Renting your property - tell lender or not?

holly_hobby

Reasons not to be silly and tell you lender...

B&C policy invalidated - house burnt down by your tenant, YOU owe the lender, damage to property etc by the tenant you pay up, etc, etc.

Breach of your mge t&cs - which can result in request by lender of full redemption (repayment of the mge) within max 3 mths usually. The breach is lodged, and you then have to source an alternative lender whom will know you're not adverse to bending a few rules.

I have the feeling though that no matter what reason is discussed by professionals, you will still go your own way ... we at least will able to say "told you so", when you come back looing for a way out, when its all gone pete tong !!

Hope this helps

Holly

franklee

Turnbull2000 wrote: »

I get the impression it's remarkably common. One chap on my team at work bought a property with his now wife, and are letting out their old properties without permission from the lenders (and enjoying ultra low tracker rates too). Another lad is looking to do the same soon, and a couple of others tell me their mates are playing the same game.

Yes there do seem to be plenty of people prepared to disregard their mortgage terms. However surely the more people hanging on to low trackers they aren't entitled to the more resources the lenders will put into eliminating it?

If the lender does find out I'd expect them to be less willing to negotiate a good deal retrospectively as they would have up front because retrospectively they have your mate over a barrel. Upfront he could at least have threatened to remortgage elsewhere if they didn't offer competitive terms. Retrospectively he has to put up with whatever penalties they levy.

Which raises the question, how will penalties be taxed? As we know the interest element of the mortgage repayments is tax deductible. Say your mate on a low tracker does that for a few years. If when their lender discovers the unauthorised let the lender charges a higher rate of interest backdated till your mate moved out will he have lost the chance for this backdated extra to be an allowable expense? Which years will it be allowed for? Do such penalties even count as mortgage interest at all? I've no idea but it would be fun explaining to the revenue the lender is charging so much more because your mate fundamentally and deliberately broke his mortgage terms so can he have the overpaid tax back please.

Turnbull2000 wrote: »

Holding onto rather than selling your first property seems to be the way forward these days. Why save for a pension when a tenant can do it for you?

Which can be done honestly or if that's not affordable then it's not a great investment.

jjlandlord

franklee wrote: »

If when their lender discovers the unauthorised let the lender charges a higher rate of interest backdated till your mate moved out will he have lost the chance for this backdated extra to be an allowable expense? Which years will it be allowed for?

I'm not exactly sure on what basis a lender could do that.

franklee wrote: »

I've no idea but it would be fun explaining to the revenue the lender is charging so much more because your mate fundamentally and deliberately broke his mortgage terms so can he have the overpaid tax back please.

HRMC would not care about a private matter between landlord and his lender. The landlord would not have breached any tax-related laws.

atppkr

Thanks everyone for posting, some interesting views on this matter. Im by no means going to take the "not telling mortgage route" however, interesting to get views of people who "know" someone who do/done it before.

A few have mentioned the fact that if the property burnt down and you had LL insurance, you wouldn't be covered? Seriously?

Thrugelmir

jjlandlord wrote: »

HRMC would not care about a private matter between landlord and his lender. The landlord would not have breached any tax-related laws.

If at the outset there's a total disregard of setting the letting up in a business like and professional manner. Then there's an increased likelihood of declaring the business to HMRC either.

jjlandlord

Thrugelmir wrote: »

If at the outset there's a total disregard of setting the letting up in a business like and professional manner. Then there's an increased likelihood of declaring the business to HMRC either.

The premise was that HMRC knew about the letting activity. If it did then not obviously CTL or no CTL, landlord would not discuss with them...

holly_hobby

atppkr wrote: »

A few have mentioned the fact that if the property burnt down and you had LL insurance, you wouldn't be covered? Seriously?

No .. that would be if YOU DID NOT HAVE LANDLORD BLDS INS AND the consent of your lender.

Obv if you had CTL and LL Blds ins, then you are fully protected for events covered within the policy t&cs.

Hope this helps

Holly

Werdnal

I seem to recall there was a similar thread on here recently, and one poster said the T&C of their LL insurance actually stipulated that they had to have BTL or CTL terms. Obviously all insurances vary on their requirements, so some may not specify this, but knowing how keen some insurance companies are to wriggle out of paying up on claims, its always wise to read the small print!

dacouch

holly_hobby wrote: »

No .. that would be if YOU DID NOT HAVE LANDLORD BLDS INS AND the consent of your lender.

Obv if you had CTL and LL Blds ins, then you are fully protected for events covered within the policy t&cs.

Hope this helps

Holly

Just to point out, providing you had the correct insurance policy eg a Landlord Policy, then the policy would not be void if you do not have consent to let.

A very small percentage of Insurers stipulate you have CTL, if you were with one of these and did not have CTL, then there is the chance the policy would be void, although there is also a very strong chance the Ombudsman would over rule any voidance or claim declinature

holly_hobby

dacouch wrote: »

Just to point out, providing you had the correct insurance policy eg a Landlord Policy, then the policy would not be void if you do not have consent to let.

A very small percentage of Insurers stipulate you have CTL, if you were with one of these and did not have CTL, then there is the chance the policy would be void, although there is also a very strong chance the Ombudsman would over rule any voidance or claim declinature

Should this be the case, you would still be in gross breach of your mortgage terms - and I wouldn't wish to be seen encouraging any such action.