My retired mothers interest only mortgage expired - please help! :(

lonestarfan

holly_hobby wrote: »

Doesnt work that way - the loan must be affordable during the term regardless of LTV or borrowing, otherwise as Si. states the Judge may reject any petition for possession, due to irresponsible lending practices (which would also fall foul of FCA regs).

Hope this helps

Holly

Thanks Holly very helpful. Yes I understand now from your very patient posts that its to be looked at again as a whole and just because they've got the loan at the moment doesn't mean its affordable in terms of the criteria a lender would use. If it meets the income mutliples etc and the ltv & age etc then they would be ok to offer them a revised mortgage.
Thanks a lot.

holly_hobby

lonestarfan wrote: »

Thanks Holly very helpful. Yes I understand now from your very patient posts that its to be looked at again as a whole and just because they've got the loan at the moment doesn't mean its affordable in terms of the criteria a lender would use. If it meets the income mutliples etc and the ltv & age etc then they would be ok to offer them a revised mortgage.
Thanks a lot.

You've nailed it and a v quick learner ....

Glad (as Si will be) to have helped understanding in how assessments are made ...

H x

lonestarfan

That kind of exchange with you and Simon is good for lurkers as well as it increases their understanding too.

holly_hobby

lonestarfan wrote: »

That kind of exchange with you and Simon is good for lurkers as well as it increases their understanding too.

Yep, thats why if something can't be done or lenders don't like it, or there's a (legal !) way round a problem, I'll expand and try and explain why it is, rather than a quick and curt hit, which often doesn't help the readers understanding on why something isn't permissible or how to solve the problem to hand.

There's lots of helpful advisers on here, and we all try and do the best we can to those we are answering - albeit some are a bit fluffier :A in responses than others

H xx

TLOR

holly_hobby wrote: »

95% borrowing on a 2nd property

Possibly , under a "let to buy" arrangement (ie where you are renting out your original home (which is self funding), and seeking a new mge on a property to be your new primary residence). Under a straight 2nd property, no you won't get 95% whether its your primary residence of not.

But this isn't going to be your primary residence - and you know it from outset - as you intend to let it to your parents post completion ... which means its a fraudulent application (deliberate attempt to decieve for finanical gain). Sorry.

CTL - as I say IF the lender believes you have pchd under a resi mge as a back door buy to let (although usually its the other way round), or for anyother reason, they can and do refuse CTL requests - which means that to let without the lenders tacit consent, puts you in breach of your mge T&Cs - to which they can demand immediate redemption.

Advising by the book

Yep I've been in the business well over 2 decades, on both sides of the fence, both direct advising (mges and financial products) and financial audit/compliance of advisers, and there's not a mge dodge I don't know or haven't seen, to which the lenders and their compliance dept, are now much more savvy to back door apps and "rule bending". And of course I'm also aware that there remain a few dodgy brokers and advisers still out there, whom regardless of the legal ramifications of their "guidance" may give clients inappropraite advice and even fraudulent insruction just for the commission and proc fee ... after all unless the client can prove they acted solely on the advisers guidance, its the individual facing the legal music themselves.

Batting away such warnings with, they won't find out, they don't want to reposses, it won't happen to me etc, is really a foolish way to proceed, given that, yes they do, yes they will, and yes the can .... I can only advise on the right way to do this .. and not how to commit fraud or get yourself and others in a pickle .... and thats the kind of advice I think (hope) you came on here for.

Cashback

Buying a property with a deposit that the occupant is going to re-imburse you with is effectively a cashback arrangement and again fraudulent declaration of deposit.

So, lets go back to the beginning ....

You, providing the deposit, can buy a property for parents under a regulated buy to let arrangement.

The app will be generally be based on your earned income (and affordiabity) and not rental income as with traditional buy to let arrangements.

Parents can not provide the deposit, nor reimburse you directly for this.

Parents can claim HB IF the let is run on a traditional landlord/tenant financial relationship and set up (AST, rent reviews, etc).

I'm not trying to be obstructive, really I'm not, my priority is that you don't expose yourself to unnecessary legal risks, as even though it wouldn't affect me if you did, its my professional ethics that stop me from saying "go for your life", "fill yer boots" - as lenders of today are less likely to turn a blind eye and more likely to puruse matters.

Hope this helps ....

