Letting my house without telling the mortgage company
Published 11/03/2013 
We live in a small two bedroom house with two children already and I have now found out I am pregnant again.
I rang the mortgage and asked about switching to a buy to let mortgage so we could let our house and rent instead . They made it sound really easy.
The paperwork came and it turns out we don’t fit about three of the criteria for a buy to let mortgage.
Now I don’t know what to do. It looks like its going to be impossible to get a buy to let mortgage.
Our credit it bad so switching to another provider is probably not an option either.
We now seem to be left with three bad options
- Let out the house without the mortgages consent but I am worried that a landlord insurance company might inform them or insurance would not pay out in the event of a claim.
- We sell the house at a big loss as there is no money left in it then have to pay off the rest of any debts secured against the house or
- Live in a very small house with either 3 kids sharing a small room or a child in the room with us.
We really are stuck at the moment as all options seem risky and stupid.
Any help or any other options would be greatly appreciated!
Many thanks
Isabelle Smith
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Mark Alexander says:
11/03/2013 at 21:52
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Simon says:
11/03/2013 at 23:45
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Antony Richards says:
12/03/2013 at 17:24
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darren says:
12/03/2013 at 20:26
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Mark Alexander says:
12/03/2013 at 20:59
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Antony Richards says:
13/03/2013 at 08:35
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Matthew says:
13/03/2013 at 11:43
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Mark Alexander says:
13/03/2013 at 11:49
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Tony Atkins says:
13/03/2013 at 12:42
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Mark Alexander says:
13/03/2013 at 12:49
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Paul Harsley says:
14/03/2013 at 09:34
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isabelle smith says:
14/03/2013 at 18:35
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Paul Barrett says:
15/03/2013 at 04:33
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Antony Richards says:
15/03/2013 at 08:41
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Paul Barrett says:
17/03/2013 at 14:26
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Mark Alexander says:
17/03/2013 at 14:40
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Matthew says:
17/03/2013 at 14:50
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Antony Richards says:
18/03/2013 at 08:51
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Mark Alexander says:
18/03/2013 at 09:21
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Antony Richards says:
18/03/2013 at 09:42
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Paul Barrett says:
18/03/2013 at 11:12
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Mark Alexander says:
18/03/2013 at 11:29
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Paul Harsley says:
18/03/2013 at 11:36
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Jon A says:
18/03/2013 at 22:57
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Mark Alexander says:
19/03/2013 at 10:57
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annette stone says:
21/03/2013 at 13:23
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brian ingram says:
23/03/2013 at 19:27
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Mark Alexander says:
23/03/2013 at 19:56
Leave a commentIsabelle
I think your problem might be that you have asked the wrong questions of your mortgage lender. You don’t need a buy to let mortgage, you need permission to let.
I suggest you write to them to explain the circumstances and to request permission to let your property. Don’t be afraid to tell them the whole truth about your financial circumstances, they have a duty to try to help you. If they realise they your alternative may just be to declare bankruptcy and leave them with all the problems that might well focus their minds a bit too. If they don’t agree then go to Citizens Advice and ask them to introduce you to a specialist.
Good luck with this and with your new baby.
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Mark Alexander recently posted…What do you do when a tenant leaves and does not give you the keys?
Best either sell and rent, or
Live in the smaller home, whilst overpaying to rebuild your equity.
Don’t be foolish and commit mortgage fraud. Agencies are being increasingly capable and spotting this fraud. Don’t make your financial status become worse by being black listed.
Do not whatever you do let the house without the mortage company’s written approval. You could end up in a whole lot of bother. Luckily not too many tenants (or indeed their solicitors) know the law so I would suggest thousands of landlords are getting away with it ……………. for now.
if the mortgage company gets paid why should it matter at the end of the day the house owner has borrowed the money and is responsible to make sure the monthly payments are made (in a perfect world). all the mortgage company is worried about apart from increasing the margin is in case of default tenants have rights !!! makes it more difficult to reposes the property. i like the fact we all still try to do things by the book but the banks have used every trick in the book to make money legally or illegally !!!!!!!
Hi Isabelle
I don’t think I answered your question fully earlier.
I suspect the question you asked your mortgage lender was “can I convert my mortgage into a buy to let mortgage” and that’s why you got the answer you got.
Asking for permission to let and spelling out the reasons is a different matter altogether so far as a lender is concerned.
What are the likely outcomes?
