What actually happens if you rent out your property and don't tell the lender?

moneysaver45

Lovelyjoolz wrote: »

Still confused. My fees for the BTL were half what I paid for my residential mortgage and the interest rate is very good. Perhaps I have been lucky to find such a good deal then? But I can't be the only LL with this particular mortgage deal.



Which profit is the bank taking exactly?

The interest rates and fees for BTL should be higher than residential. They should be comparable to corporate rates, because BTL are sold on a business-to-business. Renting out properties is a business. Maybe if more people understood this, perhaps there would be fewer 'hobby Landlords' making a mess of things.

You're lucky to be on that rate- I certainly haven't seen rates advertised as low as that. It's pretty much undeniable residential mortgages are cheaper in general.

And the profit the bank is taking is the difference between paying off a mortgage at, say 2.5%, compared to one at 4.5%. I'm still only going to be charging the same amount in rent no matter what interest rate I'm paying.

princeofpounds wrote:

It depends a lot on the attitude of the lender. Prior to the crunch, I think they would always turn a blind eye more or less.

Now, the least they are likely to do is charge you the BTL and backdate the amounts if they can.

It's also very common now to see mortgages where there is a residential rate, a BTL rate, and then the agreement has a clause which means if you let it out without permission you pay BTL+x% (backdated).

What they can do is partly to do with what sort of contract you have signed.

Ultimately, they could just ask for their money back and foreclose on your property unless you could get it refinanced, but this hardly ever happens.

Cheers. So general consensus is they'd ask you to pay the money back (plus maybe some extra).

Now- how likely is it that a lender would actually find out? How would they ever get to find out exactly? If the mortgage is always paid on time every month, surely they'd have no particular reason to investigate?

moneysaver45

hermante wrote: »

You want a 25% deposit, right? Let's buy a property together and I'll put up the remaining 75%. I'll take 75% of the rent from our tenant, thank you very much.

Or, I could just not inform them, and take 100% of the rent for myself. Why would I do otherwise if it's possible to get away with it?

moneysaver45

Werdnal wrote: »

Many savvy tenants ask for proof you have consent to let or a BTL mortgage. No proof, no tenant.

Remember if you go for an interest only mortgage, the interest portion of the payment is deductable against any tax you have to pay on your rental income.

With so many different organisations having access to each others records these days, it is easier than ever for mortgage lenders to find out who is letting "illegally" - utility companies, electoral roll, council tax, DVLA, HMRC can all provide information to prove you are not living at the property.

There have been a few posts here recently from tenants who had received "for attention of the occupier" letters, which were from mortgage lenders trying to find out who is living at the address. With the ever increasing number of accidental LLs who are deciding to let as they cannot sell, it is only a matter to time before all lenders start trawling their customers to see who is doing so without CTL/BTL.

And if you are found out, how ever unlikely you seem to think that might be, it could seriously affect your ability to gain a mortgage or any sort of credit in the future.

Becoming a "dodgy" landlord from the start ... is that really how you want to run your letting business????

I suppose if they ask, you'd just refuse them tenancy? Anyway, the plan here is that I'm going to be renting to a family member, so obviously they'd be on board with the plan too. And would know what to do with any 'for the attention of the occupier' letters.

With regard to my address being found out by HMRC etc- maybe I could rent a PO Box and have all my mail sent there? That way it's not 2 seperate living addresses being flagged up by 'the system'?

And yeah, I know it's deductible against tax. I still don't want to pay 4.5% if I could be paying 2.5% though.

Werdnal

So you think letting to a family member means it is OK to commit fraud on your mortgage application?

Are you also aware of all the other legal obligations and costs involved in letting - which apply even if your tenant is "family"? Read this:

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

But then, of course, you want 100% of the rent in your pocket, so you will probably ignore all this as well.

I hope your family member does to dirty on you and takes you for the ride that you obviously want to take your tenant on. Many, many tales of woe here from LLs who have let to family, friends etc, and been taken to the cleaners ... never advisible, but then, you seem to have all the answers so good luck!

moneysaver45

Werdnal wrote: »

So you think letting to a family member means it is OK to commit fraud on your mortgage application?

Are you also aware of all the other legal obligations and costs involved in letting - which apply even if your tenant is "family"? Read this:

But then, of course, you want 100% of the rent in your pocket, so you will probably ignore all this as well.

I hope your family member does to dirty on you and takes you for the ride that you obviously want to take your tenant on. Many, many tales of woe here from LLs who have let to family, friends etc, and been taken to the cleaners ... never advisible, but then, you seem to have all the answers so good luck!

