shackybracky

I would much rather be totally open with our mortgage lender about our Australia plans but it doesn't seem I have a choice unless any of you know any different.

So here's our situation with the house. 5 years ago we took out a 125% mortgage to consolidate some debts and refurbish the house (it badly needed it and definitely had potential). We thought that with the improvements to the house, rewiring...new central heating...double glazing...new kitchen...new bathroom...walls moved...oak flooring...new carpets...new door frames and doors...gardens landscaped...etc, the house value would go up and be near what we borrowed. Then the recession arrived and buggered all that up.

Roll on 5 years and we have a house that is probably worth what we paid for it despite all of the improvements so we have negative equity. Our mortgage lender isn't offering any new deals to existing customers so we can't fix the rate or change to a buy to let. We can't move lender because of the negative equity. And a friend of a friend who works for our lender says they wouldn't give us permission to rent the house out because of the negative equity. And if we sold it for what it's worth, if it did sell that is, we'd still have about 20 grand outstanding to the lender.

I know we'd be in breach of the contract terms if we don't tell the lender, and i'm aware of the consequences, but I don't see any other choice other than risk it or not go to oz. We'd obviously go through a rental agent and get the necessary insurances to be a landlord so we and the tennants would be protected. But is there any way that our lender could find out that we'd rented our house out?

Grayling

Be very careful

In effect the mortgage company are the property owners.

If you do anything untoward it may well invalidate your house insurance.

shackybracky

If the house insurance is landlord insurance, would it be invalid if the mortgage lender didn't know the house was rented?

I feel very trapped with this house due to various circumstances out of my control.

Grayling

That is what you need to find out.

Insurance companies employ lots of clever people to find ways to avoid paying out.

Bermudashorts

Read the policy carefully and make sure you don't fib on the forum if asked "does your mortgage lender know the property is let" or similar. If they don't ask the question and the policy wording doesn't exclude it, then I would srtuggle to see how a claim could be denied.

koalakim

When we first moved over we did rented out without telling them, got landlords insurance etc. However, on a trip back we had to go in and see them about something else and hypothetically asked the manager and he said mmmm....if it's short term lets i.e. 6 months then maybe not tell us otherwise it would have to a be a buy to let and with a higher interest rate. So as we only ever got 6 month lets then we thought well that's okay then, we weren't particularly comfortable with it but we couldn't really afford to change at the time. Plus every time a let finished and we were waiting for it to be relet then that was eating into our savings.

It maybe a different case now as it would seem they've really clamped down on mortgages and you might find you can't get a B2L one because of your situation, which you've already said. From what I read in the Daily Mail it seems they are really grilling everyone on spending habits etc to get the golden mortgage these days. Problem is if you are in negative equity with over a 100% mortgage then you really don't want to be paying extra interest rates as your rent may not meet your mortgage payment either. At the beginning we were only just about breaking even although once the interest rates started dropping like a stone then we finally started making something on it.

Just tread carefully these days as they maybe quite hard on you if they find out, whereas we did it before the GFC kicked in and we sold it after 2 years as to be honest being a landlord was a pain in the ****.

How about handing back the keys and skipping the country as long as you don't go back to visit. Is there a friend or family member who needs to rent, then it wouldn't be exactly be such a commercial deal or say they are looking after the house whilst you did a overseas contract etc and it gets extended and extended until you can be in a position to sell.

Get the house valued and then at least you will know what it's worth, you maybe surprised.

Finally, it depends on how much you want to come to Oz, then you'll find a way round it - there is always an answer Grasshopper

Scotty1

You may actually have a bit more power in this situation that you think.

You tell the bank that you re moving to Oz. You want to do the right thing and continue to pay the mortgage and have a tenant in the property. They refuse. Are they going to tie you to the house and refuse to let you out the country - no

You are in a different position to many people as you do not have any equity in the property. It is the bank that is exposed not you.

I am not suggesting or recommending that you hand back the keys, however the bank knows that were you to do that, it is a civil debt that they would have to pursue, and the chances of recovering it are not high.

Much better to let you lease it out.

I would be up front with them that you are moving - just don't give them contact details in Oz until they give you permission to let.

However you need to know if the rental income will cover the outstanding mortgage. Does it? If not then I suggest you contact a money advice centre (the ones run by the CAB not the private ones) for your options

Good luck and hope it goes ok

LeeWillo

I rent my house in the UK. I got 3 estate agents to come and look at the house and give their sales pitch. 2 out of 3 told me they would require a letter from the mortgage provider giving permission to rent it out. I got advice from an accountant who rents out properties who told me to ensure that whoever i used was a member of a certain body (i can't remember the name), the one that didn't need the letter wasn't. The body regulates on how long they can hold the rent money for when paid by the tenant (they aren't supposed to hold it at all) and other things like that. The 2 out of 3 told us about a NRL1 form which is something you fill in when moving abroad so you don't pay tax (you may still be liable to tax, it's just that the estate agent don't remove it from your monthly payment). My mortgage provider told me I could rent it out for 2 years, then would have to seek permission again, but after 6 months my interest rate will go up 1.5% despite being on now high due to drop in interest rates fixed rate (about 200 pounds i reckon). Plus I had to pay 50 pounds for the privelige of the letter. You have to pay either way, at least I know my insurances are all valid and never any danger of the mortgage provider finding out and penalising me. Sell if you can, I don't want to. I want to be able to go back to my house should I desire, plus it was a hard slog getting the deposit together, I don't want to sell it and give the deposit to the government in capital gains tax. I'd rather do it this way.

