Wanting to keep my excellent 'lifetime tracker' mortgage

Frances63

Hello, I have a dilema!

I took out a super mortgage with the Portman building society some 13 years ago with a high deposit.

The rate was 0.75% above the BoE base rate. No collar!

It's now with the Nationwide bs due to takeovers and they have honoured the terms, so currently with the 0.5% base rate I am paying an excellent 1.25%.

My house value has increased quite a lot in that time, so I would say I own between two thirds and three quarters of the house outright.

I am now looking at the option of renting my house out and living elsewhere. To do this the Nationwide want to add an EXTRA 2% to my mortgage rate. More than doubling it!

Why should they be allowed to do this? There is absolutely no increased risk to them and it won't affect them in the slightest. I think it's immoral for them to 'cash in' for no reason.:(

Is there no way round this?

.

ViolaLass

There IS an increased risk to them. For example, if they want to repossess, they would have tenants to deal with.

holly_hobby

They can do this because you have a residential mge on a property that you now want to use for commercial purposes - and its non-negotiable I'm afraid.

As a result, although they are allowing you to rent it out under your residential mge (which is completely discrectionary from their part), to take account of the statistical increase of exposure to default (as this will no longer be your home) they can and are adding a loading.

The good news is the associated interest is a permitted deduction from your gross rental receipts.

If you don't like the loading, simple, don't rent out and sell, or try and seek a BTL product from an alternative provider whom will beat the 3.25% you've been offered - many BTL deals are intermediary only, so you would be best to explore your options with a whole of market mortgage broker (rental income 125% of mge, if you use 6% as a basis calc it'll make sure you're figs cover all lenders)

Hope this helps

Holly x

dimbo61

You have a lot of equity in your home !
I think speaking to a good accountant who deals in BTL properties and a good mortgage broker to find the best deals for both BTL and residential mortgages.
You are starting a business so getting professional advice will help you make a success of the business.
You may only need 25% equity to get a good BTL mortgage if you can get a good rental return.
You can then use some of the equity to put down a bigger deposit on your new home.

ViolaLass

dimbo61 wrote: »

You have a lot of equity in your home !
I think speaking to a good accountant who deals in BTL properties and a good mortgage broker to find the best deals for both BTL and residential mortgages.
You are starting a business so getting professional advice will help you make a success of the business.
You may only need 25% equity to get a good BTL mortgage if you can get a good rental return.
You can then use some of the equity to put down a bigger deposit on your new home.

Borrow money at a higher rate (BTL) to get a lower deal on a residential mortgage. Great advice...

Thrugelmir

Frances63 wrote: »

There is absolutely no increased risk to them and it won't affect them in the slightest.

Not the real issue even though the risk profile does increase. You are wishing to change the terms of your relationship onto a business footing. Additional interest loading has always been in existance nothing new.

Frances63

But how does it actually affect them to warrent doubling the mortgage interest? This seems extreme.

I can't see how the risk is increased if I own 75% of the value. There is no way they would need to repossess. I have an excellent cedit rating & have never missed a payment.

Frankly I feel it is none of their business what I do with my house. Yes, it will be a business; the tax takes care of reflecting any payment due on profits.

I do understand what you're all saying but how can they justify taking twice as much interest?

They frankly do nothing to deserve it.

kingstreet

They are not "taking twice as much interest" intentionally.

Whatever your rate, Nationwide charges a premium in return for consent to let. It's only double because you have such a low rate to start with.

If you compare the rate you will be paying with an alternative let to buy mortgage product, you'll find that the LTB rate and costs leave you worse off than the Nationwide offer.

R_P_W

Frances63 wrote: »

But how does it actually affect them to warrent doubling the mortgage interest? This seems extreme.

I can't see how the risk is increased if I own 75% of the value. There is no way they would need to repossess. I have an excellent cedit rating & have never missed a payment.

Frankly I feel it is none of their business what I do with my house. Yes, it will be a business; the tax takes care of reflecting any payment due on profits.

I do understand what you're all saying but how can they justify taking twice as much interest?

They frankly do nothing to deserve it.

Simple. Pay the mortgage back and borrow it from another lender....see what rate you get and compare it.

Your argument is flawed! You are on the best rate out there probably and they are treating you no different to their other customers. You are the one that is moving the goalposts on the agreement.

dunstonh

But how does it actually affect them to warrent doubling the mortgage interest? This seems extreme.

It isnt doubling the interest. It is adding a loading. That loading would be the same whether the rate was 1% or 10%.

I can't see how the risk is increased if I own 75% of the value.

You are asking them to change your residential mortgage to a commercial mortgage. This increases the risk to them for repossession purposes and buy to lets suffer greater risks on property damage.

There is no way they would need to repossess.

I am sure everyone who has been repossessed felt the same way.

Frankly I feel it is none of their business what I do with my house.

Actually it is as they have first charge against it.

Yes, it will be a business;

Exactly. They are being good enough to allow you to use a residential mortgage for commercial reasons.

They frankly do nothing to deserve it.

Go elsewhere then.

opinions4u

Why should they be allowed to do this?

It is you who wishes to change the nature of the agreement. Why should you be allowed to do so?

There is absolutely no increased risk to them and it won't affect them in the slightest.

While it's irrelevant, BTL mortgages have different risks.

But you want your mortgage to become a commercial arrangement to support your part time business as a landlord. They don't even have to entertain the proposition.

I think it's immoral for them to 'cash in' for no reason.

But there is a reason.

Remember you can offset interest against rental income for tax purposes. I'm not sure my taxes should subsidise your business this way, but that's the way it rolls.

Frankly I feel it is none of their business what I do with my house.

A rather selfish and ignorant view to take. You borrowed their money. You signed the mortgage deed. It's very much their business. If you don't want it to be their business give them their money back.