Letting my house without telling the mortgage company

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Letting my house without telling the mortgage companyWe 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

  1. 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.
  2. 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
  3. 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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Comments

  • Isabelle

    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.
    Mark Alexander recently posted…What do you do when a tenant leaves and does not give you the keys?My Profile


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  • Simon says:

    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.


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  • 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.


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  • darren says:

    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 !!!!!!!


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  • 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?
    Mark Alexander recently posted…Serving the correct section 21 noticeMy Profile


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  • 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 – P1110My Profile


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  • 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 FebruaryMy Profile


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  • @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?
    Mark Alexander recently posted…Property auction results record 6-year highs in FebruaryMy Profile


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  • 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.


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  • @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.
    Mark Alexander recently posted…Property auction results record 6-year highs in FebruaryMy Profile


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