1) The lender says Yes
2) The lender says Yes and charges a fee or increases your interest rate. It has to be reasonable though or you have the right to complain and then take the matter to the Finincial Ombudsman service if your lender does not satisfy your complaint.
3) Your lender may decline, in which case you can also complain and refer to the Financial Ombudsman service if your complaint is not resolved to your satisfaction.
Now let’s assume none of the above work out in your favour.
Letting a property without your lenders consent is not a crime. If you insure the property as a buy to let the insurance should pay out in the event of a claim whether your mortgage lender has given consent to let or not.
The absolute worst case scenario is that your lender could demand repayment if you are in breach of your mortgage conditions. If they do that you would complain, then go to the Financial ombudsman. If that didn’t work your mortgage lender would need to go to court to seek repossession and you could appeal.
I doubt if it would ever come to the above but even if it does, what do you have to lose?
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Mark Alexander recently posted…Serving the correct section 21 notice
And the responses above prove to me the value of good agents. Mark, that is definitely not the worst case scenario.
Antony Richards recently posted…£450pcm – PENDEEN – P1110
Your problems could be overcome by approaching a letting agent, but it has to be a really good one! They will perhaps, sort you out an interest only mortgage, and find you tenants, and deal with all problems that the house produces, from repairs to finding tenants. By having an interest only mortgage this will reduce your tax bill, and you can start paying off the loan as things get better. You will still have the problem of where to live, but perhaps a friend or family member will help until you can move either back home at the end of the tenancy, or by that time you may have decided to stay where you are.I am a retired disabled man and found that many agents tended to take advantage of me, but Martin and Co. here at Newark were wonderful. They have branches all over the place, so I hope there is one near you!
Matthew recently posted…Property auction results record 6-year highs in February
@Matthew – I have been monitoring your comments and you never seem to miss an opportunity to promote Martin and Co. Are you somehow connected to them?
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Mark Alexander recently posted…Property auction results record 6-year highs in February
Does anyone know why mortgage lenders to owner-occupiers want to be told whether the property is let or not? If it’s just to verify there will be a proper insurance policy and perhaps a rent guarantee policy in place, that’s one thing, but if they use it as an opportunity to impose a higher interest rate or force the borrower to switch mortgage products or even repay the loan, I can’t see on what basis they have a right to do this. The borrower will still be paying the interest and perhaps some capital repayments, and the property is insured, so what’s the problem? If anything, the lender is better protected if there’s a rent guarantee policy in place, because a normal owner-occupier usually has no such policy agaisnt the risk of redundancy, so is if anything at higher risk of default than a property that is rented out.
@Tony Atkins – it has been proven that a person will go to far greater lengths to service the mortgage payments on their home if they are in financial difficulty than they will to hang on to a property they do not live in. Therefore, on a very broad brush basis, a mortgage on a let property is a higher risk which lenders believe they need to price accordingly. I could debate this all day long and keep switching sides and providing examples to try to disprove this let me assure you. However, I’m just telling you how lenders look at this. Please don’t shoot the messenger.
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Mark Alexander recently posted…Property auction results record 6-year highs in February
Isabelle,
I have a property that I lived in that was the opposite to your situation; at the time I was single and was in a 4 bed house!
Dependant on your mortgage company(?) the process will be slightly different but with mine, Nationwide, they have a form you can download from there website and fill in and send back. They granted it for 3 years on the condition the rent was making a profit on the mortgage payments so check this would be the case. It will make your case stronger. On some cases they also add a letting fee of 1.5% after 6months so make sure you can afford the increased payments.
I happen to also know that Santander simply ask for a written letter detailing reasons and a cheque for a set fee of £295. Although I have also heard (not confirmed) that they can ask for a higher fee if they can provide written evidence to support the reasons why.
As Mark pointed out, your best option is to write to them and ask, have a look at there website and search for permission to let conditions. Also have a Google and see if you can find anything for your mortgage company?
@Mark Alexander, I’m not sure your advice is wholey correct; I believe that if you do not have consent even the landlords insurance can be void as when getting my properties insured they did ask this question on the phone and pointed out that this was written into the policy, by signing and agreeing to the terms you are stating you have permissions to let.
I would strongly advise against renting out without consent and would get back in touch with your mortgage provider.
Who is your mortgage with Isabelle?
Paul
Hi thanks everyone for your helpful comments!
