Want to let my property without Consent to Let?

button409

Hi everyone,

I'm hoping someone can help me! I purchased my property in 2007 at the height of the property boom, and now want to move. I am currently on my mortgage lenders variable rate, as our fixed term has now finished. We have had it on the market now for 18 months, at a price 10% lower than the price we paid, and have been unable to sell. We are unable to drop the price any further due to the outstanding mortgage (we were already looking at losing £16k if we sell at the current asking price).
Properties in our area rent out very quickly, as and we are now wanting to rent out our flat. At the rental income we would receive (minus landlords insurance/agents fees etc) we would be making a profit of around £60p/m on the flat -nothing significant.
I contacted my lender regading CTL, and they have said that yes they are happy to grant this, but only if we pay £1000 fee, and they will then increase our payments by nearly £400 p/m!!!!!!!!!!!!!!!! This would make the mortgage cost much higher than the rental income, and therefore we would be unable to move.
We are in a very difficult situation as we are desperate to move. We have seen several mortgage advisers who have 'unofficially' advised us to rent the property without gaining CTL, telling us 'everyone does it', and some even admitting to doing it themselves. We are now considering whether this is something we should do.
We are not thinking of doing this to make a profit (and would be making very little), but purely because we are stuck.
I am worried to death about what could happen if our mortgage lender finds out, and we haven't got the correct CTL.
Any help or advice would be greatly appreciated.
Thanks!

hellzbellz84

i DID used to let my house without CTL but my guilt got the better of me, my mortgage came to the end of its term with halifax and i asked for them to put it on a CTL mortgage and it only went up £50 a month. my sister however and a good friend of mine have not told their mrotgage providers and have been ok up til now with their tenants.

But IF things went belly up with your tenants, you could be in more trouble than its worth, but this is just my opinion.

does anyone know of anybody that has been penalised for renting their property without CTL, would be interesting to hear though!!!

hope you find a solution soon

xxxx

Turnbull2000

Just follow the advice of the mortgage advisers. They're correct, loads of people just rent out without asking.

Werdnal

If the lender finds out your are breaching their terms, they can impose the fee for consent and back date it to the first time you let it. Many tenants are savvy and will ask for proof you have consent. No-one here can predict what will happen, and I doubt anyone will condone you letting it without consent anyway!

If you are not making any profit on letting, how are you going to make this work financially. You need to cover your mortgage on the let property and your living expenses (rent or mortgage) on your new home - how will that happen if you have voids in let or bad tenant who stop paying.

You also need to attend to repairs and maintenance quickly, otherwise tenant can withhold rent or report you to the EHO. You cannot simply tell them in middle of winter when there is 2 foot of snow on the ground that you cannot afford to repair the heating.

You cannot just let it and hope it will pay for itself, it just doesn't work that way, and it can cost you more than you make on it. I would seriously question whether you have sufficient financial backing to do this properly, or whether you will struggle ...

Whilst you are here, you'd better read this:

http://forums.moneysavingexpert.com/showpost.php?p=41160642&postcount=12

to give you an ideal of what letting is all about. Just because you are using an agent, don't think that makes it any easier or less costly, and the financial obligations of letting rest with the landlord!

starbarboy

Hi there

Not only would you be breaking the terms of your mortgage you are at risk of invalidating any insurance should you do so.

If your mortgage company found out it may not just be yourself who would be penalised - you have to consider the effect it may have on any tenants should this happen.

Stephen

mrginge

Will these mortgages advisors offer to underwrite any of your costs if you take their 'advice' and get found out?

As they are happy to tell you to break the terms of your mortgage agreement, does this not make you question any more of their professional advice.

starbarboy

mrginge wrote: »

Will these mortgages advisors offer to underwrite any of your costs if you take their 'advice' and get found out?

As they are happy to tell you to break the terms of your mortgage agreement, does this not make you question any more of their professional advice.

Telling you that "others do it" does not constitute as advice - you can't place responsibility on someone else for your actions when you know that what you are doing is wrong.

POPPYOSCAR

It is a gamble.

Yes lots of people do it.

Depends if you are one of those people prepared to take the risk.

It is an interesting question if anyone has been 'found out' by the lender and what the consequences were.

FireWyrm

starbarboy wrote: »

Hi there

Not only would you be breaking the terms of your mortgage you are at risk of invalidating any insurance should you do so.