Goodness sake, did they put something in the water today? I'm sure the bank won't miss the money you allege that they're 'entitled' to. They make billions each year as it is. The rates are unreasonable, so yes, I do believe it's perfectly acceptable to commit 'fraud' in those circumstances. Not everything enshrined in law is justified. When Stalin was sending everyone to the gulags in Siberia, that was also perfectly legal under Russian law, but I'd never suggest that someone should turn in those who were on the run because otherwise they'd be 'breaking the law'.

Yeah, I know it's not the same thing, but the point is that just because something is leglly allowed like a bank charging crazy interest rates, doesn't make it right. I'm not planning to take a tenant for a ride at all- if the mortgage is always paid and up to date, there will be no difference whatsoever for the tenant.

All that happens is some bank somewhere doesn't get an extra few thousand a year to add to their multi billion pound profits. Oh well, I'm sure I'll be able to sleep at night. :rotfl:

GAH

Im sorry OP, it seems you have come on here looking for people to justify to you that its ok to do this. If course it isn't, its fraud, but from your posts it seems as though you will do it anyway.

If your property was to flood or burn down you wouldn't be covered, but you obviously are willing to take the risk as you have a lump sum saved up if you ever needed to re-build the house for example.

Or, if you mortgage company do find out, and at worst you need to pay the whole amount back, you have this money as a contiengency i'm guessing.

With the wealth of information out there these days, it would be easy to find out your not in residence, ever heard of the land registry and title deeds?

Just read your last post as well, If you think rates are high now you really haven't done your research, there the lowest they have ever been.

moneysaver45

GAH wrote: »

Im sorry OP, it seems you have come on here looking for people to justify to you that its ok to do this. If course it isn't, its fraud, but from your posts it seems as though you will do it anyway.

If your property was to flood or burn down you wouldn't be covered, but you obviously are willing to take the risk as you have a lump sum saved up if you ever needed to re-build the house for example.

Or, if you mortgage company do find out, and at worst you need to pay the whole amount back, you have this money as a contiengency i'm guessing.

With the wealth of information out there these days, it would be easy to find out your not in residence, ever heard of the land registry and title deeds?

I'm not interested in whether people think it's OK or not, I even said that in my OP! My questions were whether they could realistically find out and what possible sanctions they would take if they did.

Anyway, so what if it's fraud? You don't make an omelette without cracking some eggs. If the UK government introduced a law that said you had to work 100 hours a week and paint your car pink with green spots, would you follow it? Just because it's a law doesn't mean that it should be obeyed!

EDIT: I mean 'high rates' in comparison with residential mortgages now. The rates for residentials are considerably low, and the deposit you need to put down is too.

Notmyrealname

moneysaver45 wrote: »

I'm not interested in whether people think it's OK or not, I even said that in my OP! My questions were whether they could realistically find out and what possible sanctions they would take if they did.

Someone I knew many years ago did it and lost their house. The mortgage company foreclosed on the mortgage and the full amount outstanding was immediately due.

Anyway, so what if it's fraud?

You can go to prison for that.

What is your view on the millionaires that avoid tax? Will you be declaring the income to HMRC?

The rates for residentials are considerably low, and the deposit you need to put down is too.

Residential mortgage interest rates are only low for those who can put down a 25%-35% deposit. A friend of mine bought a house with a 5% deposit and the rate is 2% more than mine and higher than my LTB mortgage.

geoffky

what a little snake you are...i believe if you are willing to commit fraud what else would you do.People who think the rules do not exist for them usually run their whole lives like that..i hope you get caught and it is not that hard to get caught..

But you know different!!

brit1234

moneysaver45 wrote: »

Cheers. So general consensus is they'd ask you to pay the money back (plus maybe some extra).

Now- how likely is it that a lender would actually find out? How would they ever get to find out exactly? If the mortgage is always paid on time every month, surely they'd have no particular reason to investigate?

You forgot to add being arrested, charged, convicted and prison for fraud by representation. I love the new fraud act it is so easy to arrest people who do this. If you say no one will find out your wrong. Nowadays police share so much info with partners such as councils, banks and of course we have our sources (members of the public often inform).

But at the moment you haven't started you stupid idiotic plan. Instead we are looking Conspiracy offences with evidence stored on this discussion thread and your internet address recorded.

Do the right thing and get a buy to let mortgage rather than face fines, prison and be credit blacklisted.