

Never do business with friends and/or relatives.

Make no mistake, when you start letting out a property, and become a landlord, you're in business.

If you let this house out, where are you going to stay?

ellies_angel

Don't so it, big mistake, I did it to a friend I had for over 20 years. We are no-longer friends! She didn't take care of the house and when she moved out I kept finding things which she had broken or damaged and never mentioned. I have since let it out (using a leasing agent) and have had no problems.

BitterAndTwisted

jamiematt wrote: »

Would I need to have a contract drawn up by a solicitor, or can we put something in writing between ourselves? Whilst I am aware that business arrangements with friends can go badly wrong, I have known this person all my life and doubt he would cross me.

Join a landlords association and then you can take advantage of their template AST. The cost of membership can be offset against the rental-income for tax purposes. You are aware that only the interest can be offset for tax? You could end up making a loss.

This might be a friend of long standing but how would you proceed if they stopped paying the rent? If you're not prepared for the expense and heart-ache of eviction this may be the wrong profession for you.

G_M

jamiematt wrote: »

....... Whilst I am aware that business arrangements with friends can go badly wrong, I have known this person all my life and doubt he would cross me.

Many thanks,
J

It's not a question of trust, it's a question of the unexpected. What if he is made redundant? The rent is a bit late. You understand. Then only half the rent is paid because finding a new job in this economic climate is hard? You still have to pay the mortgage. At what point do you stop being 'understanding' and start chasing him?

How far do you chase? Do you evict and make him homeless as well as jobless?

With a stranger these decisions are easier. With a friend they are hard. And the friendship can be lost.

That's apart from ellies valid point above.

willdc1

I agree with all the other posters. I got a job as a contractor working away during the week for a period of 6 months (coming back at weekends, but staying at my boyfriend's who is local).

A friend of mine asked if she could stay at mone and pay me a fixed sum each month, as she was renting her house out to tennants as she diodn't want to live there for various reasons.

Well, a few weeks after she moved it, I came back at the weekend to find she'd moved the entire contents of her house had been moved into my house / garage without even asking! All of her stuff was supposed to go into storage! So I made up some excuse such as I was going to be allowed to work from home, so asked her to move out.

Plus when she moved out, it was no way up to my standards of cleanliness and had to REALLY give the plave a deep clean.

I know your situation is different as you're renting out the whole house, but absoltuely never mix business with pleasure. We're really good friends still, but if the situation would have gone on any longer, it may well all be different now.

As the other poster say, it becomes a business transaction - what happens if the washing machine breaks, or they flood the bath or cause strucural damage (even by mistake) or get behind on the rent? You won't be so forgiving then. If it's by tennants that you don't know then you can charge them / evict as necessary without any consideration. It all just gets so complicated when you know them.

My friends had a bad experience with renting their place to friends, and they said "never again"!

Please learn form our mistakes! :T