If your mortgage company found out it may not just be yourself who would be penalised - you have to consider the effect it may have on any tenants should this happen.

Stephen

Worse than that. You HAVE to declare your profit to HMRC and there is an arrangement in place between banks and HMRC to specifically stop this sort of thing. Granted, the advantage was for HMRC, but banks can poke around too.

If the bank finds out, you could be in a world of trouble.

That said, I had a self cert mortgage back in the day and I lied about our income to get it. Nothing bad befell us although I wasnt stupid enough to advertise the fact to the bank. You have asked the bank for permission once, it's going to look suspicious if they call asking for you and get someone else on the phone. Better to remortgage to another bank and try again.

POPPYOSCAR

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/9137236/House-prices-dare-you-let-out-your-home.html


This is quite a relevant article.

A snippet from it.

"Simon Gammon of Knight Frank Finance said the extra money paid to mortgage companies by accidental landlords was a "tax on honesty". He said most people did not bother to tell their lender. "The reality is that people are struggling at the moment and that one phone call could cost you thousands of pounds," he said. He said he had never heard of anyone being forced to pay backdated extra payments when they were discovered to be letting out a property but said these landlords were almost never discovered.
However, Ray Boulger from mortgage broker John Charcol said at least one lender had a policy of charging higher rates to those who were "discovered" to be renting out their properties, rather than telling the lender. He added that lenders could also go through electoral rolls to check whether someone else appeared to be living at the property. He said some lenders would allow you to come to the end of a fixed-rate period before moving onto a consent-to-let rate, while others would force you to pay early repayment charges and move immediately. "There is a huge variation," he said
Many people who become accidental landlords cannot apply for buy-to-let mortgages either. Instead, they are forced onto special let-to-buy rates, which are higher than the best rates for either residential or buy-to-let mortgages.
Platform, owned by the Co-op, has only recently come back into the let-to-buy market after excluding first-time landlords who are renting out their residential property. Halifax, like many other lenders, charges home owners more if they let out their homes. Currently, Halifax customers have a variety of mortgages available at consent-to-let rates, all above the standard variable rate (SVR) of 3.99pc.
These include a three-year fix at 5.69pc with a £999 fee, which requires 40pc equity, and a three-year tracker at 5.99pc with a £1,495 fee requiring 25pc equity. A spokesman said there were products available for those with lower levels of equity.
Nationwide also requires customers to pay more if they are letting their property after six months. "Customers who become accidental landlords need to complete a form to ask us for permission to let their property and there is a £50 admin fee for this process. For the first six months there is no other charge, but after six months the mortgage interest rate will increase by 1.5 percentage points," a spokesman said. This change would add £3,000 a year to the cost of a £200,000 interest-only mortgage.
Nationwide said the change reflected the "additional risk" that the building society was taking on by lending to new landlords.
Many people who move out of their homes and rent them out do not realise that they need to inform their mortgage lender and take out specialist insurance. However, if you do not inform your lender you are in breach of your mortgage terms and conditions. What is more, lenders are beginning to get tough on those they suspect of letting out their property without the lender's consent. Halifax, Britain's biggest mortgage lender and part of state-backed Lloyds Banking Group, has been writing to some borrowers it suspects of letting their properties. The letters warn that if borrowers do not reply promptly, Halifax will assume that the property is being let out and impose a higher rate on their loan.
A spokesman for Clydesdale and Yorkshire banks said the lender had also written to its customers reminding them that consent was required to let out a property. It also requires customers to move onto higher buy-to-let rates if they are doing so. The bank announced last week that it was raising its standard variable rate from 4.59pc to 4.95pc in May. However, many of its buy-to-let rates are higher than this. Those with 20pc equity in their property will pay 5.29pc for a two-year fixed rate, for example.
Mr Salusbury said accidental landlords should not forget to take out insurance cover to protect them from the risks associated with becoming a landlord. Figures from Moneysupermarket.com show that you could buy landlord insurance, which includes a rent loss guarantee and legal expenses cover, for as little as £123.81 a year for a house in the M20 area of Manchester."

Tjrw1985

Hi, I used to work for a mortgage lender who would put the price up if they found out.

Now the only way they will find out, is if a payment is missed and they send out a so called "counselling agent" who finds out the property is tenanted, and if the agent gets no response then an electoral roll search was carried out.

If either showed up a potential tenant than an interest loading fee of 2% was added to the interest rate, and a form sent to apply for consent.