Buying a new house - Do I need to tell the bank?

s_D_john3

Hi all,
Quick one - we own a flat on a good mortgage rate and are keen to move. We've found the house we want and have had an offer accepted. We've also found a mortgage lender who may lend on the house for us, in the knowledge that we own the flat, and are comfortable that we can afford both whilst we wait for the flat to sell.

The flat is banked by HSBC and we have anywhere between 15%-26% equity in it depending on who's valuation you believe.

My question is, do we need to tell HSBC about us taking out another mortgage (albeit another provider on a different property)? i can't see anything in the small print of the mortgage paperwork, but you just never know!

The flat is up for sale and if we can shift it at an acceptable loss we will look to rent - obviously requesting HSBC's permission first.

I suppose if they knew about the other mortgage they can alsways ask to repay as our financial outgoings have changed and they may deem we can't afford the mortgage anymore. But practically, what do you think would be a likely reaction (I realise - no such thing when it comes to banks!) and should we tell them ahead of applying for the other mortgage, even though they may kibosh our moving plans?

All thoughts welcome!

Thrugelmir

s_D_john3 wrote: »

My question is, do we need to tell HSBC about us taking out another mortgage (albeit another provider on a different property)? i can't see anything in the small print of the mortgage paperwork, but you just never know!

No you don't. Though you'll need the lenders permission to let the property. As that changes the terms on which you borrowed the money to purchase it.

kingstreet

There is no obligation on you to tell your existing lender your plans. If you do decide to let the property, you will need to obtain consent to let from the lender and consent to sublet from the freeholder.

Presumably, the building is insured under a block buildings insurance policy and you have no need to disclose your absence from the property.

s_D_john3

Thanks for the swift replies both of you. And yes, buildings insurance is for the block, so I had assumed there would be no obligation to inform them of an abscence. Have you any experience of this and whether there are obligations on the individual lease-holders? Due to the administrative nightmare it would be, I had presumed not. Perhaps I should pick up with the property manager to be safe.

I agree, I would not rent without permission as it's obviously dodgy. I've heard good things about HSBC's CTL policy (typically one year with no fees), so if we can't sell in say three months hopefully renting will be the option. Mind you considering tenants will make the sale more difficult and our currently low rate (BoE + 0.79), I may be better off just keeping the flat unlet and on the market until I get that magical perfect buyer. Choices.

Thrugelmir

Letting shouldn't be viewed as a short term solution.

s_D_john3

I do heed your warning and agree. Keeping the flat on as a long term investment is something we had always originally intended to do, but recently were attracted to getting some equity out to fund other plans (wedding etc). So renting would not be a decision I take lightly, nor for the short term (despite the massive BTL fees down the line!).

Thrugelmir

s_D_john3 wrote: »

I do heed your warning and agree. Keeping the flat on as a long term investment is something we had always originally intended to do, but recently were attracted to getting some equity out to fund other plans (wedding etc). So renting would not be a decision I take lightly, nor for the short term (despite the massive BTL fees down the line!).

I was also thinking of having tenants. As tenants have rights with regards to viewings, occupation etc. So selling isn't necessarily a straightforward and timely process.

s_D_john3

Ah, I see your point and again agree. If we thought sale was feasible within a 12 month timeframe, we shouldn't look to just try and squeeze six month rent out in the mean-time.

Out of interest, I've posed the hypothetical question to HSBC this afternoon, and they confirmed (as advised by you both above) that there's no obligation to tell them. Also got some warm messages about CTL if it came to that although will ultimately depend on which way the wind is blowing when/if we come to do it.

If anyone else finds this thread and is interested, HSBC warned that the CTL would be granted immediately on request (subject to checks) and not from the point of letting. Might be old hat to some of you, but I had thought it would be from the point the tenancy is taken out. Worth bearing in mind when determining your AST term.

bigadaj

You need to be careful about insurance also. Whilst you obviously need landlords cover for when it is let, you also need to be careful if it is unoccupied, as most policies provide no cover for properties unoccupied for more than amonth

kidmugsy

Rather than let for a few months I'd want to sell. This can usually be achieved by pricing it attractively. Or, as you say, the mortgage is so cheap that you could just hang on for a few months and hope you don't get squatters.