garyp

I took the risk and rented out without telling mortgage company because I wasnt going to let this stop me from moving to OZ. I did enquire with them about renting out house and they would only let me rent out for 2 years, with a small admin fee. I seen this as a problem as renting out my house was probably a long term solution and would have been difficult to manage when I was other side of world.
I never went through an agent as I sort of knew the people who were renting. rental agents would need everything above board and may ask to see permission off mortgage company to rent maybe?
I took out landlord insurance but some companys ask you who your mortgage company is and may tell them. the company i finally used didnt ask so I wasnt really not disclosing anything. who knows if they would pay out if something happens, thats the chance you take if you really want to move.
So i had my rent which covered the mortgage and the lender was happy and none the wiser.

shackybracky

Thank you everyone for your advice. I rang a family friend who is an estate agent and asked him about permission letters and landlord insurance. He said he won't need a letter of permission from our lender and he said the landlord insurance will be worded so that it is still valid without our lender giving permission to rent. He said to redirect our post to a relatives house so nothing will be sent back from our house with a message saying we're not living there. He said as long as the mortgage is being paid every month there won't be a problem.

I don't like keeping info from our lender but I'm not putting our lives on hold until the market picks up again. Australia has been a long term dream and I'm not letting a damn recession stop us!

bingobob777

Yeh it's the recessions fault you're in negative equity, absolutely nothing to do with taking out a 125% mortgage

No doubt your mortage payments on a 125% mortgage will be more than the rent you'll get, so you'll be sending money back every month, it won't be let all the time, you'll have to pay management fees etc etc

Keep it and it's going to cost you, sell it and it's going to cost you. With one the pain will be upfront with the other it will be drawn out over several years.

You decide. You took out a 125% mortgage at almost the peak of the housing market, why shouldn't you face the consequences?

And FYI and others, in the UK you CANNOT just hand the keys back. The mortgage company can then just sell at whatever price it wants and chase you for the rest of your life for the outstanding balance.

shackybracky

Had I known a recession was around the corner I wouldn't have bought, I would have stayed renting. How was I supposed to know what was about to happen with the worldwide economy?

If the recession hadn't happened and house prices had stayed at what they were 5 years ago, my house would now be worth what we now owe and I wouldn't have any negative equity. So yes I do blame the recession.

Yes the rent won't cover the mortgage payments so we'll be sending some back every month but we have budgeted for that. And I'm well aware of fees and management costs involved in renting out our house.

You talk like I should be punished for taking out a mortgage at the wrong time? Why? Nobody could see what was coming. I'm just trying to deal with what I've got now.

And I have no intentions of giving the keys back.

koalakim

Unfortunately in the UK you get much greater house price swings than you tend to do here. We bought a house back in the late 80's and 3 years later because of the recession it had lost 25k but then when things got good we ended up selling it for a considerable amount more than we paid for it 15 years later,

Bit harsh Bob as yes, maybe 125% mortgage was a risk and if he wasn't moving to Oz then his situation wouldn't even arisen provided he continued being employed. Unfortunately for some 100% plus mortgages were the only way people were ever going to afford to buy. The GFC thing happened pretty quickly and unfortunately he maybe in an area where house prices have been badly affected. We lived in Brighton and all that seems to have happened there is house prices haven't gone up, we sold our place for more than it was worth when we left for Oz - then got stuffed with the exchange rate.

Anyway, Shacky you seem to be working things out, good luck!

Beoz

Didn't the 125% mortgages cause the recession?

The_Griswolds

If your rental income will cover your mortgage and loan costs then forget "a friend of a friend who works for our lender says" just contact your lender directly and ask to speak to the Home Loans Administration department.

TELL them that you have been offered an employment contract in Australia and that you "intend to return" to the UK within 2 years. You therefore would like to rent out your property whilst you are away to cover your costs.

They will need to see your Landlords Insurance with them named as a party with an interest and a copy of the tenancy agreement.

Having seen how many letting agents work around the world we decided that we didn't want them anywhere near our house, tenant or money!

Instead we went down the DIY route:-

- Used an online rental service (Silver £79) http://www.lettingaproperty.com and had the property rented within 24 hours of it being advertised (via rightmove).

- Had reference checks (credit and employer) done through the same online agent (Free to landlord - Tenant pays), (accepted by our insurers see below)

- We obtained 5* rated (who knows until you have to claim ) Landlord insurance http://www.justlandlords.co.uk/which also covers loss of rental / non payment of rental.

- Used local tradesmen to get Electric / Gas / Energy certificates etc

- Had a local professional inventory clerk create a property inventory and check the client into the property £145 (whislt we were in Oz) and used him again to do 1/4ly inspections (£45).

- We used the Governments Tenants Deposit Protection scheme http://www.depositprotection.com/, so both the tenant and I know it is a safe as it can be (Free service)

- The tenant pays his rent Direct into our UK bank account, so we know immediately if he is late rather than wait 6 to 12 weeks for an agent to tell us

We believe we have so much more "control" over the letting than we would have had through an agent, we have a far better service than most agents are able to offer and at a significantly reduced price. The tenant knows his deposit is secure, he has access to us 24x7 via a UK phone number which we obtained through SKYPE and we have access to and contact with the local tradesmen we used who are happy to deal direct with a landlord rather than waiting 30/60/90 days for invoices to be paid through a letting agent.

We would strongly advise you NOT to let out a property WITHOUT informing your lender, you ARE just asking for trouble!

As for the personal comments about your decision to take out a 125% mortgage from others on this board, just think one day you could have a life as perfect as theirs, they have never made any mistakes !

The proliferation of these anonymous personal attacks are one of the reasons I rarely visit BE these days