Renting out do i need to change mortgage?

MortgageMamma

Did Halifax give you consent to let your property? The problem you have here is, if you are to cancel your existing insurance Halifax will be informed and they will want to know what insurance policy you have put in place and have their interest noted on it. If this is landlords insurance, it gives the game away and you may even be charged if Halifax need to assess the suitability of the policy. Halifax will then want to know why you have landlords insurance when you have a residential mortgage and claim to live in the property.

Secondly, if you rent that property without Halifax's consent and they find out, which, and due to the insurance situ they will, then you are in breach of your mortgage deed and they are within their rights to demand full repayment of the mortgage. You would then be FORCED to remortgage and would incur the 3% penalty.

To me, you sound like naive FTB who has bought this property for an investment, without the advice of a professional mortgage broker and now you are in the doo doo because you are caught in an insurance dilemna

If you kept your normal residential insurance on the property and you needed to make a claim, the fact that tenants are there would invalidate that as well

I think if Halifax won't give you consent to let then you have problems. For a start you are very unlikely to be able to remortgage to a buy to let mortgage at 95% loan to value, more even if you have to fork out for early repayment charges

You need to consider your options very carefully now before you make any decisions

MarkyMarkD

I'm afraid that your position is very clearly in the wrong. You basically needed a BTL mortgage but deliberately obtained an FTB mortgage "because of the lower rate and so you didn't have to have such a big deposit". So your original mortgage application was fraudulent.

And you did this without having a clue how you were going to get away with it.

There's no moral or legal reason why you shouldn't tell Halifax you are letting the property; there's no moral or legal reason why they SHOULD give you consent to let when you so blatantly lied to them to get the mortgage and there's no moral or legal reason why you shouldn't be forced to redeem the mortgage and pay the redemption penalty, if you continue to choose not to live in the property you supposedly bought to live in.

Assuming you didn't contact Halifax on a "no names" basis, you've already told them that you intend to let in any case!

silvercar

I guess if you had done this through a mortgage broker, they could at least have told you which lenders would give you consent to lease or switch to a BTL mortgage. They would also have told you to take buildings insurance out independently of your lender. You could maybe have waited a few months before contacting the lender and had a good story eg bought when relationship collapsed, now back together....

OK lecture over, you came here for advice, so:

In practice how are your lenders likely to find out there are tenants? Assuming you make the mortgage payments, so their collection team doesn't need to visit, only if they get letters sent to you, returned to them.

Buildings insurance: either keep your policy and take out a second as well, belt and braces but expensive. Or move your insurance to another company as a residential insurance, they will notify the Halifax. Then tell the new insurance company that you are now letting the property (check beforehamd that you have a company that does both), they will increase your premium but are unlikely to notify the lender as the lender's interest has already been noted.

You could just keep your fingers crossed that everything will be OK. There must be loads of people letting property on residential mortgages, most won't get caught. As far as the insurance goes, you should still be covered for major building claims etc - its wilful damage by tenants that won't have coverage. Again loads of people have the wrong insurance. Just depends on your attitude to risk.

MortgageMamma

silvercar wrote: »

I guess if you had done this through a mortgage broker, they could at least have told you which lenders would give you consent to lease or switch to a BTL mortgage. They would also have told you to take buildings insurance out independently of your lender. You could maybe have waited a few months before contacting the lender and had a good story eg bought when relationship collapsed, now back together....

OK lecture over, you came here for advice, so:

In practice how are your lenders likely to find out there are tenants? Assuming you make the mortgage payments, so their collection team doesn't need to visit, only if they get letters sent to you, returned to them.

Buildings insurance: either keep your policy and take out a second as well, belt and braces but expensive. Or move your insurance to another company as a residential insurance, they will notify the Halifax. Then tell the new insurance company that you are now letting the property (check beforehamd that you have a company that does both), they will increase your premium but are unlikely to notify the lender as the lender's interest has already been noted.

You could just keep your fingers crossed that everything will be OK. There must be loads of people letting property on residential mortgages, most won't get caught. As far as the insurance goes, you should still be covered for major building claims etc - its wilful damage by tenants that won't have coverage. Again loads of people have the wrong insurance. Just depends on your attitude to risk.

I cannot believe you are encouraging someone who has clearly committed fraud to continue on the lines originally planned. Do you realise that this person could end up repaying their mortgage in full if they take the course of action you suggest?

Quite frankly I think if the OP is ignorant enough to do this, they are not very likely to be fully conservant with the responsiblities of being a landlord which in itself is unfair on potential tenants, oh, and of course its a residential mortgage isnt it? Do you really think the rent will be declare to the IR? That is, if the OP even knows rental income is taxable:rolleyes:

silvercar

MortgageMamma wrote: »

I cannot believe you are encouraging someone who has clearly committed fraud to continue on the lines originally planned. Do you realise that this person could end up repaying their mortgage in full if they take the course of action you suggest?

