Mortgage company will not allow me to let


Readers Question - Published on 16/02/2014
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The plan is to move in with my partner and let this flat out, but Halifax are very reluctant. Their attitude is unhelpful, dismissive, and borderline contemptuous. They don’t even seem interested in converting it to a BTL mortgage. (its a flat, £60K equity, £200K loan, bought 7 years ago, part repayment/part interest only mortgage. Don’t ask…).

I have three shops and 9 flats let out, needless to say letting out another would be no problem for me.

Has anyone else suffered this obstruction to their plans, and what options are there in terms of convincing the mortgage company of the low risk? Mortgage company will not allow me to let

The flat is close by our places of work, and would be convenient for me/us to use as a “crash pad” occasionally. What’s to stop me getting a lodger in, assuming the mortgage deeds don’t prohibit this, and simply not being there very often?

Thanks

Doug

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Comments

  • Hi Doug

    You may have been asking the wrong question of your mortgage company.

    Based on a mortgage of £200,000 and equity of £60,000 that would make your property worth £260,000 and your LTV 76.92%.

    It may well be that you simply don’t meet the lenders criteria for a buy to let mortgage. Halifax have several criteria, e.g. maximum of three mortgages with the Lloyds banking group, LTV and also a criteria of rent being at least 25% greater than the mortgage payment. There are lots of other criteria too.

    If you were to request “consent to let£ you might get a very different response. If they decline consent to let unreasonably then you are well within your rights to make a complaint and if they refuse, to them involve the Financial Ombudsman – see http://www.financial-ombudsman.org.uk/consumer/complaints.htm

    However, all this takes time which you probably don’t have so taking in a lodger seems to make a lot of sense as an alternative way to proceed. If you apply for another personal mortgage though be sure to declare the situation. Also make sure that all your bills, bank statement etc. still go to this property, otherwise you may find it difficult to prove it is still your home and that could affect you in many other ways, e.g. capital gain tax when you sell, exclusion from the £4,250 tax free allowance from the Rent A Room scheme in respect of rental income received from your lodger etc.

    Good luck whatever you decide.
    .
    Mark Alexander recently posted…How much to charge myself for lease renewal?My Profile


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  • Reply to the comment left by “Mark Alexander” at “16/02/2014 – 11:53“:

    Good advice, Mark BUT in his shoes I would be very careful about the part time lodger landlord stunt – an aggrieved or even just a very avaricious and savvy “lodger” could always muster some witnesses and prove that the resident landlord wasn’t in fact in residence and that he/she is in fact a tenant – giving them many rights over the property. The first post I responded to on your site dealt with this sort of situation (although in that case the property was a council flat when the “lodger” moved in http://www.property118.com/help-needed-to-evict-a-problem-lodger/41080/). It had turned really, really nasty with the “lodger” locking the landlord out and I believe threatening court action. Despite received wisdom, you can’t simply lock a lodger out of the property (unless their behaviour is extreme enough for the police to arrest). Human nature being what it is, a house share situation is prone to many more problems than a normal remote let of a whole property.
    With a LTV ratio of <80%, surely he would be able to obtain a BTL mortgage with another lender if necessary (provided no further advance is required)?


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  • Reply to the comment left by “Mandy Thomson” at “16/02/2014 – 12:28“:

    Hi Mandy

    I was assuming that Doug would genuinly continue to be a resident landlord, albeit not home to often. I hadn’t occurred to me to read between the lines and that he could be pulling a “stunt”. If that was his intention though, then I agree with your advice.

    80% LTV may well be achievable in order to remortgage onto a BTL elsewhere but the costs of refinancing may not be too palatable, especially if Doug is getting a good rate on the mortgage he has at the moment or if he’s tied in to penalties if he moves it.
    Mark Alexander recently posted…How much to charge myself for lease renewal?My Profile


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  • In a situation mentioned. What the lenders wants is to extract more money. They will offer

    a) Admin fee + higher interest rate.
    b) Switch to buy to let mortgage with a higher rate of interest plus a whopping product fee. Even though the amount that is going to be same.

    If you ask to have a equity with drawl (when you have adequate equity) they will not allow it despite of meeting the criteria .


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  • Reply to the comment left by “Mark Alexander” at “16/02/2014 – 12:43“:

    I was only using the term “stunt” in a somewhat flippant sense – more in the sense of someone being a little naive and in attempting to get around an awkward situation by diverse means and likely to get stung rather than someone trying to be a rogue landlord!


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  • “Their attitude is unhelpful, dismissive, and borderline contemptuous. They don’t even seem interested in converting it to a BTL mortgage.”

    As a business they can choose who to conduct trade with and on what terms. There’s no right to borrow money.

    Try another lender.


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  • Based upon what you say, it is very likely that you are running into the perceived problem of trying to get another BTL mortgage in a round about way. Particularly when with 12 let properties you may be perceived as an over borrowed property investor.
    I understand some banks have limits on the number of properties.
    Just a thought.

    If on the other hand you feel you are a very good risk and could get finance elsewhere then
    a. complain to the bank (they have to formally respond). Then go to the FCA.
    b. look elsewhere


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  • Thank You all for your edifying replies.

    The thrust of my original reference to the specific mortgage lender was to wonder whether they are typical of the market, or unusually cautious. Clearly, re-mortgaging with another lender is looking more likely.

    The pseudo-lodger idea was semi-serious, but I am now appraised of the pitfalls, and I appreciate the advice.

    Regards – Doug


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  • Is your mortgage with a sub prime lender ?


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  • Reply to the comment left by “Doug Green” at “16/02/2014 – 22:35“:

    Hi Doug,

    If you can reduce the remortgage, if that is what you have to do, to 75% you will find a more competitive range of products. However 80% is still possible at a slight cost.
    Check out our BTL quote engine for examples >> http://www.property118.com/buy-to-let-mortgage-calculator-2/


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