Giving house to local council for rental?

sockpuppetuk

A small problem someone maybe can give me some advice on.

My wife, small son and myself are moving to Spain at the end of August and as we have known for some years that we would be going have concentrated on getting our mortgage down as low as possible with the idea of renting it and giving us some income while away plus covering the endowments which we want to keep going.
We have got it down to just over 10k and decided that rather than go the private route of renting and having the hassle of not knowing what was happening with the property plus maybe having months at a time when it would be empty that we would take a lower rent and hand it over to the local council. They pay a fair bit less but you are guaranteed that amount every month even if the property is empty and when the time is up then we could let for another period or take the house back and they would put it back to the condition it was in originally should it be needed.

The problem is that our lender (Abbey) are happy for us to sign the house over to the council but will not allow them to sub let which means the agreement is useless. They will not budge on this issue even though the council tell us they have other properties that are mortgaged with the Abbey and this is the first time they have stipulated this.
We could just about afford to pay the mortgage off completely but don't really want to do this as A) they are keeping the deeds for free. If we need to raise capital quickly then adding it to the mortgage is probably the easiest way whilst abroad.
We have looked at maybe remortgaging but are told that the lowest amount we can borrow is £25k and one penny.

Just wondering if anyone has any suggestions really.

Thanks.

Leighthal

Surely you could remortgage with a more flexible lender for the 25k and simply payback the 15k difference straight away?

sockpuppetuk

Our main problem is finding a mortgage company that will allow us to give the property to the council and then allow them to sub let.
So far we have found just one and their charges were absolutely horrendous.

ken_and_dot

A couple of things occur to me here.

Firstly you could hand the property over to a private letting agent. Most of them have a scheme that guarantees you a rent whether the property is let or not, but as with the council, the rent would be lower than the normal market rent. You would also have the on-going problem of landlord's repairs although the agent would manage this for you if you wanted. The problem there is that you need to be sure you can trust the agent otherwise you are handing over a blank cheque and you could find miscellaneous amounts deducted from your rent every month for questionable repairs.

I think you would also need to remorgage with a 'buy to let' product. Re-mortgaging for a minimum of £25,000 would not worry me. Put the surplus in a high interest rate account to offset the repayments, or better still use the surplus to fund the deposit on a second buy to let.

sockpuppetuk

ken_and_dot wrote: »

A couple of things occur to me here.

Firstly you could hand the property over to a private letting agent. Most of them have a scheme that guarantees you a rent whether the property is let or not, but as with the council, the rent would be lower than the normal market rent. You would also have the on-going problem of landlord's repairs although the agent would manage this for you if you wanted. The problem there is that you need to be sure you can trust the agent otherwise you are handing over a blank cheque and you could find miscellaneous amounts deducted from your rent every month for questionable repairs.

I think you would also need to remorgage with a 'buy to let' product. Re-mortgaging for a minimum of £25,000 would not worry me. Put the surplus in a high interest rate account to offset the repayments, or better still use the surplus to fund the deposit on a second buy to let.

I have thought about a letting agent but with the council, although it is a lower rent (approx £100 pm) there are the fees to pay the agent (approx 18% with management), any repairs (with the council only payment for major repairs are required), periods of time where the property is not let (council guarantees to pay whether the property is occupied or empty) and finally at the end of the agreed contract the council will put the house back into the condition it was when the rental was first started so all in all I would say that this was the better option.
As for the re-mortgage, I have been on the phone and internet most of the afternoon and getting a buy to let package is no problem but getting one that will allow sub-letting is just about impossible so far even though the 2 endowments we have running easily cover the £25k minimum borrow already.

Leighthal

How about an unsecured loan to pay off the mortgage?

AndyWallace

Leighthal wrote: »

How about an unsecured loan to pay off the mortgage?

Excellent suggestion.

sockpuppetuk

Leighthal wrote: »

How about an unsecured loan to pay off the mortgage?

I can just about pay off the mortgage anyway, that is not the problem.
I want to keep the mortgage going if possible because its an easy way of raising cash while out of the country if needbe plus somewhere to keep the deeds.

The problem I have is finding a lender willing to allow the council to sublet.

AndyWallace

You'll not likely find any lender that allows this on a residential mortgage. Third Party Rights and an overreaching interest could get in the way of the lenders interest.

Andy.

Edit: A solicitor will store deeds for less than the interest paid on the mortgage and Abbey would give you 75% of the property value even though you're living abroad (EU) and wheteher or not the property is unemcumbered.

sockpuppetuk

AndyWallace wrote: »

You'll not likely find any lender that allows this on a residential mortgage. Third Party Rights and an overreaching interest could get in the way of the lenders interest.

Andy.

Edit: A solicitor will store deeds for less than the interest paid on the mortgage and Abbey would give you 75% of the property value even though you're living abroad (EU) and wheteher or not the property is unemcumbered.

That's exactly what I needed to know, many thanks.

rizla01

Have you looked into the many schemes around that are an insurance policy that guarantees the income if the property is empty.

A lot of agents run these schemes.

One example is here.

http://www.halfapercent.com/landlords/rent_guarantee.jsp

I have not used this one and am not recommending it but there are many similar ones on the market.