remortgaging and letting

baisui

Am a bit confused about what to do, I'll be grateful for any advice.

Let me outline the situation...

- My wife and I have been in our current property for about 3 years and are coming to the end of our first mortgage term - we had a 3 year fix. 

- Our preference would be to remortgage on another 3 year fix with our current lender. 

- I have a year's sabbatical leave from my job and my wife can work away and we plan to go abroad.

- We want to let out our house for the year to help to cover the mortgage (should just about break even after expenses if we can let it for the whole period) and to avoid leaving the house empty

- We have savings to cover the year's mortgage payments if necessary.

- We have 30% equity in the house

- When we took out the mortgage my wife had a regular job, now she has two year's of erratic (but overall higher) earnings from own company. The outstanding loan is approx 5.4x my salary. If necessary, savings mean we could get this down to 5x.

So my question is what should we do? My first thought was to request consent to let. We've been here for 3 years and only intend to be away for one year. However, I have read that lenders won't give consent at the time a mortgage is arranged. Does the fact that the period we want to be away coincides with the time we need to remortgage mean that we wouldn't be able to get consent to let? 

I would consider getting a btl mortgage, but we would want to fix in the current environment, but I understand if you have btl, you can't actually live in it, which we would want to do when we come back, is that right?

TIA!

csgohan4

letting it out has it's own legal and tax implications

no guarantee to get your house back if the tenants refuse, not all tenants want to stay in a house for only 1 year max. 

CTL is at discretion of the lender, not guaranteed

baisui

Thanks, so what would you advise? We also can't leave the house empty for all that time. 

baisui

A bit of extra info, not sure if this was clear above...
I'm concerned about asking for consent to let within a short period of remortgaging - does that make a difference? We've been living in the house for years and plan to return after a year.

davidmcn

The risk is they say no to the letting. Then what?

baisui

davidmcn said:

The risk is they say no to the letting. Then what?

Then we'd have to reconsider our options I suppose. But I'd like to understand the process before applying, which is why I posted on here. 

Two things are puzzling me in particular: 
- I've read that if you ask for CTL near the beginning of a mortgage you are likely to be refused as it looks like a trick to get a cheap BTL mortgage. We are in a different situation, we'd be at the beginning of a new mortgage period but just having remortgaged with the same lender after already had the house for some years.
- Do they have transparent criteria, such as rent:debt ratio or LTV, for making the decision as they do for BTL? That would be helpful because we could try to get our ducks in a row if there are any areas where our application might be questionable?

amnblog

Consent to let is normally given by most Lenders if they believe the let is a temporary rather than permanent arrangement.
Do not expect them to swop your mortgage on to a new rate whilst on consent to let. Bad timing could leave you on the standard variable rate.

baisui

amnblog said:

Consent to let is normally given by most Lenders if they believe the let is a temporary rather than permanent arrangement.
Do not expect them to swop your mortgage on to a new rate whilst on consent to let. Bad timing could leave you on the standard variable rate.

Thanks, yes we have pretty bad timing...I was thinking of asking now to give plenty of time with a view to letting in 3 or four months but we have to remortgage before that.

newdriver101

Banks usually require 6 months with a mortgage product before granting CTL.  I was in a similar position a while back (had the opportunity to work abroad + had just re-mortgaged). At the time my bank stated I would need 6 months before I could apply.  My plan fell fell through so I did not apply in the end.  In my case it was a starter home so I was not worried about moving back into my flat on my return and would have been happy to switch to a buy-to-let once the mortgage term ended.  As other posters have said - There are additional considerations with being a landlord and you may have issues removing the tenant when you’re ready to move back in...

ayvamummy

I read on here recently that someone was refused CTL as they had recently remortgaged within 6 months of applying for CTL.   Use the search tool for CTL topics for similar cases

baisui

baisui said:

- Do they have transparent criteria, such as rent:debt ratio or LTV, for making the decision as they do for BTL? That would be helpful because we could try to get our ducks in a row if there are any areas where our application might be questionable?

Anyone have any idea about this ^^?