Will UKAR let me switch to BTL?

by Readers Question

12:06 PM, 2nd November 2015
About 3 years ago

Will UKAR let me switch to BTL?

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Will UKAR let me switch to BTL?

I have a 3-bed in central Birmingham that has a UKAR mortgage of around £250,000 set at 0.5% above the base rate apparently in perpetuity.stuck

I’ve weathered the storm for the last ten years and the value of the property has risen. This is the only mortgage and the only property I have.

However, for personal reasons I now need to move out of the house. My financial circumstances have changed since taking out a huge self-cert many years ago…

Under my current mortgage conditions, it seems crazy to rock the boat. I’d like to take on some tenants, and ask UKAR if I can switch to a BTL mortgage. There’s enough potential in the house for income that it wouldn’t be a problem to do this at all, in terms of making the mortgage payments.

But having read the various horror stories about how UKAR operate I’m scared that if I ask, they’ll either say “no” and then watch closely to see what I do, or that they’ll say “yes” and then wait eg a year and then retract their permission. (That’s what I’d do, if i was wanted to clear my book of mortgages!)

I suppose I could just proceed without asking their permission, which would result in a decent amount of income, which I’d then declare to HMRC as I have no intention of breaking the law re tax! If I were to do that, would UKAR be able to find out from HMRC that I was declaring an income from property, or would that information be private?

Does anyone have any experience of how they might operate in this circumstance? Am I being too cautious by not asking, or am I right to assume the worst?

Gary



Comments

Neil Patterson

12:10 PM, 2nd November 2015
About 3 years ago

Hi Gary,

With the mortgage being a regulated residential currently you are afforded more protection, but I would not personally want to risk giving you advise other than not to mislead the lender deliberately.

Peter Fisher is an expert on this subject and you can view his members profile here >> http://www.property118.com/member/?id=7217

Ross McColl

15:43 PM, 2nd November 2015
About 3 years ago

I would be very careful about trying to change this over. I predict they will do one of two things and I believe its more likely to be the latter. They will either say no outright, in the hope you will have to sell the property, or they may potentially say yes, but ask you to sign new terms and conditions. How long have you got left on the mortgage until you need to redeem it?

Luke P

16:43 PM, 2nd November 2015
About 3 years ago

Not the 'professional' answer, but...if this is your only property, you'll get away with renting it and not switching it to BTL. Just make sure you insure the property as a BTL and pay HMRC. Maybe 'take lodgers' and use the tax free allowance...

Linda Lane

8:27 AM, 3rd November 2015
About 3 years ago

One problem with that is that I believe you have to name your mortgage lender on your insurance policy and maybe the two will link up?

Jon Pipllman

9:53 AM, 3rd November 2015
About 3 years ago

I think you are right to expect UKAR to use your request as an opportunity for it to try to find a way to get your mortgage off its book.

I don't know exactly how they would proceed without seeing the particular contract you have with them, but I can foresee several potential triggers for them

- you move out
- you buy another property as your PPR
- you rent it (if you rent it without their consent, them calling in is a done deal the day they find out imo)

Can you source a BTL mortgage from another lender and use the funds to clear the UKAR mortgage?

Luke P

9:53 AM, 3rd November 2015
About 3 years ago

Reply to the comment left by "Linda Lane" at "03/11/2015 - 08:27":

I've never come across it -perhaps on some policies, but I don't know how common it is. The more I think about it, I'd keep it as MY 'main home' and rent it to 'lodgers' to take advantage of the allowance and cause the least amount of hassle with the lender and your own affairs.

Luke P

10:07 AM, 3rd November 2015
About 3 years ago

Reply to the comment left by "Linda Lane" at "03/11/2015 - 08:27":

I've never come across it -perhaps on some policies, but I don't know how common it is. The more I think about it, I'd keep it as MY 'main home' and rent it to 'lodgers' to take advantage of the allowance and cause the least amount of hassle with the lender and your own affairs.

JohnCaversham

9:27 AM, 4th November 2015
About 3 years ago

With regards to insurance, my understanding is-mort co's only ask for their interest to be named on building policies when the mortgage is first taken out or property is first mortgaged to them but not in subsequent years so it's not mandatory and i have never been asked on any of my renewals.
Consider a block of flats with a communal policy and multiple mort co's some res some btl-would be a nightmare trying to name all the mort co's on the policy so i don't think this would be an issue here?...
IMHO of course!

L Silver

9:33 AM, 7th November 2015
About 3 years ago

You can ask UKAR for permission to let the property rather than convert to a BTL. I did this once with Northern Rock as was, and they agreed with no hassle. This would need to be your only residential property though.

If you're staying in the property you could rent-a-room which has tax advantages.

Puzzler

9:54 AM, 7th November 2015
About 3 years ago

I have been asked to provide the insurance schedule on an annual basis to Platform and JP Morgan although it seems to have lapsed recently. Not any other lender. However you risk invalidating it if you don't follow the rules.

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