Let to Buy breach of mortgage conditions

by Readers Question

10:14 AM, 9th March 2016
About 3 years ago

Let to Buy breach of mortgage conditions

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Let to Buy breach of mortgage conditions

We are about to buy a residential house to live in, partly financed by taking out a new residential mortgage, and partly financed by taking out a Let-to-Buy mortgage on our existing home and releasing equity from it. see no evil

The house we are buying is in very poor condition and is not habitable until some essential repairs are carried out. We estimate the repairs would take 2 months to complete.

Our mortgage advisor, who has arranged both mortgages for us, told us there was generally a period of 60 days allowed before we must move out of the Let-to-Buy property (the one that is currently our home, but will be let out in the future). He advised us not to inform our solicitor of this, because if we did she would be legally obliged to inform the mortgage lender, and that it was better to just avoid mentioning it.

However our Let-to-Buy mortgage offer has just come through, and in the terms and conditions it says we must vacate the property immediately on completion of the mortgage, and that we must send written confirmation that we will do so. It is too late for us to arrange an alternative Let-to-Buy mortgage because if we go past the 31st March deadline when stamp duty goes up, the whole deal will become affordable for us.

We can’t afford to move into temporary rented accommodation, because it would use up our repairs budget for the new house. We didn’t mind ‘not mentioning’ that we wouldn’t be moving out immediately, but sending written confirmation that we will move out immediately when we know it’s not possible (ie. lying in writing) is quite a different matter. We are quite annoyed with our mortgage advisor for not being aware of this condition on the mortgage he arranged for us, as he knew the poor state of the house we are buying.

We have asked his advice about what to do now, and he said we should join the electoral register at the new address as soon as we complete, and as long as the mortgage is being paid, he is sure the lender will not check whether we have actually moved out of the let-to-buy immediately.

My question is, should we follow his advice? We expect to be able to move into the new house 2 months after completion, so apart from sending the untrue written confirmation, we would be in breach of the mortgage conditions for 2 months.

What are the likely consequences of this if our lender does actually send someone to check and finds us still living at the current house? What is the worst case scenario that could occur?

We would be grateful for any advice

JPH



Comments

Neil Patterson

10:21 AM, 9th March 2016
About 3 years ago

Dear JPH,

It is standard practice for a lender to insist you move out on the day of completion for a Let to Buy mortgage.

Your adviser is obviously inexperienced and should not be telling you to lie to the lender and break the mortgage contract you have with them.

If caught you will be Black Listed with all lenders on a Hunter Match search and it will scupper you for all future mortgages.

I know this does not help, but you should complain directly to the company or network your adviser works for as it is highly regulated by the FCA.

For all readers, if in doubt about what Brokers to use please make sure you contact us as all our partners are highly qualified and experienced.

Adam Davies

13:31 PM, 9th March 2016
About 3 years ago

What Neil says is correct, and of course, is the ‘right’ advice. I would not expect anything different from someone in his position says on a public forum.

However, your own advisor seems to be coming from a more realistic standpoint, where discretion is sometimes the easier option. It is not like he is outwardly encouraging you to commit mortgage fraud (e.g. taking out a residential mortgage for a BTL), he is simply advising you to keep a few things to yourself. I wouldn’t class your advisor as ‘inexperienced’ because of this advice. My advisor for example has over 20 years experience in the mortgage industry and has suggested similar in the past.

At the end of the day, I guess it depends on how comfortable you feel with going forwards. By all means, make the complaint against your advisor and look for another mortgage, but will the alternate result be worth it? Sometimes a bit of discretion is needed. The alternative is to do everything by the book, it may take longer, cost you more money, but at least you will sleep at night! The choice is yours.

Kate Mellor

11:32 AM, 10th March 2016
About 3 years ago

Personally, whilst I - like you - would feel a little uncomfortable about having to write a letter that is patently untrue. I WOULD do it in your situation though.

The overall intention of your remortgage IS a genuine buy-to-let. You are NOT planning on remaining in the house as residents for more than a couple of months and in my personal view as long as you can be 100% certain you can finance both mortgages during the changeover and letting process I would NOT lose any sleep over it.

Do you really believe that lenders send someone to knock on your door at 5am and see who lives there? NEVER, EVER going to happen! The ONLY way this will ever come to light is if you default on your payments during the period you are still living there - or you tell them yourself.

As for taking action against your mortgage advisor, I personally wouldn't do that. He advised you of the 'likely' terms of the offer only. It was your job to ask yourself the question 'What if it isn't?' & decide what you would want to do in that scenario. If this was a deal-breaker for you, you needed to make that clear to your advisor and request that he calls potential lenders and asks the specific question before you commit money & time to an application process. Although we can all be wise after the fact!

To reiterate, I currently have 17 mortgages and I would not lose one wink of sleep over this issue provided you know you can comfortably afford to do what you need to do and still pay BOTH mortgages, bearing in mind that it could take longer and cost more to do your renovations and it could take longer than you foresee to let your current property once you start marketing it, so you need to have sufficient funds/income to cover these possibilities.

That said, only you can make this decision.


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