Can I temporarily rent out a residential mortgage?

Grumpy_chap

lshinnmorr said:

All of the initial comments to my post were outlining how terrible an idea it would be to buy and how I would be doing something illegal / potentially get in trouble with the police for being in my (fairly normal-seeming) situation 

I am not sure which post you read as indicating you could potentially be in trouble with the police - I don't read any of the posts in that way.

Assuming you followed all the rules of letting a property, then the only "trouble" would be being in breach of the terms and conditions of your mortgage.  That would be a civil, not criminal, matter.  The penalties a lender could impose are quite severe (demand immediate repayment of the full sum borrowed and a fraud marker on your file) but whether a lender would jump straight to that point, or give you an opportunity to rectify the situation first I do not know.  In your case, all of that is irrelevant as you were aware you would need "Consent to Let" which would most likely be refused and you'd stop at that point so everything else would not happen.

I hope this all goes well for you and you get the house - there are ways to resolve the tenancy term.

saajan_12

lshinnmorr said:

Ok, understood. Thanks for the responses - I will not buy. 

Sidenote: it seems kind of crazy to me that owning your own home gives you less flexibility or freedom than renting, with so many more possible negative consequences like getting in trouble with the law as outlined in the replies. I will keep renting for the foreseeable few years and not buy anything. 

House ownership was never meant to be flexible - for example to move, it takes 2-6 months and high costs to buy/sell, (for solicitors, surveyors, agents, stamp duty etc) while renting you can up and leave with usually a month's notice after the intial fixed term. 
House ownership gives you stability (no landlord to chuck you out), some autonomy to decorate / renovate / extend the property, and an asset you own ie don't keep paying capital forever. There might still be restrictions from a lender or freeholder, but much more freedom than you would have when renting. 

For your specific point of being able to let / sublet the property, you can't do that unilaterally when renting either - would need agreement from the landlord, so at best owning is equally flexible on this front, not less so. 

Mickey666

lookstraightahead said:

If you have a mortgage, you don't own your own home, the bank does (or at least they have a say in the matter). There's nothing wrong with having a mortgage, it's a good type of debt, but someone else is financing your home yes.

That's not strictly true.   Even with a mortgage it's your name on the deeds, which is the legal proof of ownership.

The bank is certainly financing your ownership, and they have secured their loan on the house so they can force the sale of it in order to recover their loan in the even you default on the payments, but you're still the legal owner of the property.

Slithery

lshinnmorr said:

All of the initial comments to my post were outlining how terrible an idea it would be to buy and how I would be doing something illegal / potentially get in trouble with the police for being in my (fairly normal-seeming) situation because I would have a mortgage, which made me think that possibly getting a mortgage is not a good idea after all. This makes it much clearer. 

No-one said it would be a terrible idea to buy, we all just said that it would be a terrible idea to let out a property on a residential mortgage without CtL and assume you could move in in 7 months.

Getting a mortgage and owning your own property to live in is nearly always a better idea than renting.

Salemicus

Have you considered taking a lodger?

Emmia

lshinnmorr said:

lookstraightahead said:

If you have a mortgage, you don't own your own home, the bank does (or at least they have a say in the matter). There's nothing wrong with having a mortgage, it's a good type of debt, but someone else is financing your home yes.

Can I ask a potentially stupid question - in your view why buy a house at all? Would it not be better to keep renting (lower cost than a mortgage in London) and save the money in an ISA or a pension instead? Saves you money and gives you so much more freedom and flexibility with none of the risks (both legal and financial) outlined by other commenters?

The obvious answer is that even if renting is cheaper, it is never ending... you could rent until the day you die. With a mortgage eventually you own the property (which is an asset like an ISA) outright. 

Renting is flexible but is not without risk or downsides... your landlord could decide to sell, double the rent, you can't make improvements so easily... 

AnotherJoe

lshinnmorr said:

MaryNB said:

lshinnmorr said:

user1977 said:

lshinnmorr said:

Sidenote: it seems kind of crazy to me that owning your own home gives you less flexibility or freedom than renting, with so many more possible negative consequences like getting in trouble with the law as outlined in the replies.

It isn't a "owning your own home" thing, it's a "wanting to borrow a large sum of money" thing.

Sure - what I'm hearing from a lot of these comments is that it's probably not better to get a mortgage at all and to stay renting If you can't afford to buy outright. 

Until your landlord gives you 2 month's notice (pre & post covid) because they want to sell the house. 

Also the vast majority of people plan to have their mortgage paid off by the time their retire and so they massively reduce their outgoings by the time they have to start relying on a pension. There was a poster here who's elderly in-laws were being given notice to leave because the landlord wanted to sell. Imagine being asked to leave your home when you're in your 80s!

Also, for most people a mortgage is much cheaper than renting. My mortgage is £624 a month. The house across the way went up for rent recently at £1,000 a month. 

Renting makes sense if you haven't got a sufficient deposit or aren't sure where you want to live long term. For the vast majority of people, buying is better if they can afford the deposit and mortgage repayments and plan on staying put for the foreseeable future. 

There is some flexibility with a mortgage but as you're aware you have to be living in the property for a while to get a consent to let. Renting out the house is running a business so the criteria is going to be different. A consent to let is just a temporary adjustment to the terms. The risks involved in granting a BTL mortgage are very different to a residential mortgage so the lending terms won't be the same. Also since you're asking a bank for a 6 figure sum, it's going to be on their terms. 