Holly x

Hi Holly,

I am currently working in the City and my prime residence is also in central London, my parents live in a rural town which I have been looking to purchase another property in for sometime so I have a base when I go "home". You are therefore incorrect in your assertions. What I am exploring is if I can purchase this property as my prime residential property (as I will be letting my London property - dont worry I have already confirmed when I purchased the property if it can be converted to buy-to-let which it can). Salary and deposit would not be an issue, I was merely pointing out (for the interest of others) that I consider the risks you pointed out about deposit to be a non-starter as I do not believe it would ever provable in a court even with discovery except in the most contrived circumstances (it would mean that in such circumstances a mother would never ever be able to treat her son in the future or leave any kind of inheritance etc etc). So yes I agree that by the book it is probably illegal but it is such a grey area I simply don't consider it an issue, just my opinion thats all so please don't take offence.

Regarding the consent to let, I am merely trying to gauge the risk/reward as with anything in life. This is your profession so your position is clear and in someways you don't really have a choice but to play it by the book as you are given the professional advice. I like many others on this forum may find themselves in circumstances like my parents where they have to make tough decisions where none of the options are without risk. I respect your opinion as a professional and I think it is commendable that you offer your time on these forums, I for one have appreciated your posts. However my own experience is that obtaining consent to let is a much more trivial issue than you suggest. However you clearly have much more experience than I (and my own broker) so as I mentioned I would be interested in exploring this particular area more to better understand the risks.

Do you have any stats on how many lenders have started repossession procedures against a mortgage holder who isn't in arrears due to them letting the property without consent to let? (I think this would also benefit others on the forum as I hope this thread as)

Dave_the_Ginger_Cat

TLOR wrote: »

Do you have any stats on how many lenders have started repossession procedures against a mortgage holder who isn't in arrears due to them letting the property without consent to let? (I think this would also benefit others on the forum as I hope this thread as)

Like Holly, I've been in the lending industry for more than 20 years, and much of it in secured lending and Credit Risk.

Stats are thin on this topic due to the way court proceedings are raised in this country and the number of lenders. A single lender will know this internally but doubt they will publish.

The actions a lender would be likley to take for a let without consent could include

• Alter the rate to be a commercial one
• Raise a proceeding for a fraudulent application if it were hidden from the outset
• Charge a premium and fees for buildings insurance - you need to notify insurers, and they will often look for confirmation of consent from your lender

You may also struggle to find a solicitor who would be willing to take the purchase on. Most act for both the buyer and the lender and the sitting tenant part would be likely to conflict with them representing the lender.

The majority of lenders, like Holly, have seen many variations on attempts to circumvent their rules and will not view a deliberate attempt at manipulation in a terribly good light. For what it's worth, I would look unfavourably on such a situation were the case presented to me for a decision.

A more positive thought, which may be an option - are you able to capital raise on your London house to settle their debt? This would be legit, and would allow everyone to continue living where they are with minimal disruption

holly_hobby

TLOR wrote: »

Hi Holly,

I am currently working in the City and my prime residence is also in central London, my parents live in a rural town which I have been looking to purchase another property in for sometime so I have a base when I go "home". You are therefore incorrect in your assertions.

With regards to you buying as a resi (to reduce the min deposit) but with the intention to "let" to your parents (inc their claim for HB) .... not really .... refer your earlier post ...

TLOR wrote: »

Hi Holly,

Likewise, if I decided to purchase the property to live in as a second home on a residential basis and then after the mortgage went through I then decided to let the property that would be my prerogative (as long as then let the mortgage provider know I had subsequently decided to let it)

Further confused by you now saying this pch will be your primary residence, and you'll no longer live in London.

TLOR wrote: »

I am exploring is if I can purchase this property as my prime residential property (as I will be letting my London property - dont worry I have already confirmed when I purchased the property if it can be converted to buy-to-let which it can).

Any residential mge can be remortgaged onto a buy to let if the income and LTV is there - or do you mean consent to let (which is a temp tacit agreement of the lender to operate os of resi t&cs) ?

If you are letting your london home (where you work), and buying a house OS of London (which as we know from ealier posts is really for parents to live in), for the lenders point of view, is the distance commutable ? If not, it should ring alarm bells at UW stage, and accordingly may be pulled for referral on a manual underwrite.

TLOR wrote: »

Salary and deposit would not be an issue, I was merely pointing out (for the interest of others) that I consider the risks you pointed out about deposit to be a non-starter as I do not believe it would ever provable in a court

Without wishing to appear rude, what your personal opinion is, and what you believe to be, to what occurs are 2 very different points - its important to recognise that.

Indeed I have personally been involved (representing the packager) in court proceedings for a fraudulent mge - its not pleasant for anyone caught up.

TLOR wrote: »

even with discovery except in the most contrived circumstances (it would mean that in such circumstances a mother would never ever be able to treat her son in the future or leave any kind of inheritance etc etc).

I presume this is in ref to your sourcing the deposit and parents later reimbursing you for this.

