Living In Own Very Cheap BTL And Want To Move

cottlad

I live with my family in my own house that was previously let out and still has a BTL mortgage. Family size has increased with the arrival of 2 wee ones and i would really like to move to a slightly larger property that we could settle in long term. The thing is, current BTL interest only mortgage is nearly 7 years old and after an initial 5.6%, i've spent the last 4 years at 1.75% above base rate which means we pay very little (£160/month.)

info:
Current loan amount: £85k
House value: £140k
My Salary: £45k Spouse Salary: Currently zero (housewife)
Intended new house cost: £215k approx

The things i'm looking for info on are:
1. Would telling the mortgage company that the property is no longer let, be shooting myself in the foot and result in us being switched to a much higher interest residential mortgage?

2. Is there a way to increase the current mortgage or remortgage on a similar rate with the same company?

On the agreement it mentions 'The interest rate payable in accordance with this offer is portable.' (on future loans)

3. Is there a possibility we could keep the current property and let it out again (at approx £625 versus current mortgage cost of £160 giving us £465 minus expenses to put towards a different mortgage) whilst purchasing a different house for the family on a residential mortgage? The only thing other than the current house equity available is an endowment worth about £13k so am not sure we'd have the necessary needed for any more deposit unless they could take into account current equity.


Basically, is there any way to move without considerably increasing our costs. Have i just got too much of a good deal at the moment to allow me to progress to something bigger? And if that's the case and we stay put, should i just stay quiet about living here? Or could I rent it to the wife at 125% of the current payments?

Any info really appreciated as i'm a bit nonplussed with it all and don't want to shoot myself in the foot.

Cheers folks

holly_hobby

Firstly, you should have advised your lender that the property was no longer a BTL propety, but instead had become your primary residence.

Which would have meant an affordability assessment, and switch from a BTL mge and product to a residential mge and product.

That being said, you haven't - and I'm not going to get into the whys and wherefores of the implications at this time (although others may comment), as its apparent that you intend to move out in the short term.

If you wish to now move out of this property and let it, then there are obv no changes to your current mge as its already a BTL arrangement.

If you are short of a deposit for your next primary residence, then you this could be withdrawn from free equity in your "let" property, via either a further advance with your current lender/BTL mge, or via a remortgage to an alternative provider (there are some fee free deals about).

In doing so, the full interest element of the BTL mge remains tax deductable - as the further borrowings are classed for HMRC purposes as a business capital withdrawal (nb - this is subject to the new mge being no more than 100% of the original pch price, if for example you are basing your FA or remortgage and free equity, as a result of an increase to the property value itself. If its more than 100% of the original pch price, all this means is that the extra element of interest is not a permitted tax deduction off rental income).

The BTL mge is already in place, and now to be let will obv remain as a BTL - your further advance/equity release will be based on rental income being equal to 125% of mge repayment, although now there are a number of lenders whom have also have a minimum earned income of 25k (obv unaware whom your current lender to say if they have this criteria).

Your residential mge for your new primary residence, will be based on satisying their status requirements with sufficient income to svc the reqd loan, and if affordability is tight, you need a lender happy to exclude the BTL mge from their affordability assessment, which should be the case if it is self sufficient and on an AST.

A decent whole of market broker will be able to assist in guidance onthe BTL issue and sourcing a suitable provider for your residential arrangement now sought.

Hope this helps ..

Holly

cottlad

Cheers Holly.
Probably won't be moving out short term as probably couldn't warrant the switch from paying 1.75% to somewhere around 4% just so we can have a bit extra space. That may change if interest rates do. Looks like there's no easy way to move without getting a full mortgage at todays rates. Would be safer to wait until wifey is back working and we have an extra income. Just wanted confirmation there's no easy backdoor around the situation.

With that said, we'd probably stay here for a year or two so would be good to know any implications and how they can be side stepped so we can keep the BTL and the low rate? Should i just keep shush or should i do something like rent the property to the wife? Is that even possible?

GMS

cottlad wrote: »

Cheers Holly.
Probably won't be moving out short term as probably couldn't warrant the switch from paying 1.75% to somewhere around 4% just so we can have a bit extra space. That may change if interest rates do. Looks like there's no easy way to move without getting a full mortgage at todays rates. Would be safer to wait until wifey is back working and we have an extra income. Just wanted confirmation there's no easy backdoor around the situation.

With that said, we'd probably stay here for a year or two so would be good to know any implications and how they can be side stepped so we can keep the BTL and the low rate? Should i just keep shush or should i do something like rent the property to the wife? Is that even possible?

You are in breach of your mortgage terms and conditions by residing in the property. 'Side stepping' the issue is fraud.

holly_hobby

The fact is you can't side step - you are in breach of your mortgage T&Cs, and if discovered by the lender, they may actually request immediate redemption of the mge (ie - they want you off their books and you'll have to find another lender pronto)

If you are to remain there as your primary residence, you need to inform the lender of the change of use (ie from let to residence), I may not divulge just how long you've been swinging the lead with them, as that will certainly irritate them.

The process for when you divulge the change, will be your income will be assessed in support of the mge, and you will be switched to a residential mge.

There are no ways round this - fraud may be a strong word - if you didn't intend to live in it when you actually obtained the BTL mge (however completely appropriate if that is exactly what you did, to obtain a mge whilst avoiding income verification). Deliberate concealment of changes to the arrangement, is a little more fluffy and may be more accurate, if making it your primary residence was after you had tenants and actually operated the prop as a BTL venture.

Whether you divluge now is up to you of course, but you are at least now aware of the folly of your ways if you continue to operate the property in the way you are.

Hope this helps

Holly

getmore4less

if you want more space you could always rent somewhere bigger.

noddynoo

this is fraud

angelsmomma

Hi Holly :wave: Do you remember me?

My mortgage company has just realised that I am in breach of my terms for doing this and are not very happy with me.

They have not recalled the mortgage because I did change my address with them when I moved into my buy to let and it is only now I am trying to raise another buy to let on my previous property that they have connected the dots and realised it is mortgaged with a buy to let product.

I had changed this mortgage to a repayment so I guess that is why they have not been too harsh. They also said I could get another mortgage if I moved out agaain but to be honest I am just going to pay down the mortgage and stay here.

I have been lucky op but would not even try to bring this to their attention by applying to release money from your buy to let property. Did you change your address with them when you moved in?

Simon_gloster

More people should read this post and I thank you dearly for posting.

Many harp on here, including me about breaching terms etc and the ostrich syndrome of it'll never happen to me etc.

Proof here that lenders dont just sit around all day hoping payments are met, they all have fraud departments paying staff every day to investigate suspicious actions and activities.

holly_hobby

Hi Angel ... of course I remember you

So sorry to hear the issues you have held, but you have managed them as best can be, and ultimately have survived x

As Simon says, and I always make clear in any threads of this nature, lenders do take the hump when they find out a client is/has been breaching terms and they generally don't play nicely when they do.

The OP has now started another thread , on the same subject of releasing equity from his BTL but without a FA or re- mge !

He says he has started a new thread, as this one got bogged down with people going on about him living in his btl and breaching terms ...

Holly x

angelsmomma

Popped over to have a look. oh dear! Don't do it op, you could end up with no home if they recall the mortgage.