Is honesty the best policy?

chrishar

I own one property with a residential mortgage, I am renting it out without all the correct permissions etc in place. I want to try and get everything as it should be.

I have approached a broker who has told me it should be fine to do a standard re-mortgage/borrowing more in order to give me some equity with which to buy another property.

He then suggests a second residential mortgage for a new property which I plan to live in. He said later on I can convert the first mortgage to a buy to let if need be, or just apply for consent to let.

This all sounded ok but he has given me a list of documents I need to come up with, which I feel could be a problem. For example my bank statement and payslip has a different address, of a friends house where I currently rent a room.

The only thing I have with the address of my own property is my mortgage statements. My bank statement also shows rent coming in and nothing going out for bills/council tax so I'm wondering if this could cause a problem depending on who looks at them.

Would it be best if I contact my mortgage company direct and own up that I am renting out the property but at the time didn't realise all the things I needed to do? Or am I worrying too much, and maybe what the broker has suggested will all go through ok?

GMS

Find a new broker. This one is likely to get you on a naughty list.

Senior_Paper_Monitor

Words fail me - are there still brokers out there doing business this way !!


Its no so much that they are corrupt as the fact that they are clearly stupid - can you not spot what the bank who has the current mortgage will identify from the basic documents they want at the point of application for more borrowing ???


Walk - or in fact RUN !!

chrishar

It sounds like the advice is to 'own up' and see what the current lender says, I am not sure how they will respond to this.

On one hand I'm fed up with doing things the wrong way, being deceitful etc. On the other hand I do wonder whether mortgage companies allow a lot of things to go on whilst turning a blind eye, so long as the repayments are met?

Senior_Paper_Monitor

The lender is currently probably unlikely to come 'looking for you' to be honest, although be aware that there is an ongoing co-operation between HMRC and CML members to identify 1) those not paying tax on rental income 2) residential rates on BTLs.


But to advertise what you are doing to the lender by asking for some more money and providing evidence of other addresses, rental income etc is akin to throwing yourself under an oncoming train - inevitably messy !

Goldiegirl

If they become aware that you are letting the property they won't turn a blind eye.

By letting the property without consent, you are in breach of the mortgage conditions. Being in breach of the mortgage conditions is actually grounds for repossession of the property...... They probably wouldn't go that far, but they might slap a higher interest rate on the mortgage.

If they became aware you weren't living in the property they certainly wouldn't consider any further lending. If you apply for further lending in the current situation, you'd probably have to sign a declaration confirming you agree to adhere to all the mortgage conditions, when you clearly aren't! So that could be construed as fraud.

Get your affairs in order, it'll give you piece of mind

chrishar

I am happy to pay a higher rate, if this is what they require. I am also fine with paying the tax on the rent, I just want to get things in order.

I currently have about 60% LTV and would like to extend this to 75% which would give me enough for a deposit for somewhere else.

Funny_old_game

The ironic thing about this us the extra money you want may be swallowed up when the man in the black bowler gets turns up from the inland revenue asking for x number if years unpaid tax.

I think you property move is a longer way off than you anticipate.

Not a good position to be in I'm afraid.

Thrugelmir

Owning up is the best way forward. Better than being found out. No one is going to dress you down. The matter will be dealt with in a straight forward manner. Once done you'll sleep a lot easier.

In answer to your question "Is honesty the best policy?"

Financial relationships are built on trust. Once that trust is broken then there's nothing. So rebuilding bridges has to be priority.

Jackie132

As per your conversation, I think he is trying to deceive you, and you should try another one who is trusted in your area. Honesty is good thing but not for those in which you can't trust.

amnblog

two points

1. What your broker seems to be suggesting is mortgage fraud and is illegal.

2. The majority of lenders for your new mortgage will ask for evidence that your current mortgage is either on a buy to let basis or that you have consent to let - therefore you need to come clean.

3. Your rental income will need to be declared on your self assessment tax return otherwise future lenders will not consider it in affordability calculations which it likely to trip over any further lending.