sportsendurance

Hi,
We move in 4 weeks and our bank won't allow us to move to a buy-to-let mortgage unless we come out of our current mortgage contract. This is not an option as we would have a huge redemtion fee to pay. It's too late to cancel flights etc and a very good friend has decided to rent our house indefinitely. I'm sure there are many on BE who have done something similar and I'm just wondering wehether it has caused any problems!

Cape Blue

Make sure you get the correct lettings insurance - at least that way both yours and the bank's asset is properly covered.

Scotty1

If nothing goes wrong, your mate pays the rent and doesn't lose their job, you are ok with potentially invalidating your house insurance, and you either declare the income to the tax authorities or risk that too - no problem!

I looked at this too, but didn't have redemption penalties and decided if I couldn't get the existing mortgage provider to agree I would switch to someone who would. The key problem is insurance and not telling your mortgage provider you are letting the house, in most cases, means they can get out of providing you with cover.

Don't mean to put a damper on things but see if you can get insurance first.

JAJ

Why should an insurance company care whether or not you tell your mortgage provider?

Rod-Helen-Poppy

Our mortgage providor allowed us to rent our property out without having to chnage the mortgage type.

It is called 'consent to let' - they sent us a form that we had to fill in, just includes terms of rental agreement, duration (we lied and said maybe 2 years ) and proof that i was to be working abroad - so sent them a copy of my new contract.

they agreed to the consent to let as rent covers mortgage etc, we just changed the insurance to landlords insurance and told them date when tennant moves in etc.

they appear to be pretty cool so far and it was a huge weight off our minds.

check the terms of your mortgage as this could be allowed in them. it costs us £100 admin fee.

sportsendurance

Thanks,
much appreciate your advice

Scotty1

Because in many cases the mortgagees are noted as interested parties on the building insurance and the insurer thought they were insuring the buildings with the owner in residence and now its someone else who may not be as careful

Red_V_Roger

Our mortgage company managed to find out that we were letting a house out that we used to live in (long time ago before we moved to Oz). They were not happy, but we provided a copy of the landlord's insurance certificates together with a bit of a guff explination and never heard any more.

Bermudashorts

OP definitely needs to change the insurance, this is not being debated ... I think the question was why would the insurer care what type of mortgage the owner has. I cannot think of any reason why they would care either. On the other hand clearly the bank would care what kind of insurance the owner has.

Some do some don't, sounds like OP already checked his. My bank doesn't allow letting mortgages either, I was gutted as we have a superb tracker mortgage.

NedKelly

So what's the worst that can happen? I suppose they could ask for full repayment of the outstanding but then that would be at their request so I don't think they could charge the penalties if they did.

Personally I would let the property without consent (not financial advice you understand). I think many people do let without problems. As long the mortgage company gets paid each month, they won't know what is going on. The only reason they would want you to convert to a BTL mortgage is so they can charge you more.

Bermudashorts

I asked permission because they are my normal bank and I was planning to change my registered address in which case I felt sure somebody would notice.

I did however also tell a white lie and say I was going away temporarily (could be true if we don't like it, one reason we want to keep house). When I said this, they agreed I could keep my current mortgage for the time being.

I don't think the bank could possibly ask for full repayment. Well perhaps they could, but they won't get anywhere. If any of us had that kind of cash lying around we probably wouldn't have mortgaged in first place.

NedKelly

When I first started my own business I was advised by my lawyer, in no uncertain terms, that I should always have my personal bank account, my business bank account and my mortgage with completely different organisations. Otherwise if there is a problem with one there will be a problem with them all. This is sound advice that everyone should take.

Bermudashorts

Well when I wanted to get a UK mortgage whilst still living overseas the bank I had a history with was my best bet. It was a bonus that it was also the best deal.

I also think it is not good to put all eggs in one basket, but why would having a mortgage and savings in the same place be a risk?

NedKelly

I remember a case that went to the high court after BCCI went bust. Without digging up the details, I am sure you can find it if you search, some guy had a mortgage with them and also had a savings account with a substantial amount of money in it. When the bank went bust the bank guarantee scheme paid out £20,000 which was the limit of the Bank of England liability at the time. This guy had nearly a million pounds so he lost the best part of it. The banks administrators then wanted his mortgage repaid which was something to the tune of £500,000. He argued that they should offset the mortgage against his £1M loss but the high court disagreed saying that the two accounts were separate so he still owed the outstanding mortgage.

Anyway, you get the idea, but really he should have spread his money around. Unless you have an offset account I would keep my savings somewhere else. The other thing is that the bank knows less about you.

Rod-Helen-Poppy

you have to change your insurance to landlords insurance as technically you are not living in the property, and most mortgages (in the small print) only allow the property to be empty for 30 or 60 days or so - any longer and you;re breaking the terms laid out in your mortgage. if you are letting you need landlords insurance as it is slightly different to the usual buildings and contents. usually when you cancel your insurance the mortgage providor finds out - so if you changed from normal to landlords they'd have something to ask probably.

it sounds like his mortgage provider is being an ******** if you ask me, and wants them to move to buy to let for the extra money. i only found out about the 'consent to let' from the independant financial advisor that works in my local HSBC - he said give it a try, so we did and our mortgage providor has kindly agreed; we're hoping they forget about this as long as the mortgage is getting paid and dont want us to go on a BTL in a few years.

have you not considered going down the interest only route? but then again you'll get shafted for fees as you're changing the mortgage type.

good luck and hope you get it sorted