What happens if landlord stops paying buy to let mortgage?

turtleneck

A work colleague was telling me about his let flat where the tenant hasn't been paying the rent properly and not letting him know or answering the phone or texts.
I said he should evict them but apparently it's a long process so I just wondered what would happen if he stopped paying the mortgage?
What affect would this have on the landlord if he does or doesn't own any other properties?
Or if he has the money in the bank but cancels DD can they just take the money?
Thanks for any info

Dorian1958

So if I understand correctly, your work colleague would prefer to risk having his let flat repossessed, rather than go through the hassle of evicting his tenants?? Unbelievable. Suggest he stops being a landlord and sells up. Not a clue, I imagine.

Caz3121

he would build up mortgage arrears and possibly have property repossessed, sold with him liable for any shortfall and black mark on credit for 6 years.
If the tenant is over 2 months in arrears then he should look to follow the correct legal process to terminate

davidmcn

turtleneck wrote: »

What affect would this have on the landlord if he does or doesn't own any other properties?

Much the same as if he stopped paying the mortgage on the property he lives in (but without the hassle of having to find somewhere else to live). It would b*gger up his credit record, to say the least.

Or if he has the money in the bank but cancels DD can they just take the money?

If it's the same bank then in theory yes, they probably have a right of set-off so could transfer credit balances from other accounts.

turtleneck

Thanks for the answers. I don't think he would do this but we were just talking about the options. If it will affect his own credit rating it would no doubt be a bad idea. I guess also the bank would auction the property and get a low price? Would they then take their debt and fees and still give him any surplus? Thanks again for the info.

HampshireH

If he want's to be seem in good light with financial institutions for the foreseeable he would forget this option

It is FAR cheaper to go to court after serving the relevant notice than it is to accrue mortgage arrears and go down that route.

Not sure why he would throw he house away in such a manor to be fair. Seems a very strange thing to consider. Of course his credit would be affected.

If he doesn't want the house - sell it

Dorian1958

How much equity does he have relative to the mortgage? Once repossessed, the lender will go for a sale which recoups the loan, they will not care about making a surplus to give him. Obviously depends upon a number of factors, if he is lucky he might something back. Worse case, the sale does not cover the mortgage (plus costs), so he ends up with a debt to the mortgage provider.

turtleneck

I think he has about 25% equity the minimum you could put down on a btl.
I will suggest putting in writing to tenant the intention to sell.
He lives with another work colleague as a lodger so not sure he would be affected too much by a repossesion as he can just carry on lodging.
He said he wishes he never let it out as it's stressful and the tenant has become pretty awkward and uncommunicative.

Pixie5740

How curious that your "colleague's" tenant is having issues paying the rent at the same time that ttaylor and jamels2 are also having issues with tenants paying the rent.

molerat

turtleneck wrote: »

I will suggest putting in writing to tenant the intention to sell.

How does that get rid of the tenant and how will it make the property sellable. With a sitting tenant the place is only attractive to BTL landlords, with a sitting tenant not paying the rent it is unsellable - well, not at a price that would be acceptable to him. Get him to start the eviction process rolling.

davidmcn

turtleneck wrote: »

I guess also the bank would auction the property and get a low price?

Not really, most repossessions are sold in the conventional way via estate agents. The bank is obliged to take reasonable steps to get the best price but inevitably it's likely to be below what he could get if he was in charge. Plus the bank will charge for costs which he wouldn't incur (changing the locks, clearing the property etc), on top of all the interest, legal costs for the repossession etc.

Would they then take their debt and fees and still give him any surplus?

Yes, if there's a surplus then he gets it. But if there's enough equity, why would he even be considering this as an option, rather than selling it himself?