Trapped in consent to let and negative equity dilemma?

by Readers Question

9:28 AM, 1st September 2015
About 3 years ago

Trapped in consent to let and negative equity dilemma?

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Trapped in consent to let and negative equity dilemma?

I have a flat which is in negative equity by 25k. As the flat wasn’t suitable for my little girl to grow up in I bought a house. trapped

I ask my lender for a consent to rent my flat out. It is only allowed for two years and one if the condition is to return to live there after the agreed period, which I am not intending to do.

I can’t get a Buy to Let mortgage as I have to pay the difference from the market price plus 30% minimum deposit that it is required, which amounts to £50k. I don’t have this money and I need to rent the flat out so I can keep paying the mortgage. What shall I do?

When I went to the mortgage provider to ask for advice after I explain my situation, I have been told ‘who will know that I am renting it out if I keep my mortgage payment going’. That wasn’t the advice I was expected. Please can someone advise what I shall do? I want to do the right thing, but I am stuck.

Also will my landlord buildings and contents insurance be valid if I don’t tell the mortgage provider I rented my property out? I can’t see why it shouldn’t be.

Ps I am single mum and I have never defaulted on any payments

Snejana



Comments

Neil Patterson

9:34 AM, 1st September 2015
About 3 years ago

Hi Snejana,

I feel for your situation as it is tricky and uncertain.

I always advice that it is your responsibility to tell the lender. When you say you went to your mortgage provider do you mean your broker or your actual lender as I find it odd that someone working for the lender would say to keep paying the mortgage and keep quiet.

As long as it is Landlords insurance cover then the type of mortgage should not have any effect.

Howard Reuben CeMap CeRER

12:54 PM, 1st September 2015
About 3 years ago

Hi Snejana

You may not have all of the cash to reduce the BTL (CTL) property, but is there any sufficient equity in the house you bought to release some funds to put towards it? You won't be increasing your debt, just shifting some of it across your two properties. Do you own any others too?

Was it your lender who said "‘who will know that I am renting it out if I keep my mortgage payment going’"?? That's not just bad advice that's tantamount to collusion to fraud. 'Gaming' is a toxic issue at the moment, so please stick with a professional mortgage consultant (independent of your lender) who will work with you legitimately.

Hope that helps

Howard
http://www.property118.com/member/?id=314

Sneja Vasileva

23:30 PM, 1st September 2015
About 3 years ago

Neil, yes I went to my mortgage provider adviser. I thought it is a bit strange that I have been given this advise.
Howard. I do have a bit of equity to release from my other property, not much but enough to cover the negative equity.
As I have obtained a concert to let for two years I let the flat out abpnd bought a new residential property. I have been told that since I haven't sold the house two years ago when I bought my new one which my main residence now. I need to pay a capital gain. I find that unbelievable as I only delayed the sell as I was hoping that in two years the price will go out. I originally purchased the property in 2002 for the value of £56000. In 2007 and remortgaged borrowed more money. So my mortgages went from £53000 to £110000. I have been told that if I sell the house now for 110000 I have to pay a capital gain on the difference. I lived all these years in the property and it was my main residence. so I can't understand why it has pay capital tax. I haven't gained anything. I only defered the sale so I can recover the loss as the flat how worth £85k if I even managed to sell it. And I will be selling at a lots. So if I decide to look for buy to let mortgage hopefully I can get one for for 75% of the current market value of £85k I can't declare the £25 pounds as a capital loss, so with the buy the let mortgage in ten years if I sell the house for 110 I had to pay capital gain on £25k. Is that correct because it doesn't make sense to me. Thank you for your advices. At the moment I want to just cry. I don't know how to get out of this situation
Snejana

Howard Reuben CeMap CeRER

10:35 AM, 2nd September 2015
About 3 years ago

Obviously, for specific tax advice (inc CGT), please see an accountant.

If I can assist with your new BTL mortgage requirements, please contact me via my Property118 member link and we can discuss your personal requirements in more detail.

Puzzler

8:44 AM, 4th September 2015
About 3 years ago

The period you lived in the property is exempt from CGT so you will have to pay some but not as much as you think. I would need the details of when you lived in each property and the prices paid to give you an estimate.


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