Halifax - consent to lease conundrum

Lizbeth

Hi hopefully someone can help, I'm going round in circles!

My circumstances have changed and I'm having to rent elsewhere short-term. Initially this is for six months, but ideally it would be for three years (also giving me chance to save up to sell my current flat and relocate).

I bought my flat for £105k in 2005 and have about £82k left on the mortgage. However flat prices locally have come down, so I suspect I don't have a great LTV ratio (which means long-term I'm unlikely to be able to get a Buy to Let mortgage as they usually require 75% LTV). My three-year fixed mortgage with Halifax comes to an end in October.

I'm trying to work out my options, which from what I've read seem to be:

Option 1 - Ask for consent to lease, possibly pay product fee and rent the flat out. Then in October (when my current mortgage expires) take out one of their specific Consent to Lease mortgages, pay another product fee and pay the high interest rates.

Option 2 - Leave it empty, get council tax exemption, remortgage from a wider range of residential products in October and pay product fee. Then ask for consent to lease on the remainder of that product and rent the place out.

Option 3 - Leave it empty until October, get council tax exemption then move back there myself in October. Really not an ideal option!

I was hoping to use the next three years to save my wages towards a deposit in order that I can relocate. I'm not looking to profit out of this, just find a solution where ideally I can live elsewhere until I can afford to sell my place in about three year's time (I've got about £7k in savings so can cover repairs that crop up, plus on my wage I can afford to pay the mortgage/service charge if I didn't have a tenant - although this wouldn't be ideal!).

I don't want to speak to Halifax directly and have my card marked, until I know my options (thanks Kingstreet).

Thank you, if anyone can make sense of all this!

kingstreet

On option 1, you shouldn't have to pay anything now. However, they will want you on one of the three year CTL products come October when the current deal ends.

Option 2 means you'll be better off over a longer period, because you get your product transfer when your current deal ends. If you go for something over two years from then, you may never end up on one of the CTL products if you decide to sell first.

Be careful of the early repayment penalties, either way.

I suppose the question is, can you afford to leave the property empty for so long and still afford to live?

Lizbeth

Thanks, that's really useful. I've read so many posts and got the impression that some people were being stung for a hefty product fee straight away, which would wipe out up to three months' rental income by which time if I'd held on a couple more months I could have got a better residential rate.

Option 2 - I could afford to live for the next six months but it would mean I wouldn't be able to put away the money I'd hoped to enable me to sell up and buy a house in a few years (I'm aiming to save £30k in three years).

Yes, if I'd be signing up for it, I'd have to commit to the full term. Maybe at the end of this if I wasn't in the position to sell up and buy a house, I could use some of my savings to get the LTV down to 75% and get a BTL mortgage on the flat. It's difficult to predict exactly where you'll be in three years time and not tie yourself into something that scuppers your plans in the future!

I was wondering how much of a gamble there is with Halifax not giving consent? I'd be able to charge about £500pcm, but Halifax may have a formula about how much rental income is required compared to the mortgage cost per month. It's difficult for me to find out how much the mortgage would be a month without getting on Halifax's radar!

kingstreet

The product fees are added to the loan, they aren't payable up front. You don't want to leave them added for too long, but there's not the urgency of having to pay upfront.

I've never known them ask about the rental income. They appear happy for you to do it, as long as they can hike the rate and charge the fee as soon as your product ends.

If you owe £82k, using the usual BTL standard of 6% on interest only, that means a mortgage payment of £410 with a 125% rent requirement of £512. That's a worst case scenario for a BTL remortgage of 80% or more. This isn't Halifax formula. It's just to give you an idea.