Paul our mortgage is with NRAM! Is there a difference between getting permission to let your house and switching to a buy to let mortgage. We just rang and said we wanted topotentially let out our house out and they sent details on changing to a buy to let mortgage, a big list of requirements to be accepted (about three of which we don’t meet) and some questions to fill in. I just find it silly they have so many requirements at the end of the day as long as the mortgage is being paid should it really matter how!
One should NEVER call a mortgage company giving your account details!
Always call making a generic query about a certain mortgage product.
the point is if you need consent to let and you cannot comly with the terms for conversion to let to buy mortgage you are stuffed; the cat is out of the bag.
Yes if you insure a property with LL insurance whilst a resi mortgage is in force there is the possibility that the insurance won’t pay out.
No insurer has ever asked about my mortgage and what type it is.
i suppose it is possible if the insurer is trying to wriggle out of a claim.
You are damned if you do and damned if you don’t.
You either rent the property out and do not advise the mortgage company you are.
Or you do rent it out and take the risk of insurance not paying out in the event of total loss.
This means that with no consent to let you face having to rent the property out as you need to because of domestic circumstances; but cannot afford to convert to a let to buy mortgage because of the onerous and unachievable terms.
After all the whole reason you need to let is because you cannot rent and afford the mortgage at the same time.
You will therefore HAVE to take a risk and let out with NO consent to let; you have no choice except for staying in the property as residential occupiers.
There are millions of resi owners (Accidental Landlords), letting out in contravention of their mortgage policies as they can’t sell as they are in negative equity and they cannot meet a let to buy mortgage condition of additional interest rate and extra capital injection
I know what I would do in such a situation………………………..and I would have my fingers crossed most of the time!!!!
Terrible advice.
DO NOT LET YOUR HOUSE WITHOUT MORTGAGE COMPANY’S WRITTEN CONSENT.
Simples.
Antony Richards recently posted…£450pcm – PENDEEN – P1110
Unfortunately it is not that simple.
Do you suggest the person is stuck in the existing house!?
If they are refused consent to they are definitely stuck.
If they are given consent but cannot meet the usual stupid onerous requirements of higher interest rates; breaking possibly their cheaper long term resi mortgage rates, never to be got back again, and additional capital requirements which they could not afford they are stuck.
Whereas if they choose to let out nobody will be any the wiser providing they stay on the electoral roll; pay the mortgage and hope the house doesn’t burn down.
Make sure they have LL insurance etc.
Unfortunately the strictly best way is not a lot of use to this person; as indeed has occurred to hundreds of thousands of ‘accidental LL’; who like it or NOT have taken my suggested possible course of action.
It isn’t correct; but most mortgage companies know this goes on an providing they aren’t told and the mortgage is paid they let sleeping dogs lie!!
It is only the moribund property market; lack of mortgage finance and large deposit requirements which is causing this situation; leaving ‘accidental LL little alternative than to play fast and loose with their mortgage conditions.
I very much doubt whether these people can afford to rent and leave their resi property empty and pay the mortgage aswell!
What if they had to move to the other end of the country for work and couldn’t sell!!
Do you suggest they move and pay rent and then be bankrupted because they could not afford their mortgage on a house they couldn’t sell!
It is all very well quoting what one should do; but when that advice will invarably stop the person moving or working the system so they can move without loss; it really is no help at all!!
@Paul Barrett – your latest comment pre-supposes that mortgage lenders will withhold permission to let. I doubt that will happen, especially under the circumstances of this case and also in the other examples that you have cited. If permission to let is withheld then I suspect the Financial Ombudsman Service would uphold a complaint from the borrower.
However, if a borrower asks a lender a different question, e.g. “can I convert my mortgage into a buy to let”, that’s a very different scenario altogether.
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Mark Alexander recently posted…How to secure massive discounts from property developers
I have written before about the Newark branch of Martin and Co. but the only connection I have with them is through my property. I have suffered at the hands of other agents in Newark and therefore am keen that other people stuck in my position are not stung by the apparently cheaper agents, who then charge large repair bills, or are just dishonest. Martin and Co. have always been very straightforward, and treat the tenants fantastically.
Matthew
Matthew recently posted…How to secure massive discounts from property developers
Whilst I have sympathy with all the above, those offering advice show the pitfalls of this forum – lack of detailed knowledge.
DO NOT LET WITHOUT MORTGAGEE’s WRITTEN CONSENT
Antony Richards recently posted…£450pcm – LUDGVAN
@Anthony Richards – It’s not clear who your comments are directed at. Do you disagree with my opinions and if so please explain why?
