First plus loan wants £100 admin fee!

jackie2029

I have a first plus loan secured on my house, i recently moved and informed them of me renting out my house, they told me i have to apply to rent it out because of the loan and i have to pay a £100 admin fee for the previlege! what a cheek, it is me doing all the work, i have to find and send in a mortgage statement, fill in some forms and sent them off and i feel i have been railroaded into this and the fee seems very high, i have questioned whether i have to do this and they explained sortof no but they will have to inform my tenants as they will be illegally renting of me, i have asked to see the paperwork on this with regards to terms and conditions of renting but just feel it is very unfair, they have me over a barrel and i cant do anything about this admin fee, any advice?

Apples2

Are you expecting different answers this time?

https://forums.moneysavingexpert.com/discussion/comment/61389825#Comment_61389825

Thrugelmir

Lenders have always charged fees, so nothing new. A £100 is actually low compared to a number of lenders.

If you cannot afford a £100 are you in a position to be running a business? As its a drop in the ocean compared to the risk you are taking on.

jonesMUFCforever

When you mortgage your property it actually doesn't belong to you so they are right in saying you need permission to rent it out.
They can charge a fee for this which would have been in the terms and conditions of your loan agreement.

What if the tenants completely wreck your property seriously damaging its worth?

manzanilla

If you want to be rid of First Plus then you need to sell your house not rent it. Until that point you are stuck with them.

Will you actually be making a profit on renting it out? Remember you can't set your monthly payments on the FP secured loan against the rent yoiu will be receiving .... you can only offset the interest payments (not the capital payments if any) on the original mortgage. So you need to consider if you are going to end up owing tax on this.

antrobus

manzanilla wrote: »

....Will you actually be making a profit on renting it out? Remember you can't set your monthly payments on the FP secured loan against the rent yoiu will be receiving .... you can only offset the interest payments (not the capital payments if any) on the original mortgage. So you need to consider if you are going to end up owing tax on this.

I'm not that convinced that this statement is correct. I'm not aware of anything in tax law that places such a restriction on anyone.

manzanilla

Interest on a secured loan that has been taken out to clear other debts is not an expense "incurred wholly and exclusively for the purposes of the rental business". Therefore it can't be deducted from the rental income. See .hmrc.gov.uk/agents/toolkits/property-rental.pdf

There are exceptions to this if the loan was for the purpose of improving the property, or their is complicated BTL empire, but usually the rule of thumb is that secured loans / second morgages are NOT tax deductible.

If you look at all the websites talking about BTL you will see that they talk about deducting mortgage interest, not secured loan interest.

jamesd

It's a breach of mortgage conditions to let without permission from both the main mortgage lender and any other lenders. It's normal to both charge a fee for getting permission and for mainstream mortgage lenders to charge a higher interest rate, perhaps 1% higher, when letting.

manzilla, a secured loan is a mortgage-backed loan, just like the other mortgage-backed loan. The purpose is the key factor to consider, not the security or type of loan or the property the loan is secured with.

From the time the property was transferred to the BTL business, the loan is part of the financing of the BTL property. The original loan purpose might have been something else but that's not what it's doing now. Now it's part of the "purchase" value to the business of the non-equity portion of the property.

Thanks, not, for wasting my time with that HMRC document that does not say anything of substance about this, about all it says is the usual wholly and exclusively bit, nothing at all specific to secured loans. If you want to claim they are different somehow please provide proper supporting documents, not just a URL in the hope that nobody will bother to read what the content there really says.

The best way to handle this is to declare to HMRC in the tax return notes the original purpose of the secured loan and the capital outstanding at the time the property was transferred to the rental business with the loan being part of the financing of the property from that time. Then all is well declared and if HMRC has any doubts they can seek clarification or act as they deem appropriate, with jackie2029 protected by having made full disclosure to HMRC.

You may not know it but it's completely fine to take out a loan secured on a property for the purpose of withdrawing capital from a business. That's effectively what this loan has become from the time the property entered the letting business. jackie2029 could take out more loans secured on the business to do this capital withdrawing, up to the total value of the property at the time it entered the letting business, and use the money withdrawn for any purpose at all, deducting the interest cost from the rental income. She'd also need to account for the money in the capital part of the business accounts.

iolanthe07

We've been through all this before with Jackie on another thread, as Apples pointed out. Jackie obviously didn't bother reading the replies, which were much as the above. You cannot let your house to tenants without asking the mortgage company first, and they are likely to charge extra interest because having tenants in the house makes it much harder to repossess in the event of a default. They might even refuse permission altogether.

If £100 is a big deal to you, should you be a landlord at all?

gb12345

iolanthe07 wrote: »

We've been through all this before with Jackie on another thread,

Yes but she didn't get the answer that she wanted, so she's trying again. To save her the trouble of a third thread here is what she wants to hear.

"£100 is a scandalous amount to be charged. Just don't bother telling them or the main lender that you are letting the property as they don't really care. Also forget about HMRC as well, they won't be interested."

DISCLAIMER: The answer above is intended to satisfy the needs of the terminally stupid to get the answer they want to hear and should be in no way relied upon as sensible advice.

UsetheFORCE

gb12345 wrote: »

Yes but she didn't get the answer that she wanted, so she's trying again. To save her the trouble of a third thread here is what she wants to hear.

"£100 is a scandalous amount to be charged. Just don't bother telling them or the main lender that you are letting the property as they don't really care. Also forget about HMRC as well, they won't be interested."

.....don't forget the disclaimer, the OP might think you are being serious!!!