Sub-letting our flat when the bank says no

topherknowles

We'd really like to sub-let our city centre flat so that we can get a second mortgage on a house out of town.

It's the best solution for us at the moment as we'd be in negative equity if we sold.

The mortgage provider have told us our mortgage product doesn't allow sub-letting but I'm told they will back down on this if we are persistent enough.

Does anybody have any experience of doing this?

betmunch

You need to get consent to let from your lender before you get a tenent in or you will be breaching the terms of your loan.

I think you need to follow up the "back down on this if we are persistent enough" angle before you do anything.

It is also likely that the lender you use for your new purchase will request that they see proof you have consent to let the flat out before they will grant you the new mortgage

topherknowles

@betmunch Thanks, the title of that was probably a little misleading... we don't have any intention of doing it behind the banks back, I just don't really understand the reasons why it's not allowed beyond 'it says so on the product'.

holly_hobby

Hi there,

This is because you are in effect turing a residential mortgage into a semi commercial one - with the added risk that as the property is no longer your primary residence, you may forgoe servicing the mortgage without too much heartache.

If CTL is granted your mge payrate will usually be loaded, with a scheduled review date of the arrangement.

If CTL is not granted, you will need to seek a BTL mge, however the neg equity situation you are currently in blows that option out the water - so your only answer would be to overpay and also use the deposit for your new property, to reduce the nge on your current home to try and erode any neg equity as quickly as possible.

If you do let without the lenders consent, you are as Betmuch states in breach of your mge t&cs, your bldgs (& contents) ins is invalidated (valid blds ins being a requirement under the mge), with the lender having the right to demand immediate redemption (repayment) of the mortgage - so a course of action not to be recommended.

There are of course lots of other considerations, and headaches in being a landlord, inc the tax situation - consider them all before you take the leap.

Hope this helps & good luck for your CTL application if you decide to proceed

Holly x

opinions4u

I just don't really understand the reasons why it's not allowed beyond 'it says so on the product'.

Simple.

Imagine a family who own two properties. They live in one. They let out the other.

They have a mortgage on each property.

They can only afford to pay one mortgage.

Which one do you think they will prioritise?

betmunch

opinions4u wrote: »

Simple.

Imagine a family who own two properties. They live in one. They let out the other.

They have a mortgage on each property.

They can only afford to pay one mortgage.

Which one do you think they will prioritise?

Thats almost word for word what I say when people ask me that question!

kingstreet

Check the lease to ensure you are able to sublet. The freeholder's permission may be required, or it may simply be prohibited.