bobbylimbo Posted June 29, 2006 Report Share Posted June 29, 2006 We're looking into renting our house while we go travelling for a year and have been given mixed advice as to whether to tell our mortgage company that we intend to lease the property. I have been in to see them to look at how much it would cost to tell them - it's a whopping £199 admin fee plus an increase of over 1.5% to the interest rate as they would change it from a residential to a buy-to-let product. My financial advisor has advised that we don't tell them and just keep our address the same and re-direct the mail. He said that they won't check and they'd never know, even though I have already been in to see them and told them the date that we'd be going. Is this the case? Would they check and how would they check?? It states in my conditions of the mortgage that if we fail to inform them that we will be renting the property out, they can repossess the house as we've broken the terms of the agreement . . . can they do this as long as we continue to meet the payments? Help!! Link to comment Share on other sites More sharing options...
tonik Posted June 29, 2006 Report Share Posted June 29, 2006 I would strongly recommend that you tell your mortgage company. I did not realise I had to do this and now have problem tenants. I am having to go to court to get possession of the property and on the forms you submit to court you have to give details of your mortgage lender as a copy of the court documents go to them. Everything will be fine so long as your tenants are ok but I wouldn't take the risk if I were you! Tonik Link to comment Share on other sites More sharing options...
sifly Posted June 29, 2006 Report Share Posted June 29, 2006 After living in my flat I decided to do the same thing as yourself. I phoned my mortgage provider (Northern Rock) and explained what I was hoping to do. They said it would be fine so long as the rent I would get would be above the current mortgage repayment + a percentage, (they wont tell you the percentage but it is arount 20%). I just said a number that was 25% more than my mortgage and they said, "yes that's fine". They gave me what is called "Consent to Let". The letter I received from them meant I stayed on exactly the same mortgage rate and terms as I was previously on, but with the ability to let me flat out. Maybe try and ask your lender for that service and if they dont, say you'll go to a provider who will. Link to comment Share on other sites More sharing options...
bobbylimbo Posted June 29, 2006 Author Report Share Posted June 29, 2006 Thanks for your replies. In response to tonik - we're hoping to rent to people we know, so hopefully we won't have any problems with them - so should we be ok? In response to sifly - I have asked for the 'consent to lease' form and it is this that they want to charge a £199 admin charge and increase the payments by £100 a month. I also have the problem that we only took out the mortgage last month and we're tied in for 2 years. So if I leave them, I will be charged the early redemption penalties - how annoying! What do you suggest now? Did either of you get your mortgage companies checking up on you? thanks for your help! Link to comment Share on other sites More sharing options...
sifly Posted June 29, 2006 Report Share Posted June 29, 2006 I see. I didn't have a charge and the rate stayed the same (I was in a 2 year fixed rate too). Maybe it is a case of the mortgage company catching up with the market as I did mine 3 years ago now. In response to your other question. No I have not had my mortgage company checking up on me. I look at it as so long as they're getting their money without any problems I don't think they would. Not sure how else to go around it if they are adamant about increasing the rate. I'd be reluctant to not have their consent, but then again if your friends are "looking after" your place while you are away ......who's to say. Link to comment Share on other sites More sharing options...
Trenners Posted June 29, 2006 Report Share Posted June 29, 2006 Hi BobbyLimbo, Firstly - you are proposing to rent out your house so it is not unreasonable that your bank wants you to convert to a buy-to-let mortgage rather than remain as a residential mortgage customer. Secondly - the admin fee is going to be tax deductable against your rental income. Thirdly - the interest charges (incurred by your buy to let mortgage) are going to be tax deductable against your rental income (which means you will effectively be paying either 22% or 40% less interest - depending on whether you are a normal or higher rate tax payer). I know the buy-to-let rate it higher ..... but is it still higher if you reduce the interest rate by 22% or 40% ? Fourthly - if you do not do this properly - you are exposing yourself to loads and loads of problems and headaches (with the mortgage company, the tenants and the courts) in the future - just to save a few pounds. So, my advice is do it properly, convert to a buy to let mortgage and maximize the tax benefits that Gordon Brown offers landlords ..... Good luck with your world tour ..... Mark Link to comment Share on other sites More sharing options...
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