First time buyer and renting the house after 6 months

BFYZ

Hello, I just wanted your views on renting out the house which we recently bought as first time buyers. 

I’m considering the situation due to current pandemic and thinking of moving abroad with family and renting out the only property we have in the UK.

Does this implicate anything with our lender? 

Is this absolutely ok to do it? Someone told me that I should take a consent from the lender or it might come under mortgage fraud. I’m concerned that they might ask something I I’m not prepared for. 

I do not understand why would it have such extreme consequences i was to still carry on paying the mortgage and rent the property although at purchase I remember it was bought as the main residence to live on and rent & mortgage payments almost correlate. 

Any experience or guidance would be appreciated. I would want to know all options before I ask my lender.

Property purchased Jan 21’ and thinking of renting it from Oc 21’

[Deleted User]

BFYZ said:

Hello, I just wanted your views on renting out the house which we recently bought as first time buyers. 

I’m considering the situation due to current pandemic and thinking of moving abroad with family and renting out the only property we have in the UK.

Does this implicate anything with our lender? 

Is this absolutely ok to do it? Someone told me that I should take a consent from the lender or it might come under mortgage fraud. I’m concerned that they might ask something I I’m not prepared for. 

I do not understand why would it have such extreme consequences i was to still carry on paying the mortgage and rent the property although at purchase I remember it was bought as the main residence to live on and rent & mortgage payments almost correlate. 

Any experience or guidance would be appreciated. I would want to know all options before I ask my lender.

Property purchased Jan 21’ and thinking of renting it from Oc 21’

Because the terms of your mortgage expect you to reside in the property and not let it out to other people. It wouldn’t be fraud though as that would occur if when applying for the mortgage in the first place you had no intention of living in the property. You would be in breach of your mortgage terms and your mortgage lender could call in the mortgage if you don’t have consent to let. 

AdrianC

BFYZ said:

I’m considering the situation due to current pandemic and thinking of moving abroad with family and renting out the only property we have in the UK.

Does this implicate anything with our lender?

Yes, absolutely!

You need either consent to let (CtL) from them, or to remortgage to a specific (BtL) mortgage.
They have lent you the money on the basis that you live in the property. You are now looking to change that.

If they need to repossess, there are a whole bunch of logistical issues that arise from the property being tenanted, especially if you have failed in other aspects of running the lettings business, meaning they cannot easily regain possession from the tenants. In addition, maximum loan-to-value for BtL mortgages is way lower than for residential - they want you to have more equity to provide better security.

Property purchased Jan 21’ and thinking of renting it from Oc 21’

Very unlikely they'll give you CtL so soon after purchasing... Especially if you are a relatively high LtV.

If you'd said January 2020 I might give you the pandemic as an excuse, but January this year was well after the pandemic was underway.
No, nobody foresaw it would last this long, and nobody knows how long it will last. But the same, of course, applies to other countries. The UK is currently the mismanager-in-chief, but boots can quickly go onto other feet.

Are you a foreign national, or do you have a residence visa for this other country you're heading for...? Remember, it's nowhere near as easy as it was before Brexit.

Then there's all the questions around setting up this business... Are you even aware of the myriad of legal responsibilities you will face? Especially looking to be a foreign-resident UK landlord... Will you be registering for the NRL scheme, or will your tenant be responsible for paying the tax on your behalf...?
https://www.gov.uk/guidance/paying-tax-on-rent-to-landlords-abroad

Will this even be a profitable business, especially if you're paying a managing agent and do have a high LtV mortgage...? Or are you just assuming?

user1977

If moving abroad permanently, why go through all the hassle of being the landlord of a property in another country? Wouldn't it be simpler just to sell and move on? Apart from anything else, I expect it would upset your creditworthiness when you look for somewhere to rent or buy abroad.

BFYZ

Yes I did not thought this through at all. I will ask my lender for CTL but I guess we might have to delay the move till past 12months on from date of purchase to ourselves better chance of getting consent to let. 

We are planning to move to Dubai and both myself and wife will have a business that we are taking with us to solely work from abroad. At the same time we would want to give ourselves a backup that if everything fails in a worst case scenario so we could just move back. It’s already a big of a task to move everything abroad with kids schools etc but pandemic has put things on hold for long that we can’t resist moving. 

I have dual nationality and thinking to avail this opportunity to seek better prospects abroad. 

