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

DVardysShadow

Yorkie1 wrote: »

I did think you were saying you didn't think it was fraud, so apologies if I misunderstood that aspect of your post.

However I think we are nevertheless going to have to disagree about the interpretation of "gain" and "loss" in the Act and guidelines.

The OP is intending to gain the entire mortgage amount from the lender. The lender is at risk of losing the entire mortgage amount - you cannot base a charge on quantifying what might happen in the future, depending on negative equity / repayments / select a random residential rate versus BTL rate / complete loss of the house which might not be insured etc.

Apology accepted.

As for the OP intending to gain the entire mortgage amount fraudulently form the lender. No, I do not believe that this is sustainable. OP is proposing to gain a loan, but is proposing to give the lender a security in the normal way. As I see it, there is no fraud on the capital aspect of the transaction. It is on the interest part of the loan that the OP intends to commit fraud - his gain is quite plainly the difference in mortgage payments between resi and BTL mortgage payments.

From your second link:

The Defendant must intend to make the gain or cause the loss by means of the false representation.

Quite plainly the OP may have 'gained' a whole mortgage by fraudulent misrepresentation and the lender may have 'lost' a whole mortgage. But I cannot see that if the OP does an SoA on the DFW board that his finances will be enhanced by the value of a mortgage, nor will the Lender have the value of that mortgage wiped from their annual report. What will show in the SoA and the Annual report is the difference in rates between a resi and a BTL mortgage. This is the true measure of loss and gain - and the measure of the gain the oP intends to amke.

To my mind, it would be utterly perverse to equate the benefit gained by the OP from this deception with the benefit derived by a true run away with the money mortgage fraudster who takes a loan and departs with the cash having left a worthless security for the lender. Utterly perverse

Running_laps

To the OP. You keep saying they are charging you more for a BTL and that this is almost dicrimatory. No, you are wrong.

Very simply the rate the bank charge you will be:

Rate they can borrow at + allowance for defaults + costs +profit margin

The big difference betweern BTL and a nromal mortgage won't be the profit margin but will be the allowance for default. If you own a BTL property and you can no longer afford the mortgage you simply stop paying and let it get repossessed. if its your own home you will; make far greater sacrifices to avoid repossession and therefore the default rate will be lower meaning they can offer a cheaper interest rate to borrowers.

Now I work as an underwriter of insurance, not mortgages but the principles are similar. Put simply if someone inadvertent breaks the rules we will view them as sympathetically as possible while still applying those rules (ie ask for the extra premium they should have paid).

If someone purposefully sets out with the clear intention to defraud us such as in your situation we will prosecute you to the fullest extent of civil law. We will pass all details to the police and ask them to prosecute you to the fullest extent of criminal law. It doesn't matter about the amount of money involved - its the principle.

Besides which you seem to think the banks are evil for making a profit yet you're willing to break laws and risk prison to increase your own profits - I think you're a worse person than those running the banks as I believe they were just stupid, not criminal.

mumbot22

A lot of sensible advice on here but I have the feeling that the guy has made his mind up already. It doesn't look like you are going to get an 'don't worry about it - it will be fine' advice, so just get on with renting the house on the sly.

DpchMd

It always fascinates me when people on forums start to judge others because their actions/comments do not fall in line with what they perceive to be morally (or legally) acceptable.

Some of the most successful people on the planet are renowned for breaking the law (or at least the spirit of the law) when they started to build their wealth.

Does that make it acceptable? No
Does that mean we, as fellow human beings, have the right to look down on them? No

The OP posted here requesting some advice. Now that he is armed with the facts he can make an educated decision about whether to proceed with his plan.

All of you who decided to take the opportunity to accuse, offend and judge should be ashamed.

Proxy

DpchMd wrote: »

It always fascinates me when people on forums start to judge others because their actions/comments do not fall in line with what they perceive to be morally (or legally) acceptable.

Some of the most successful people on the planet are renowned for breaking the law (or at least the spirit of the law) when they started to build their wealth.

Does that make it acceptable? No
Does that mean we, as fellow human beings, have the right to look down on them? No

The OP posted here requesting some advice. Now that he is armed with the facts he can make an educated decision about whether to proceed with his plan.

All of you who decided to take the opportunity to accuse, offend and judge should be ashamed.

Probably a good time to start my "how to rob a bank" thread then, seeing as asking for advice is fine whether it's legal or not.

seven-day-weekend

I haven't read the whole thread, so forgive me if thtis has already been mentioned.

I once took out a mortgage on a flat. I did intend to live in it at some point in the future (although this never actually materialised, but at the time I took the mortgage I did actually intend to). My bank gave me a residential mortgage with a Consent to Let. So I was able to rent it out.

Admittedly, this was in the mid-90s. Lenders might not do this now. But perhaps worth exploring?

Dave101t

ah....but.....
at the time of getting the mortgage, you INTENDED to live there, then your circumstances changed. failure to notify a change of circumstance can happen to anyone, you forgot! slap on the wrist only.

kingstreet

AFAIK only armed forces personnel are routinely permitted to immediately let a property purchased with a residential mortgage product.

seven-day-weekend

Dave101t wrote: »

ah....but.....
at the time of getting the mortgage, you INTENDED to live there, then your circumstances changed. failure to notify a change of circumstance can happen to anyone, you forgot! slap on the wrist only.

We sold the flat before we got a chance to live in it. It was going to be for our retirement but we decided to sell it and buy a place in Spain instead..

The bank knew we would not be living in the flat for at least five years after we took the mortgage out.

Just realised that The OP does not intend to live there, it is for a relative, so my suggestion does not apply anyway!

sims01

Running_laps wrote: »

The big difference betweern BTL and a nromal mortgage won't be the profit margin but will be the allowance for default. If you own a BTL property and you can no longer afford the mortgage you simply stop paying and let it get repossessed. if its your own home you will; make far greater sacrifices to avoid repossession and therefore the default rate will be lower meaning they can offer a cheaper interest rate to borrowers.

That all makes sense in theory. However, back in the real world, arrears on BTL mortgages have been lower than residential mortgages in 10 out of the past 12 years (although the current repo rate is a bit higher, but presumably that's largely because banks are less hesitant to repo BTL properties in arrears as opposed to owner-occupied properties) - as per CML statistics from
www.cml.org.uk/cml/filegrab/march-2012.pdf?ref=8182.