TLOR wrote: »

So yes I agree that by the book it is probably illegal but it is such a grey area I simply don't consider it an issue, just my opinion thats all so please don't take offence.

There is no other legal way than by the book, the only other way, which isn't grey at all, its clear, would be a fraudulent application - which of course would be your choice if you feel this is a non-issue in the greater scheme of things.

TLOR wrote: »

Regarding the consent to let, I am merely trying to gauge the risk/reward as with anything in life. This is your profession so your position is clear and in someways you don't really have a choice but to play it by the book as you are given the professional advice. I like many others on this forum may find themselves in circumstances like my parents where they have to make tough decisions where none of the options are without risk.

Getting oneself in a pickle through poor or ill-informed choices, does not support submitting fraudulent financial applications.

TLOR wrote: »

However my own experience is that obtaining consent to let is a much more trivial issue than you suggest. However you clearly have much more experience than I (and my own broker) so as I mentioned I would be interested in exploring this particular area more to better understand the risks.

Do you have any stats on how many lenders have started repossession procedures against a mortgage holder who isn't in arrears due to them letting the property without consent to let? (I think this would also benefit others on the forum as I hope this thread as)

I have no figs on forced possession re unauthorised letting under a resi mge (as a lender wouldn't publish this data).

However the facts remain that to let without the lenders consent, is a breach of your contractual mge T&Cs - to which the lender may take several actions, from penalties and/or payrate loading onto semi-commercial rates (resulting in increased mge payments, which could lead to possession following default), to switching you onto a BTL arrangement (again higher payrate), to demanding redemption of the mge held with them (meaning you would need to remortgage onto a BTL with an alternative lender, within a given time frame - much as Mum has been told by Halifax in her situ).

Of course how you proceed and use the info provided within this thread, is completely your decision - but be careful of any jiggery pokery you may undertake, as I say lenders are MUCH more savvy these days, and much more prone to come down heavy on offenders, bearing in mind a let property has much more risk exposure to them than an owner occupied arrangement.

And given that the majority of lenders are currently trying to reduce their high exposure lending, such as those under CTL arrangements (which are always a temporary arrangement subject to lender reivew, and as such actually designed for accidental landlords, not professional investors or back door BTL apps), they'll probably use your breach as a lucky break to lever you off their mge book.

Given which, I'll repeat that the obvious and practical solution to the issue of homing your parents (following the sale of their home), is to go down the regulated BTL route, bearing in mind you say you have sufficient income (and if you also have sufficient personal deposit to proceed) - but I get the impression that the deposit issue is the killer (hence your venture into a high LTV resi with the intention to apply for CTL - which may in fact be refused due to the regulated nature of the let i.e more than 40% of the dwelling will be let to family (parents).

Lots for you to consider ....

Hope this helps

Holly

LondonBoy

Very interesting thread. Can someone please clarify a few things for me as I may have misunderstood.


It appears the mother's plan is to sell the property, clear the mortgage debt and pocket the equity.


The son then intends to purchase a second property for his parents to live in. They will be charged rent. As they are unable to afford the rent the government will be pay the rent via housing benefit.


The housing benefit I assume will cover the sons mortgage on the property and maybe more, When the parents pass away the son will still have the second property. Depending on mortgage type the mortgage will be party repaid or with the son will have been putting away the difference in a repayment vehicle.


I'm I missing anything?

holly_hobby

LondonBoy wrote: »

Very interesting thread. Can someone please clarify a few things for me as I may have misunderstood.


It appears the mother's plan is to sell the property, clear the mortgage debt and pocket the equity.


The son then intends to purchase a second property for his parents to live in. They will be charged rent. As they are unable to afford the rent the government will be pay the rent via housing benefit.


The housing benefit I assume will cover the sons mortgage on the property and maybe more, When the parents pass away the son will still have the second property. Depending on mortgage type the mortgage will be party repaid or with the son will have been putting away the difference in a repayment vehicle.


I'm I missing anything?

Pretty much spot on .....

Issues are OP also wants to pch the property (to be let) on standard residential terms and rates.

H x

LondonBoy

Ok - so lets take another family. Lets say the parents are 50 and earning 40k pa between them. They have cleared the mortgage on a house valued at 200k. They remortgage to IO and take out 180k. They use this to "clear debts". Lets say one of those debts was to a dear friends company.


The IO term passes, they have no repayment vehicle is place (just a nice tan). They sell up clearing the debt.


The dear friend hears of this predicament and buys a buy to let to house them in. They can't afford the rent so the government pays the rent via housing benefit.


Isn't this just a housing benefit scam and a way to avoid paying inheritance tax?