Wrong Mortgage on Let property - Scared !! Please advise!!

Terrified38

Hi

I am a (now i realise, very naive) landlord and have just found out that a property I am renting out has a residential mortgage on it.

Sounds dodgy, but the mortgage was arranged by my 'business-partner' a few years ago and they have since left the country. I simply signed where I needed to. I was under the impression that all was in order and continued to let the property.

The recent tenant has sent letters back to the lender who has contacted me to clarify. This is the first I have thought of it and have since dug out the mortgage docs to see what they said. I am calling the lender on Tuesday to tell them the situation, but I am terrified of the consequences.

Please can someone advise of any experience they have had of this????

HappyMJ

The consequences are the lender may requirement full repayment of the outstanding balance immediately. They may then offer you a new mortgage on different terms. It's not the end of the world.

franklee

There's a similar thread on landlord zone recently you may want to compare notes with:
http://www.landlordzone.co.uk/forums/showthread.php?46824-Letter-from-my-Mortgage-Lender

I suspect they will charge you more (possibly backdated) or you could find a BTL mortgage elsewhere if that's more competitive.

Terrified38

Thanks Franklee. The link was very helpful.

I will speak to the Lender on Tuesday and update.

Werdnal

Are you complying with all the other legal requirements of letting? Who is receiving the rent - you/your business partner? Who is declaring the income for tax? Have you protected the tenant's deposit and provided them with the prescribed information from the deposit scheme? Have you an GSC or EPC for the property?

If you have missed out any of the above, your lack of consent to let may be the least of your worries!

Read this:

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

for more info on how to do it all correctly!

G_M

They are likely to either
* grant you Consent To Let, depending on your circumstances/length of time the letting is intended and their policy - some admin costs
* move you to a BTL mortgage - higher interest rate and admin costs OR
* if the are a lender whose policies do not include CTL/BTL then they may ask to redeem the mortgage and you'll need to find a new lender

Who is the lender?

As Werdnal says, there are many other issues that your partner may have 'overlooked'!

But this is not the end of the world, just a wake-up call. Don't panic. Just start doing some research and make sure HMRC, HSE, etc will not be after you too!

Terrified38

Thanks for all your replies.

The rent goes to our joint account, but the partner is in America and has been since the property was let out (About 18 months).
The rent only covers the mortgage as it was supposed to be an investment for my child. I have not declared this. Should I do so now???
There was no deposit taken from the tenants as they were not in a position to offer one.
All repairs required have been carried out and the gas certs are valid.
Not sure about the EPC. Will have to find out.
The mortgage is with Saffron.

I will happily disclose all this to the lender tomorrow and would like (If they allow) to get everything above board.

Reading through the forum, I understand 'People like me' are viewed as the scum of the earth. I completely appreciate that and really thank you all for your time and your advice and hope I get the chance to put things right.

As said, I will update so others can follow what happens. Maybe my experience may prove valuble to others.

Trollfever

Some bad news from HMRC.

But after missing the original deadline, and picking up an initial £100 fine, they must now pay a flat £10 a day on top for every further delay of 24 hours.

If they have not filed by the end of July, that bill will stand at £900 – when they will then face yet another penalty, this time for £300.

The tough new rules do not just apply to anyone who owes tax, but also those who do not owe a penny to HMRC.



Read more: http://www.dailymail.co.uk/news/article-2139765/Taxman-raking-6-5m-day-late-fines-hit-pensioners-struggle-forms.html#ixzz1uCwWmYUO

tbs624

"The rent goes to our joint account, but the partner is in America and has been since the property was let out (About 18 months).
The rent only covers the mortgage as it was supposed to be an investment for my child. I have not declared this. Should I do so now???"

Terrified38 - it is irrelevant that it was intended as an investment for your child. Your property income - your tax declaration.

Google HMRC and PIM ( property income manual) so that you can read up on what expenditure can be set down against rental income.Have you kept any receipts for GSCs, maint & repairs etc? If you are panicking get yourself an accountant to help - the fees for that can be set down.

If you have been letting the property for 18 months then that takes you back to the tail end of 2010, so declaration was needed for tax year 6 Apr 2010 - to 5 Apr 2011, which should have been made by Oct 31st 2011 if a paper return or 31 January 2012 if done online. That's the period that is late, obviously

You then also have the tax year from 6 April 2011 to 5 April 2012, but with Oct 2012/Jan 2013 deadlines ( note you need to apply in advance if you are doing it online)

If you own the property jointly then you split everything 50/50. Your partner should be checking the rules on taxation of rental income for non-resident LLs. Declare to HMRC sooner rather than later.

As well as sorting out consent/chanmge of mortgage product with your lender you need to ensure that your *current* addresses are listed against the property at the Land Registry - you potentially leave yourself open to fraud otherwise

Note btw that lenders will expect there to be a decent level of equity in the property and for the rent to meet at least 125% of the mortgage repayments.

For your T's sake you may find it useful to trawl through the Landlord Law and Shelter websites so that you have a clearer pictuire of what being a LL entails.

G_M

As you are joint landlords there is some ambiguity, but I suspect your tenant should be witholding your partner's tax from the rent.

Where it is paid direct to the account of a non-resident landlord, and unless arrangements are in place with HMRC, the tenant can be held liable for the tax.

In this case, half the rent is yours (resident LL) the other half is his (non resident).

Full details on the links within the post I directed to you earlier.

ruggedtoast

G_M wrote: »

As you are joint landlords there is some ambiguity, but I suspect your tenant should be witholding your partner's tax from the rent.

Where it is paid direct to the account of a non-resident landlord, and unless arrangements are in place with HMRC, the tenant can be held liable for the tax.

In this case, half the rent is yours (resident LL) the other half is his (non resident).

Full details on the links within the post I directed to you earlier.

Being a tenant in the UK is just brilliant isn't it. You have to contend with a landlord who hasn't got the faintest clue what they are doing, isn't even in the country, and then you have to pay their tax for them as well.

Sheesh.