They've done it and want advice from here on. As for fraud, being in breach of your mortgage terms and conditions is a civil matter not a criminal matter; the police are not going to be knocking on his door.

MortgageMamma wrote: »

Quite frankly I think if the OP is ignorant enough to do this, they are not very likely to be fully conservant with the responsiblities of being a landlord which in itself is unfair on potential tenants, oh, and of course its a residential mortgage isnt it? Do you really think the rent will be declare to the IR? That is, if the OP even knows rental income is taxable:rolleyes:

As has been explored in other threads, your type of mortgage has no material affect on tenants - it certainly wouldn't stop a repossession.
I see no connection between someones tax return and their type of mortgage. These days it will be a good few years before someone is making a taxable profit on BTL.

As a mortgage advisor you must know that people do this, you may warn people that they shouldn't, but you know it goes on.

The OP came on here for advice, I gave it. You might not like it.

qwertyqwerty

Silverfox thanks for the advice, I am going to cancel the insurance i have with the halifax and get my insurance elsewhere.

As for me commiting fraud, I don't see it like that. With ever increasing interest rates and house prices, if i was to wait a couple of years I would have never been able to afford this house. I done what i did in order to secure the house i wanted, so i wouldn't run into the probelm that many people are having with being priced out of a house.

With regards to the rental income, i'm not looking to making a profit, i'm going to charge the mortgage amount for the month.

Thanks

MortgageMamma

silvercar wrote: »

They've done it and want advice from here on. As for fraud, being in breach of your mortgage terms and conditions is a civil matter not a criminal matter; the police are not going to be knocking on his door.

Its mortgage fraud if you complete a mortgage application form and declaration for a personal residential product in the knowledge that it is going to be rented - I'd like to see lenders come down a bit harder on this

As has been explored in other threads, your type of mortgage has no material affect on tenants - it certainly wouldn't stop a repossession.

They were not the responsibilities I was referring to. Being a landlord/lady has a lot of responsibility and this individual has behaved irresponsibly by taking this residential mortgage knowing it was to let without checking out the pitfals and what is doable, so I bet they have not looked into their responsibilities as a landlord either. Seems research is not their strong point and it could cost them a lot of money.

I see no connection between someones tax return and their type of mortgage. These days it will be a good few years before someone is making a taxable profit on BTL.

If there was no immediate profit in it, taxable or otherwise people would not invest in property. The OP has not given us an indication of the size of mortgage nor the rental income so we are not really in a position to comment on that point.

As a mortgage advisor you must know that people do this, you may warn people that they should not do it but you know it goes on.

Yes I know they do it of course I am approached by people wanting to do this all the time. I do not agree with it though - the reason you dont find high LTV buy to let mortgages is because of the risk. This individual has exposed Halifax to a risk that they have not accounted for - hardly fair is it?

The OP came on here for advice, I gave it. You might not like it.

No your right I don't like it. But I've got to say I hope for the OP's sake she is granted consent to let or it could cost her a lot of money

MarkyMarkD

qwertyqwerty wrote: »

Silverfox thanks for the advice, I am going to cancel the insurance i have with the halifax and get my insurance elsewhere.

As for me commiting fraud, I don't see it like that.

You can see it how you like, but it was fraudulent. Regarding silvercar's point about civil versus criminal, making a fraudulent mortgage application is a CRIMINAL offence of obtaining money by deception. Letting the property without your lender's consent is a civil matter.

With ever increasing interest rates and house prices, if i was to wait a couple of years I would have never been able to afford this house. I done what i did in order to secure the house i wanted, so i wouldn't run into the probelm that many people are having with being priced out of a house.

This is irrelevant to consideration of fraudulent or not.

With regards to the rental income, i'm not looking to making a profit, i'm going to charge the mortgage amount for the month.

If your rental income equals your total mortgage repayments (including capital) then you are making a profit as only mortgage INTEREST is an allowable expense.

Whether you are making any profit or not, you MUST tell HMRC that you have commenced a letting business, in the same way that you must tell them about any new business activity or source of income.

You must get landlord's gas safety certificates for your appliances (including boilers and central heating) too.

There is a lot more involved in being an amateur landlord than meets the eye.

thesaint

qwertyqwerty, does the house have enough bedrooms for you to have lodgers?

SallyD

I am going to be a first time buyer at 55. Due to retire in 6 years. I am looking to buy up North and have been thinking about letting out until I move up. Hoping to put 50% down. Expecting to pay no more than £120,000 top whack, realisically £100,000. Would a kind soul explain to me in the easiest of terms about the Buy to Let mortgages - I suspect even if I were to have a lodger on short term 3 - 6 month lets this is the type of mortgage I would have to go for instead of a regular mortgage and what is a reasonable interest rate for such a mortgage and can they be flexible because I would want to pay it up asap.

I really am new to this and have appointment with BS this week and need to understand things a little better before then.

Thanks,