Consent to let or don't bother telling the bank?

chlozzi

Hi all

I'm seriously grappling with this issue:

We are in the process of re-mortgaging on our only property, which is our home. 25% deposit and valuation was fine so re-mortgage should be complete within a few days.

We haven't mentioned this to our new lender, but we are planning to go on a two year trip in two months and rent our house out. There is a very strong rental market here and we can easily cover the mortgage and all attached costs with the rent.

We are really not sure whether to ask our lender for a consent to let. From what I can tell, the situation is:

Pros for asking for consent to let:
Positive feeling that we've done everything by the book and are not 'committing fraud'
No risk of lender finding out we've lied and bumping our rate up massively or forcing us onto a buy to let
Assurance that landlords insurance means we are covered if a tenant sets the house on fire - if we don't have consent to let, maybe the insurance company will find out and not pay out

Cons for asking for consent to let:
Lender very likely to say no as it will effectively be two months after we took the mortgage out - the norm seems to be that you can only get it after six months - so then what? Would they be more likely to rumble us if we did rent without consent?
If lender says yes they will probably:
a) bump up our interest rate by at least 1%, costing us more £
b) say we can only have consent to let for 12 months, then force us onto a buy to let, which would be massively expensive
Lender very unlikely to find out as long as we pay the mortgage, which we will (and re-direct our post)
Part of me feels the banks are just using this as a way to make more £. In our case, we will always make sure our mortgage gets paid so really there is no risk to the mortgage company.

We are feeling really torn. We know of lots of people who haven't bothered to tell their bank, but then again have read a few horror stories. If it was a simple case of paying £100 and filling in a form, like in the old days then we absolutely would do it, but these days it seems like there is no way of being honest without costing yourself lots of money.

Your thoughts on this would be most appreciated...

sinbad182

You should tell the mortgage company, you know this is the case and nothing you or anyone on here says will change this.

However,

If you are comfortable with not telling them, you need to weigh up the likely hood of getting caught, how serious the effects of getting caught would be, and what you would do if the worst happened and the mortgage company came knocking.

If these are all minimal or non existent worries in your opinion then its purely down to whether you're happy keeping schtum or not.

moromir

You've forgotten a few con's...

b1) You can only redirect post for a certain length of time, I think its 6 months.

b2) Your tenants may get curious and open said post from mortgage company. Tenants have less rights where consent to let has not been granted if for any reason the property is repossessed, and if they're clued up, might shop you in to your lender on the offchance just to protect themselves.

c) Building and contents insurance likely invalid as you are unlikely to be covered if you personally arn't in residence. Worst case scenarion, house burns down and you still have to pay the mortgage off.

End of the day, if you want to be "honest" then go travelling and leave the property empty.

If you want to become a businessman and rent a property then suck it up and incur the business costs.

ognum

There are a lot of issues here. The right thing to do is to do the right thing and tell your lender.

Will you use an agent?

If you don't use an agent how will you declare your rent to HMRC?

Do you want to move back into your house on your return? How will you ensure your tenants move out?

You will be committing fraud and putting your property and your tenants at risk. Will travelling be carefree if you are thinking about this?

DevCoder

Of course if the lender finds out then they are likely to call in the mortgage immediately.

chlozzi

ognum wrote: »

Will you use an agent?

No. Private.

ognum wrote: »

If you don't use an agent how will you declare your rent to HMRC?

Haven't got to that yet. Need to get this sorted first and find a tenant. Can't I just file a tax return? I'll contact HMRC to find out what to do, but need to get this sorted first.

ognum wrote: »

Do you want to move back into your house on your return? How will you ensure your tenants move out?

Yes. We will give notice at the end of the second AST. We will tell prospective tenants we are planning to go for two years so they know our position.

ognum wrote: »

You will be committing fraud and putting your property and your tenants at risk. Will travelling be carefree if you are thinking about this?

Er no, but I won't be able to go at all if they insist on a buy to let mortgage as the rent probably won't cover it. The truth is I want to be honest and would feel much more comfortable doing it the right way, but I don't want to shaft myself by being honest.

somethingcorporate

You don't need to tell your mortgage company anything, you need to ask them as you want to vary the terms of your signed contract.

Personally, if you are going to be so slapdash towards your attitude with an institution that may have loaned you many tens of thousands of pounds what attitude will you have towards your poor tenants and any other legal obligations you have to them?

If you don't want to rent it out against the terms of your agreed contract then do not go through with the remortgage, stay on the SVR where you are and ask them for C2L. It may cost you a few bob but at least it shows you have respect for the deals you have made.

haras_nosirrah

why not cancel the remortgage and get a 2 year interest only btl mortgage if you have the 25% deposit. then change to a residential when you get back. pros - done everything by the book and don't have to worry

giraffe69

b1) You can only redirect post for a certain length of time, I think its 6 months.

Not true it is two years.

mrginge

So what we're actually saying is 'i want a two year jolly, but cant have one if i have to face up to my commercial responsibilities. Is it ok for me to screw over my mortgage lender and potential tenants instead?'

Building_Surveyor

Leave the property empty or pay up the extra cost for mortgage. Or just don't go. Either swallow up the extra cost or forget about your dream trip.

Mortgage fraud, insurance fraud, is it worth it? There are unavoidable costs when being a landlord,if you can't afford it then the answer is to not rent your property out.