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Mark Alexander recently posted…How to secure massive discounts from property developers
Mark on the assumption you are referring to Antony Richards, most of your opinions are directed at the attitude of the mortgage company which are basic common sense and are in effect opinions. I did already advise you that your worst case scenario was incorrect.
My stance is coming from the legality of letting a house without mortgagee’s consent which is why I have put in bold twice not to do it. By the way, it is do as I say not as I do, but when it comes to offering advice one has to offer the correct advice.
Antony Richards recently posted…£450pcm – LUDGVAN
Anthony your advice is of course TOTALLY correct.
The problem is is DOESN’T solve the problem outlined in the main post.
Hundreds of thousands of ‘accidental LL’ have ignored that correct advice and ARE generally letting their resi property with an existing resi mortgage but are renting elsewhere.
It is all very well obtaining consent to let; but usually the lender wants to jack up the interest rate; change the mortgage product and want more capital .
This is untenable.
Somebody moving would see all the benefits of moving to rent where they could work wiped out.
So what would be the point of renting to work when they would be no better off!?
No they make a pragmatic choice of renting out for generally more than their existing mortgage costs them.
They move for job or other reasons and rent.
If at some stage they choose or wish to sell their resi; they can without any upheaval from their rental property.
They also have the option of returning to their resi property with NO changes to their resi mortgage.
It may be technically in branch of mortgage conditions; so what.
The banks cannot be trusted whatsoever to just grant consent to let without any penalty , so homeowners just won’t advise their mortgage lender what they are doing.
@Paul Berrett – your perception of the banks is one which commonly held snd the reason why s lot of people ho about things the wrong way. See my posts above on how to do things right and how to complain if the banks don’t play fair.
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Mark Alexander recently posted…How to secure massive discounts from property developers
Isabelle,
Yes there is a difference between Consent to Let and BTL. BTL is a different mortgage product, you are essentially remortgaging (and will normally be incurring all the repayment costs etc). Consent to let is your mortgage company giving you written permission to rent your property out on your current residential mortgage.
After a quick google and looking into NRAM’s help service I found this:
http://ask.n-ram.co.uk/help/mortgages/let-property
Simply ring them and ask for a Consent to let application form and nothing else. Do not mention changing to buy to let, this is not what you want. Whoever you spoke to before obviously doesn’t know there own products enough to advise you on this. Make it clear what you want and if they don’t understand or if they mention changing mortgages etc ask to speak to someone else.
I hope this helps. Keep us all informed.
Paul
Paul Harsley recently posted…How to secure massive discounts from property developers
Definitely consider getting some professional help from a mortgage expert that is not in you company. I’m sure you are overlooking a simpler solution! Best of luck, sorry I couldn’t be of any help.
@Isabelle
Just to let you know a bit about my background to give you some confidence in the suggestions I have put forward. I retired from Financial Services in 2009. In my 19 year career I took my business from a bedroom start up to rank 38th in The Times Profit Track 100 in 2008. My business was directly regulated by the FSA. In that time my business arranged mortgages for over 50,000 people. I was also a founder of the National Association of Commercial Finance Brokers. As I am retired my suggestions can not be relied upon as professional advice.
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Mark Alexander recently posted…Gwen Davies of Burry Port
In the case of leasehold property the position is even more difficult as if you do not tell your lender and your managing agent that you are letting then not only may insurers not pay out on damage to your flat but you may be faced with a huge claim for damage to other flats and communal areas as a result of your have negated the insurance. Most leases provide for unrestricted letting but that does not mean that mortgagees and insurers do not have to be advised. in addition to damage you could also be sued for any physical or financial harm suffered by other residents. Much better to ask for permission to let in the first place.
annette stone recently posted…The 2013 Budget and how it affects Landlords and property Investors
how are you going to pay a mortgage, from the let ? The cost will be to much with mortgage, insurance, gas regulations, tax, ect . Were isthe money coming from to pay the rent I would stay were you are and pull your belt in. With two chidren and one on the way,the mortgage Com, will be hard on you , but will not be able to put you on the streets
Hi Brian
Back in 1989 that’s how I became a landlord. Sometimes it makes sense to let your own property and rent elsewhere. I was in a similar position in that I needed to move but had £20k in negative equity. Incidentally, I still own that property and it has quadrupled in value.
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Mark Alexander recently posted…Mortgage Express are forcing me to sell my home – HELP!