What if I keep my mortgage payments and doesn’t let this property out and keep it vacant. I’m just trying to find ways out to keep the complexities to minimum. Then may be after 12 months, ask to get a consent for let and then see. 

So if I keep this vacant and keep up the payments, I don’t have anything to lose right?

[Deleted User]

BFYZ said:

Yes I did not thought this through at all. I will ask my lender for CTL but I guess we might have to delay the move till past 12months on from date of purchase to ourselves better chance of getting consent to let. 

We are planning to move to Dubai and both myself and wife will have a business that we are taking with us to solely work from abroad. At the same time we would want to give ourselves a backup that if everything fails in a worst case scenario so we could just move back. It’s already a big of a task to move everything abroad with kids schools etc but pandemic has put things on hold for long that we can’t resist moving. 

I have dual nationality and thinking to avail this opportunity to seek better prospects abroad. 

What if I keep my mortgage payments and doesn’t let this property out and keep it vacant. I’m just trying to find ways out to keep the complexities to minimum. Then may be after 12 months, ask to get a consent for let and then see. 

So if I keep this vacant and keep up the payments, I don’t have anything to lose right?

Who’s going to check on the property whilst it’s vacant? Your regular home insurance isn’t going to cut it if the property is empty for an extended period. 

Greymug

BFYZ said:

 I don’t have anything to lose right?

You're just losing out on potential rental income.

andy444

You'll need to inform and check with your mortgage lender as to whether it will be acceptable. People's circumstances change so lenders do understand that you may lose your job, move abroad etc. but you will likely have to rearrange the lending agreement as it was given to you assuming you'll permanently reside there rather than as a buy to let.

saajan_12

BFYZ said:

Yes I did not thought this through at all. I will ask my lender for CTL but I guess we might have to delay the move till past 12months on from date of purchase to ourselves better chance of getting consent to let. - how long is your mortgage fixed rate? Usually you have  a better chance of getting CTL after 12 months, but often its limited to 1-2 years (meant for temporary lets). After that you'd often have to switch to BTL or sell or move back in. 

We are planning to move to Dubai and both myself and wife will have a business that we are taking with us to solely work from abroad. At the same time we would want to give ourselves a backup that if everything fails in a worst case scenario so we could just move back. It’s already a big of a task to move everything abroad with kids schools etc but pandemic has put things on hold for long that we can’t resist moving. 

I have dual nationality and thinking to avail this opportunity to seek better prospects abroad. 

What if I keep my mortgage payments and doesn’t let this property out and keep it vacant. I’m just trying to find ways out to keep the complexities to minimum. Then may be after 12 months, ask to get a consent for let and then see. 

So if I keep this vacant and keep up the payments, I don’t have anything to lose right? 
 

Things to lose:
* Keep paying for mortgage, bills (standing charges) etc for the property with no rental income, while paying for living costs abroad

* Repairs: more likely to suffer break ins, if there's a leak it could go unnoticed longer and cause more damage, heating not running so pipes may freeze etc

*  Insurance: Mortgages usually require you maintain insurance, and standard insurance may require you not leave it vacant over 30 / 45 / 60 days. As above, the risk is higher for a vacant property, so the insurance risk and premiums are higher

* Council tax may have a premium after an extended vacant period (usually after 12/24 months, but may be sooner depending on the council)

RAS

BFYZ said:

We are planning to move to Dubai and both myself and wife will have a business that we are taking with us to solely work from abroad. At the same time we would want to give ourselves a backup that if everything fails in a worst case scenario so we could just move back. 

But you can't just move back in........

If your tenant has just signed a new fixed term, it's going to be 5-23 months before you can issue a S21 notice.

The tenant doesn't have to leave at the end of the fixed term. IF you and your agent have done everything right you can then take the to, court; assume another 6 months and then you can join the queue to appoint bailiffs to remove them.

Meantime you need to house yourselves for a year or two, maintain the property and there's the possibility the tenant will cease paying rent.

BFYZ

Thanks everyone for all the input and appreciate it and I think it would be better if I house my extended family or relatives and stay back and forth in property and not change the address at all. At least it would bring some income but not at a market rate but nevertheless I can take possession whenever I want and do not have to rely on outside factors which are not in my control. 

On the hindsight, how would the lender find out if it’s been rented and we are on residential mortgage. Apart from the obvious returned mail from the address or someone reporting it.