Renting out my property

daddywhite

Hi,

I need to rent out my current property as it has decreased in value, and we have a baby on the way and need a bigger place (but obviously can't sell as in negative equity).

The mortgage company has refused to move me onto a consent to let mortgage.

I am wondering what the implications would be if I just rented out my property anyway, without telling the mortgage company? Is the worst they can do just insist I leave (in which case I would have to sell and take the hit)

Any responses welcome and thanks for your time.

Annisele

Theoretically, I think the worst they can do is demand that you repay the mortgage loan right now - as you'd be in breach of your mortgage conditions.

If you can't sell now, presumably you still can't sell if your lender demanded repayment. So, you'd need to remortgage - which would mean that you'd need enough savings to be able to bring your loan to value down to 95% or so as a minimum, and probably lower.

franklee

Suggest you read the last few pages of the sticky thread, there are links from there where this has been discussed.

Werdnal

You would be in breach of the agreement you signed in taking the mortgage on residential terms. The lenders consider the risk is greater if you are not living there, and in fact now you have asked and been refused, your own risk is even greater that they will take action if they discover that you are letting.

How will they find out, you ask? Well, in order to let you would need to abide by all the legal obligations of becoming a landlord, read this post:

http://forums.moneysavingexpert.com/showpost.php?p=41160642&postcount=12

So when you register with HMRC to declare tax on your rental income, and take out landlord based insurance, there are 2 options for your deception to be discovered. Then you have council tax, utilities, etc, which will all have to change to your tenant's name, thus another opportunity for your lender to become aware of the situation. You will need to secure the tenant's deposit in a government scheme - again, alarm bells here. Then there are your own official documents - driving licence, passport, national insurance, electoral roll, etc. all run by government agencies who all have access to each others records. Only takes a little detective work by the lender and its all there is black and white!

I have no doubt there are many landlords who do take a chance, but personally, if you are only letting now because of the depreciation in the value, how would you feel if the lenders withdrew the loan and you lost it altogether? Infact, many savvy tenants ask for confirmation that you have consent to let, before taking a property, and if in the future, any tenant should have a grudge against you for any reason, however unfairly, they may take the opportunity to shop you to your lender!

Should the lender withdraw the mortgage and repo the property, this would also affect your ability to take a mortgage for other properties in the future,

Fishingtime

You would find that any insurance you have on the property would be null and void

G_M

Your mortgage provider will insist the property is insured and will want proof. So you have to show them your insurance.

If you keep your existing domestic insurance it will be invalid if there are tenants living there, so when the tenants burn the house down, you'll get nothing.

So you need specialist landlords insurance. When the mortgage provider see you have taken out LL's insurance, they'll ask why............

Don't even think about this. Do it properly or not at all.

new_home_owner_3

G_M wrote: »

Your mortgage provider will insist the property is insured and will want proof. So you have to show them your insurance.

If you keep your existing domestic insurance it will be invalid if there are tenants living there, so when the tenants burn the house down, you'll get nothing.

So you need specialist landlords insurance. When the mortgage provider see you have taken out LL's insurance, they'll ask why............

Don't even think about this. Do it properly or not at all.

ive never heard so much tosh, ive rented my house out for the last 2 years, i got consent to let and they have never asked for my landlords insurance.

i also have firends who have never got consent and rented their properties out in my eyes all they do it for is to hike the price of peoples mortgages up.

If you do rent out make sure you get all the right insurances for renting make sure you do all gas checks and most of all make sure you get in good paying tenants.

In my experience the only time the mortgage people will be in touch is if the mortgage is not paid.

All these people who say if they find out they will call in the loan or its breach of contract, please show me any case when banks have either called in the loan or reposessed, it simply doesnt happen.

Just make sure everything else is done properly.

Werdnal

new_home_owner wrote: »

ive never heard so much tosh, ive rented my house out for the last 2 years, i got consent to let and they have never asked for my landlords insurance.

i also have firends who have never got consent and rented their properties out in my eyes all they do it for is to hike the price of peoples mortgages up.

If you do rent out make sure you get all the right insurances for renting make sure you do all gas checks and most of all make sure you get in good paying tenants.

In my experience the only time the mortgage people will be in touch is if the mortgage is not paid.

All these people who say if they find out they will call in the loan or its breach of contract, please show me any case when banks have either called in the loan or reposessed, it simply doesnt happen.

Just make sure everything else is done properly.

If it never happens, then why was the Mortgage Repossessions Act changed to protect tenants from immediate eviction when a LL fails to get consent to let and the lenders repossess?

http://www.communities.gov.uk/news/housing/1730319

franklee

new_home_owner wrote: »

i also have firends who have never got consent and rented their properties out in my eyes all they do it for is to hike the price of peoples mortgages up.

If you do rent out make sure you get all the right insurances for renting

Have they checked with their insurer that it's OK not to have consent to let? With insurance you are meant to declare all material facts and probably only find out if they are going to quibble when you make a large claim. I guess ARLA see a lot of cases and they write:

" 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. "

http://www.arla.co.uk/information/insurance/buildings-insurance/

Also if using a good letting agent they should ask about permission to let or their heads may be on the block should a landlord get repossessed see here:

http://forums.moneysavingexpert.com/showpost.php?p=46767155&postcount=39

So if they wish to use an agent that leaves them choosing a dodgy agent or lying to a clued up one.

Yorkie1

I think agencies such as Experian or National Hunter are only in the last couple of months gearing up to releasing much more information about people. So there are now increasing ways in which a mortgage lender can tell what is going on - unlike over the last couple of years.

new_home_owner_3

Werdnal wrote: »

If it never happens, then why was the Mortgage Repossessions Act changed to protect tenants from immediate eviction when a LL fails to get consent to let and the lenders repossess?

http://www.communities.gov.uk/news/housing/1730319

it may be used to repossess but this is only when the landlord doesnt pay the mortgage, this would still happen if they lived in the property and still didnt pay the mortgage, so it may protect tenants.

Im sure the person in this case will pay their mortgage, why would they want to rent it out? they might aswell get repoed now if they have no intention of paying the mortgage, hence the mortgage company repossessing and the tenats being thrown out.