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I have my flat on the market just now but despite a few viewers there's been no further interest so far. I'm looking into letting it out as a back-up option if it doesn't sell but getting my mortgage provider to talk to me is a major ballache. They only offer product switches to a buy-to-let mortgage (which they say I need) through brokers, treat applications as new customers and I don't have enough equity to cover the deposit that would be needed. What's the worst that could happen if I were to just keep the existing mortgage and let the property out?
The worst .
Termination of contract and instant repay demands.
If very little interest then its priced too high for what it is.
You would be in breach of your mortgage conditions and as per t_r they could cancel that contract and demand full payment.
The main issue the mortgage company will have is that a buy to let mortgage and the mortgage deeds contain caveats that allow them to evict tenants in the event of repossession which will currently be missing making their life very difficult in the event of a loan default.
Your call if you want to take the risk really...
I'd drop the price if I could but I can't, which is why I'm looking at letting as a backup. As it is I'll be lucky to break even on what's owed on the mortgage, never mind the £1000s spent on improvements and 15% drop in value over the past 6 years. Mistakes were made, timing was bad.
I'd be happy to hand the keys back to the mortgage company if that were an option!
They are unlikely to find out IMO
As above, you'd be breaking the terms of your mortgages and its considered mortgage fraud by some lenders. BTL increases their exposure to risk which is why BTL mortgage rates are higher. Dont do it.
Maybe its worth shopping around for a better deal than they offer?
I'd be happy to hand the keys back to the mortgage company of that were an option
A mate did that when his gf left him and took the kids, because his name was the only one on the mortgage, they had 7 years to chase him for the debt and did after about 4 or 5 years, and its not just the remaining mortgage but intrest and legal costs etc.
Don't do it IMO as ^^
I asked about this hypothetically a while back, as I was considering it (I still live in the property), and legally you have to switch because of the above. If I had to do it in the future I'd just go with not telling them, because as long as the mortgage is being paid in full and on time, why would they care or check?
Join the military and get posted, then it's free. (This may be an extreme step)
I'd much rather do it legitimately if possible, but they are making it hard to deal with them. Hopefully it sells and I don't have to take either option.
Faking my own death has been discussed, I'm worth a hell of a lot more dead than alive...
I work in the industry, they won't demand repayment, they may however put a marker on you for mortgage fraud once/if they find out. If they find out they're only likely to insist you switch to their btl rate. You won't be able to switch however & when you come to ask for a new mortgage they'll ask for proof of address as you won't be on the electoral role there. If they suspect you weren't living there they're unlikely to offer you a new mortgage which'll be a bugger if you have a redemption fee.
My advice: shop around for a true btl mortgage & take the hit. If the rent covers the mortgage they may let take it interest only, especially if you have to a low ltv.
Have you asked to convert your mortgage to buy to let mortgage or have you asked for "permission to let"?
Two very different things, the latter does not involve obtaining a new mortgage.
Can you.... go in and say "you are stuggling with the mortgage and want to move to a smaller place but cant sell. You are worried you are going to default on the mortgage and have considered handing them back the keys. If you had permisson to let that may solve things."
They are obliged to help you and would always rather give permission than take a default. You would have to be able to back up your side with bank statements, accounts etc...
if you're not in a tight financial spot then maybe they say yes, maybe they say no... but worth asking the question all the same.
ltv = loan to value, sorry jargon.
I pay 1% on the total mortgage per year as "Consent to let"
This basically puts my mortgage at 3.5% but is still way lower than most buy to let mortgages would be
I like allmountainventure's suggestion
I have a 'normal' mortgage on a buy to let.
But then Cheltenham and Gloucester are a pile of numpties who could not organise a social evening in a brewery, and so I have a letter from them asking me nicely not to take them to court for full purchase cost, expenses and damages.
The same letter also gives me permission to let the property, on a cheaper mortgage as a sweetener...just don't tell anyone that they can do this, and that they can miraculously do a mortgage in 6 days and 14 hours from c*ck up to completion...
OP as above you can hand the keys back but you still owe the money and the bank will (and should) continue to chase you. Faking your own death, been done before that - generally without success.
Many people let their property without telling the bank but as above it's almost certainly a breach of the terms of the loan, so worst case is they demand full repayment immediately. If you don't have to move out why not get a lodger, standard practice for making ends meet ?
Some good advice here thanks. It's not a case of struggling to pay the mortgage, more that we need to move (Mrs has to be closer to new job and elderly parents). Rental market is strong and I could cover any gaps of a couple of months easy enough, might see if I convince them to allow me to let.
If you're watching Mr Bank, the handing keys back, faking death etc was a joke!
I'm doing this legally but only because I'm in the military and asked my mortgage lender first!
I wouldn't have done it otherwise
I'm with Nationwide, a quick call to get permission to let and they verbally stated it would be ok. Filled out a form and all agreed with no issues. Same rate for first 6 months then an extra 1.5%. The interest paid is deducted on your tax return and still no more than 4% interest overall for me.
Some good tips there on permission to let, I never knew you could do that. Glad I read this thread!
Hope that helps your situation OP.
Its pretty obvious the place is over priced if you've had such little interest, or you need to market the place a heck of a lot better. Perhaps find a better agent to sell the place, dress it better for photos etc... Or accept a lower price if you really have to move. You could get a nice new car for the other half to take the edge off the extended commute and stay put and hope the market keeps on the up till the place reaches the value you need.
Most mainstream mortgage companies will consent to let, following a very messy divorce I rented my house out, as ex-wife was still named on mortgage she had to sign the consent letter (and refused to do so), mortgage company wouldn't touch me for a new mortgage to convert to BTL and get rid of her name so I rented it out anyway with the mortgage company knowing I was doing so. They never said a word and as long as the mortgage was paid not sure they really gave a shit.
Consent to let is usually for a fixed time (2years) and then after that they start talking BTL.
Ironically the tenants looked after the house better than I did.... just be prepared for them to want everything perfect so allow some spare cash for repairs etc.