BTL mortgage advice with the Halifax

mustnotspend

Hi

I'm in a predicament over my mortgage with Halifax. Could really use some advice please. Details follow:

- best case valuation £220,000
- mortgage outstanding £180,000, so that's 82% ish LTV
- currently on SVR at around 4% I think. 24 years remaining (have had it for 6)

Now I'm quite happy with things as they stand. However, I'm actually renting this property out (naughty I know, but I had no other option at the time - moved for work, moved in with partner, had a sprog, etc. Plus I couldn't sell as I wouldn't have got a fair price for it and covered the outstanding mortgage)

Anyhow, justification aside, Halifax have written to me saying We think you renting it, this is a breach of your t & c, etc, etc. I wrote back saying I've moved in with partner, give me time... So essentially I've bought about 3 months time.

Which means early next year I need to get it in order.

So my options so far as I can see them:
A. Get a buy to let mortgage elsewhere - but incant see this gonna happen, already spoken to a broker. Needs 25% equity and I can't get to this.

B. speak to Halifax and get consent to let. However I'm hearing some scary stories about refusals/rate hikes for this. I could manage an additional 1% but more than that would make rented too much of a drain on cash flow (Current repayment amount is £1100 pm. Rental income will be about the same...)

So I'm stalling with contacting the Halifax but not sure why. I don't think I've got any other options?

Other than do nothing?

Thanks

PS my credit so far as my my credit report is concerned looks much better than my sig below as 8k of my debt is in my partners name (and we're not financially connected...)

ACG

If you want to carry on renting your only real hope is getting consent to let from halifax.
You wont get a BTL mortgage as you need atleast 20% equity if not 25%.

Other than that, its a case of selling up.

They probably will hike the interest rate, im not sure by how much but i wouldnt have thought it would be more than 1%.

kingstreet

It's a 3 year fix around 5.5% to 6% with about £1,000 fee IIRC.

If you don't accept that, they penalise you by 1% and don't give the formal consent.

Thrugelmir

mustnotspend wrote: »

Other than do nothing?

Given you financial circumstances. Why do you wish to hang onto the property?

Breach of mortgage terms could severely damage your credit rating. These matters do get recorded.

Are you declaring rental income to HMRC?

Without lenders permission your insurance cover on the property is technically void.

A few thoughts to mull over.

mustnotspend

Thrugelmir wrote: »

Given you financial circumstances. Why do you wish to hang onto the property?

It's a fair challenge and one that I have considered. I'd prefer to keep it because in 25 years (assuming I remain on repayment) it will be lump sum / retirement fund etc

Also to note my debt position has been accumulated over years of spending more that I earn including 2 years self employed and 1.5 years on 'maternity' where I continued to spend way beyond my means.

This is quite well under control now with a plan to be debt (in my name) free by Jan/Feb 2013 and pay off partner by June 2013...

[/QUOTE]Are you declaring rental income to HMRC? [/QUOTE]
Yup

Thanks for the challenges!

mustnotspend

Thanks kingstreet.

Is it a certaintythat they WILL offer something? I'd just depends on the degree of 'penalty' they impose?

mustnotspend

Thanks kingstreet.

Is it a certaintythat they WILL offer something? It's just depends on the degree of 'penalty' they impose?

Thrugelmir

mustnotspend wrote: »

It's a fair challenge and one that I have considered. I'd prefer to keep it because in 25 years (assuming I remain on repayment) it will be lump sum / retirement fund etc

Then I assume that you aren't paying tax on the income you receive. As this quite a challenge.

chr.istine

Thrugelmir wrote: »

Then I assume that you aren't paying tax on the income you receive. As this quite a challenge.

I think he already said he is paying tax :

mustnotspend wrote: »

It's a fair challenge and one that I have considered. I'd prefer to keep it because in 25 years (assuming I remain on repayment) it will be lump sum / retirement fund etc

Also to note my debt position has been accumulated over years of spending more that I earn including 2 years self employed and 1.5 years on 'maternity' where I continued to spend way beyond my Hmeans.

This is quite well under control now with a plan to be debt (in my name) free by Jan/Feb 2013 and pay off partner by June 2014...

Are you declaring rental income to HMRC?

Yup

Thanks for the challenges!

mustnotspend

Yes, I'm declaring my rental income.
No I'm not paying any tax atm (because I've not made a profit.)

So anyway, I called up the Halifax. As expected they bumped up my interest rate to a whopping 6.19%... Which means an additional £350 per month on my monthly repayment.

Which is OK at the moment. I can easily absorb this in my salary.

BUT the longer term view is that I will probably stop working for a year, around Q4 2013 to have sprog #2. Or I should say, I'd like to. But that means that I need a fund of at least around £6k to cover the shortfall between income and expenses...

And I'm not sure I'll get to that because at the moment the priority is to pay off all our debt and build up some emergency savings (we have zip atm). A spreadsheet Ive created shows it's just about possible - but no leeway at all...

So back to thinking whether I should sell. The main things that are stopping me:
- the flat is a typical first time buy - ie small one bed flat, which is I think where the demand is poorest. Meaning getting a good sale value for it will be hard...
- I like the idea of having a mortgage-free property when I retire...

Any thoughts?

Dave_Ham

Depending upon your age, did you ask them to increase the term as this will bring the repayments down a bit...

Typically, they will go to age of 70 at end of term