Mortgage and letting

simpleguy_blr

Hi,

I currently am paying a fixed rate mortgage on small two bed house, I need a bigger house and want to move to a different place, I am planning on renting my house and move into a rented property myself.

Do I need to inform my current lender if I decide to let my property? A friend mentioned that if I do so then my lender might charge me a said fee for it and also increase my interest rate by a certain percentage!!

If possible I do want to avoid paying extra to my lender...

Any suggestions please?

kingstreet

You need to ask for consent to let and you may have to pay a higher rate and a fee for the privilege.

You will leave your tenants unprotected and invalidate your buildings insurance if you do not do this legally.

Gary123456790

Hi,

Your friend is right, you need to inform them.

If you're lucky they might allow you 'consent to let' which can be quite cheap with some lenders, less so with others. If you're unlucky they will want you to move to a BTL mortgage and this would be a very high interest rate and with fees...

Remember that if you want to buy another place without selling your old one you'll need to save a deposit for the new place as you wont be getting the equity out of your old place as you would if you were selling and buying at the same time.

You also have to factor in landlord costs such as a gas safety certificate, and some mortgage companies will reduce what they will lend you for the new place as you would have to cover both mortgages if you didnt have tenants for a period.

Gary.

simpleguy_blr

Thank you kingstreet and Gary123456790 you both have given me some very valuable inputs and thoughts, I do want to do it by the law and will ask for a consent to let and take it from there once I decide to rent.

I might rent initially and would thinking of buying once we have settled down in the area. I try and overpay my mortgage when ever I can, now that I need to plan ahead makes me think I might have to save this for our second home deposit if we decide to buy later.

Cheers

deprivedofsleep

Hi simpleguy_blr,

My partner and I have just gone through a similar thing, we have just sorted a mortgage with no problems re our current property which we are going to let.

we had to ask for a consent to let from our lender, which we filled out and paid a fee of £100ish and we also informed our prospective lender for the the mortgage we were applying for. the underwriter came back to us about it and asked us about our btl property trying to catch us out, but we were very clear that it was not a btl and reiterated that we stated that on our forms, so be wary about this in case they cross examine you.

they obviously take this into account, but it didn't seem to affect the rates very much in our case. From what I can see I'm not sure it did at all tbh?!

kingstreet

deprivedofsleep wrote: »

we had to ask for a consent to let from our lender, which we filled out and paid a fee of £100ish... but it didn't seem to affect the rates very much in our case. From what I can see I'm not sure it did at all tbh?!

It varies from lender to lender. At one end of the spectrum you have lenders who grant CTL with no charge or rate change, through to others who will insist on a change of product to a rate near 6%, a fee of £999 and a three year tie-in if you are on standard rate when you ask.

brit1234

Simpleguy & Deprivedofsleep you do realise that the Consent to Let has a limited lifespan and say after 2 years the bank may ask you to move to a more costly Buy to Let mortgage which you may not meet the criteria for.

One of the mortgage advisor's here may be able to give you more info on what will happen then.

Thrugelmir

deprivedofsleep wrote: »

Hi simpleguy_blr,

My partner and I have just gone through a similar thing, we have just sorted a mortgage with no problems re our current property which we are going to let.

we had to ask for a consent to let from our lender, which we filled out and paid a fee of £100ish and we also informed our prospective lender for the the mortgage we were applying for. the underwriter came back to us about it and asked us about our btl property trying to catch us out, but we were very clear that it was not a btl and reiterated that we stated that on our forms, so be wary about this in case they cross examine you.

they obviously take this into account, but it didn't seem to affect the rates very much in our case. From what I can see I'm not sure it did at all tbh?!

CTL will only be granted on a temporary basis. So don't assume your lender won't change the rules in the future.

deprivedofsleep

hi brit1234 & Thrugelmir,

obviously entering into something like this is a temporary arrangement and is not a decision taken lightly.

Thrugelmir

deprivedofsleep wrote: »

obviously entering into something like this is a temporary arrangement and is not a decision taken lightly.

Property can take months to sell. With a tenant in situ, timing the sale becomes more complex. Also tenants have rights with regards to access to the property for viewings etc. So any previously made profit can quickly evaporate away.

simpleguy_blr

kingstreet wrote: »

It varies from lender to lender. At one end of the spectrum you have lenders who grant CTL with no charge or rate change, through to others who will insist on a change of product to a rate near 6%, a fee of £999 and a three year tie-in if you are on standard rate when you ask.

This was the reply from my lender

[FONT=Verdana, Arial, Helvetica, sans-serif]From 01 September 2010 any new Letting applications received will be subject to a £50 letting application fee. The fee will be added to the mortgage balance when we receive the letting application form and the letting has been agreed. If the letting is declined the letting fee will not be charged. Any new lettings agreed, will have a 1.5% letting interest rate charge on the interest rate above their current rate

However no time scales were mentioned so I am assuming that this could be a product change to a BTL.
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