Second home purchase question

roadweary

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danielanthony

Well your friend is already committing mortgage fraud, and I'm willing to bet that it's not interest only so he won't be declaring the rent he gets to pay off the capital to HMRC, so that'll be a bit of tax evasion too.

GMS

Not having consent to let is against the mortgage terms. The first mortgage will be seen on the application for the second when credit checks are done so there will be questions asked.

Has this person looked into porting the mortgage to the new property and looking into a Buy to Let on the current property?

FraudBuster

Does anybody want some popcorn?

Simon_gloster

Who is the lender for the rented home eg depending on who it is may determine whether not consent is granted

As gms says, the first mortgage will appear when your credit checked. When you get confronted with this you say its let, the new lender will want to see consent or some proof its done properly. You wont be able ro prove it so you say its not going to sell, therefore the debt will be taken into account and jeapordise you chances of a family home. Non declading of rental for tax as an example is a baddie. As a banl hater id imagine you dont declare it.

At some stage during this process you'll have to change it otherwise you are knowingly trying to obtain credit by deception.

2nd floor, underwear.

Simon_gloster

roadweary wrote: »

This sounds very interesting....

The first mortgage is 115k on a house with a value of ~200k but perhaps more (was 230k before the current housing woes).

The second property is 200k and the plan had been to put 20k down.

How would porting work and what hike on the interest rate of 2.5% is likely? If it were possible to main that rate (I'd be amazed) he'd be delighted to turn the first house into a BTL mortgage.

....and apparently his income from the property is properly calculated and stated to HMRC - they don't ask for more details than the financial numbers.

If you do port this rate,(nationwide or c&g my guess) then the current home will go onto consent to lease rateas cicra 5.5%-6%.

Your new mortgage will then he 115k @ 2.5% and the other 65% at a 90% rate. Alternatively it could all go wrong you could do a 90% mortgage on new homw and be forced to 6% on the rental. That will happen should you not be able to port.

Porting is only granted should you meet your lenders terms when you apply.

Ground floor, perfume.

bigadaj

It's his 'friend' you know.

BobQ

This is breaking the law and I believe giving advice on how to do so contravenes the Forum Rules.

The only correct advice is for him to either stop letting the property or to tell his mortgage provider of the """oversight""". He may think that all he has done is morally correct, but in reality the mortgage is being obtained by fraud and he may be committing tax fraud as well.

Putting this aside,a residential mortgage is granted on the basis that you can afford it, a BTL mortgage is granted on the basis that the rental income is sufficient income for the business (letting) to afford.

When he applies for the new mortgage he will be lucky if this does not unravell.

roadweary

The advice from the forum was leading him on how to make the mortgage above board. - and it was this that was being persued with interest. However, I will delete the posts that I have made and leave the subject alone.

Simon_gloster

Rental income to cover the mortgage payment plus more is a given. Some stipulate a minimum wage for btl's as well.

If you are looking for consent from current lender, there are generally no stipulations, however you will not get buy to let rates but consent rates.

First thing you need to do in the morning is change consent immediately.

BobQ

roadweary wrote: »

Surely better to change the current mortgage (115k) into a buy to let and get a competitive deal on the 90% mortgage that would be 180k...as that would apply the higher interest rate to the smaller loan?

What kind of assurances do lenders want for a buy to let other than at least 40% equity?

Probably, but bear in mind that the BTL mortgage interest is an allowable expense were your friend to be declaring it for tax purposes

Did the Letting Agency ask for proof of permission to let?

How long has the property been let? If say it is three years, bear in mind that if this all comes out, your friend will at the very least be asked to provide tax accounts and pay any tax due on the as yet undeclared income. Of course this assumes the taxman is one of the nicer ones, others might levy penalties!