Buy to let/ consent to let

Helks15

Hi
I have a query I hope someone will know the answer to.
I have been letting a property to a tenant for a few years but the property is not on a buy to let mortgage because I thought that you only needed a buy to let if you had more than one mortgage. I have always rented through the recession but now I'm trying to buy a second property, find that I should have had permission all along.
I'm on a 100% mortgage but wondered if anyone else had done this (either accidentally or on purpose) abd what is recommended? My tenant is good and always has paid on time. But I'm wondering whether I can ask my mortgage company for a consent to let, which seems to be where you don't need a buy to let mortgage?
Any ideas will be gratefully received!!!

Thank you!

nidO

At this stage, asking for consent to let and giving them the correct details on how long your property has been let is risky because:

Your lender may say no
Your lender may say yes, but if they apply an additional charge (such as increased interest) for having consent to let they may backdate the charge for the entire time you've been letting out your property
Your lender may decide that your breach of terms has been serious enough to call in the mortgage.

This means your choices are:
throw yourself on your lender and hope none of that happens
take the halfway lie of asking for permission but tell them you're only now letting out the property which removes the likelyhood of backdated charges
lie by omission by carrying on keeping quiet about it and hope they never find out
go to another lender to apply for a BTL mortgage and hope you get it sorted without your current lender becoming aware of the current situation.

If you do tell your lender now and explain that it was a mistake/lack of understanding that's meant you haven't previously sought consent the chances are your lender will grant it (assuming your lender is actually one that typically provides consent) with no penalty, but you have a small chance of being left with a big problem if they aren't that easy.

In your situation, I would probably frankly go for the last option of sorting out a BTL mortgage elsewhere ASAP.

Incidentally, how has this never come up before? Do you still have all your mortgage paperwork going to your tenants' home because you never updated your lender with your address? If you do choose to inform your lender they may ask questions like this as your prior lack of seeking consent to let may look more like intentional deception than an omission.

bigfreddiel

More to the point have you declared your rental incom to HMRC?

Cheers fj

G_M

* New landlords: advice, information & links

big_trev

Best bet apply for BTL now for your rental. You are in breach of your mortgage conditions and they will probably hit you for charges.

Helks15

Thanks for this - I have been declaring the income to hmrc. I found out about that late too but because I make a loss each year they didn't penalise me luckily.
Thanks!!

Helks15

Thank you!! Is it possible to get a buy to let mortgage if you don't have a deposit? I understood that it's quite hard to get a 100% mortgage these days?
Thanks all!

nidO

100% mortgages don't exist any more, let alone for BTL ones. Why do you need a 100% mortgage though, even if you originally bought the property on a 100% mortgage surely you've been paying down capital from your rental income for the past several years?
Has the property dropped in value significantly or something?

Helks15

Hi
Thanks again - for years it was on interest only but it's been on capital for the past 3 years. I'm not sure what is outstanding in terms but I doubt it's 90%.
The property was in the market during the recession and someone offered 30k less than it was bought for!!

Helks15

I should have said - I doubt I've paid off 10% of the original value. Sorry!

G_M

Typically BTL requires max 75% loan to value and income of 125% of repayments, but see an independant mortgage broker or post on the mortgages forum.

I too suspect if you come totally clean to your lender they will back-date any increase in interest rate associated with CTL, though not all lenders raise the rent when they grant CTL.

The other issue is that CTL is normally a short term agreement. It is designed for owner-occupiers who temporarily let their home ie when given a years overseas appointments etc. It is not for people letting a property permenantly/long-term. So if your lender knows you've been letting for 'a few years' they are unlikely to grant CTL