Kind of unrelated to the original post now, do you think in that case if my mortgage is more than my rent that it's a bad idea?
Current rent: £737 per month

House price (very cheap for the area) : £330,000

Mortgage deposit: £40,000
Mortgage monthly repayments: £1300 per month (interest each month actually more than my current rent). 
It seems from all the comments here that mortgages hold many more risks and also, as one commenter said, you don't own the house anyway as the bank does. So is it better to just rent and save/invest the money?

How is that a fair comparison?  One is a house you live in by yourself (or maybe with a lodger to help pay the mortgage via their rent) the other is a room in a shared house.

What is the current rent on the entire property you live in? Add up all your housemates rent. I woudl be staggered if that total  was less than your proposed mortgage. It makes no sense anyway that rent would be less than a mortgage in the long term because how is the LL meant to pay the mortgage off? From their own pocket?

And, maybe this didnt occur to you, but you pay the mortgage for a limited time only, then its over and done with. Rent is forever.

I haven't paid a mortgage  for i dunno many years and i certainly wont be paying rent into my dotage and not being kicked out because a LL want to do something.

Of course there are downsides to owning, but you seem strangely set on finding only downsides, in some cases by terrible skewed  comparisons. "yeh look its much cheaper to rent a room in a house than buy a whole house".  Well no **** sherlock.

Maybe you'd be better off psychologically just renting a room. If you like that lifestyle, then by all means do it, though in which case buying a place and letting out some rooms might give you best of both worlds  because if you dont buy then unless you invest long term and well, house price inflation will likely overtake your ability to buy anything at all, like a certain denizen of this forum.

grumiofoundation

lshinnmorr said:

MaryNB said:

lshinnmorr said:

user1977 said:

lshinnmorr said:

Sidenote: it seems kind of crazy to me that owning your own home gives you less flexibility or freedom than renting, with so many more possible negative consequences like getting in trouble with the law as outlined in the replies.

It isn't a "owning your own home" thing, it's a "wanting to borrow a large sum of money" thing.

Sure - what I'm hearing from a lot of these comments is that it's probably not better to get a mortgage at all and to stay renting If you can't afford to buy outright. 

Until your landlord gives you 2 month's notice (pre & post covid) because they want to sell the house. 

Also the vast majority of people plan to have their mortgage paid off by the time their retire and so they massively reduce their outgoings by the time they have to start relying on a pension. There was a poster here who's elderly in-laws were being given notice to leave because the landlord wanted to sell. Imagine being asked to leave your home when you're in your 80s!

Also, for most people a mortgage is much cheaper than renting. My mortgage is £624 a month. The house across the way went up for rent recently at £1,000 a month. 

Renting makes sense if you haven't got a sufficient deposit or aren't sure where you want to live long term. For the vast majority of people, buying is better if they can afford the deposit and mortgage repayments and plan on staying put for the foreseeable future. 

There is some flexibility with a mortgage but as you're aware you have to be living in the property for a while to get a consent to let. Renting out the house is running a business so the criteria is going to be different. A consent to let is just a temporary adjustment to the terms. The risks involved in granting a BTL mortgage are very different to a residential mortgage so the lending terms won't be the same. Also since you're asking a bank for a 6 figure sum, it's going to be on their terms. 

Kind of unrelated to the original post now, do you think in that case if my mortgage is more than my rent that it's a bad idea?
Current rent: £737 per month

House price (very cheap for the area) : £330,000

Mortgage deposit: £40,000
Mortgage monthly repayments: £1300 per month (interest each month actually more than my current rent). 
It seems from all the comments here that mortgages hold many more risks and also, as one commenter said, you don't own the house anyway as the bank does. So is it better to just rent and save/invest the money?

As posters above have said I think you are picking out comments that seem to focus on downsides of owning - I don’t think anyone is actually saying renting and is better than buying but you seem to be inferring that. 

In the long term buying a house will most likely beat investing (this doesn’t mean you should rush to do ASAP of course-  In the short term renting is often more sensible). For example if you don’t know if you will settle in an area, might movefor work, are able t save up to buy a bigger place straight away. Buying somewhere and  then moving in say 2 years could end up costing more than the rent. Buying somewhere and living there for 25 years on the other hand....!”(see below for very rough calculations). 

Let’s ignore the (pretty big) fact that as poster above said it’s likely you aren’t comparing like for like looking at £737/£1300. E.g. house share vs own place - do you want to do that for 25 years?

After say 25 years of paying mortgage you now are mortgage free. Alternative is to rent and invest and after 25 years to buy somewhere in cash. 

If you continued to rent you would have ~£500 to invest per month. In below calculations obviously made a lot of assumptions. 
I will assume rent increases in line with any mortgage increases for simplicity.
Will assume you want to live in same place for 25 years. 

If you invested £40,000 with £500 per month ongoing for 25 years making 5% per year you end up with £437,000.

If £330k house goes up by 2% per year after 25 years it will cost  £543,000.
So your £437,000 can only actually buy a house worth ~£260k today.

So even if though your investments have gone up by more than house prices you can’t afford the same property.

I have just pulled these numbers out of thin air (also ignored inflation but assume both figures after inflation). 

As an aside the commenter claiming you “don’t own your house” is wrong. You own your house, you owe money to lender (charge on property) lender owns precisely 0% of it (fundamental misunderstanding of how mortgages work). The fact you owe lender means you have to abide by the Ts and Cs of the loan you took out (e. g. Not letting out without permission on a residential mortgage).