LittleLakeGirl Posted March 4, 2012 Share Posted March 4, 2012 Quite a simple question really, do you rent out the property you owned (lived in i.e. not on a buy-to-let mortgage) in the UK before moving and did you bother to get consent to let on it from your mortgage lender? The reason I ask is this, we have a property which isn't in negative equity but, is unlikely to sell at anything near like we paid for it right now, doesn't have enough equity for anyone to offer a remortgage, and the our lender's consent to let terms are prohibitive - up to £1,500 admin fee and up to 6.9% on the interest rate, which means that we would be effectively subsidising a tenant to live in the house to the tune of up to £300 per month, when you consider that the going rate for rentals locally is pretty much what we're paying on our mortgage at present, then you factor in landlord insurance, agents fees and accountancy fees for a UK tax return (though I could possibly discount these because of my current place of work). I realise the implications (in basic terms it's mortgage fraud) but I can't be the only one who thinks that effectively paying someone else to live in their property is ludicrous. I've had unofficial advice from a mortgage advisor / estate agent here in the UK that a number of their single property landlords are in similar situations and haven't bothered to inform their mortgage providers but I'm a cautious creature so I'm looking for some more input. Thanks all Link to comment Share on other sites More sharing options...
Guest Posted March 4, 2012 Share Posted March 4, 2012 I'd consider carefully the things like insurance and so on. You'll be rather stuffed if you insure with tenants only to find its null and void if you ever need to claim as you are not on the correct mortgage and so on. Have a look for other threads on this as its been discussed before. Link to comment Share on other sites More sharing options...
LittleLakeGirl Posted March 4, 2012 Author Share Posted March 4, 2012 Thanks, yes, the insurance issue was certainly a concern too. It is a crazy situation though, it almost makes more sense to leave the property empty, even though I'm loathe to do that too, especially as all the agents who've seen it think they could easily rent it out. Link to comment Share on other sites More sharing options...
chalkyhill Posted March 4, 2012 Share Posted March 4, 2012 You won't be able to use a letting agent as they will request a copy of the consent to lease prior to setting you up with an account. Link to comment Share on other sites More sharing options...
Paul B Posted March 4, 2012 Share Posted March 4, 2012 Also, if you use an agent and they know you are overseas you are listed as an Absent Landlord and they will pay HMRC full tax on the gross amount until you register with HMRC who will then tell them they dont have to. I just went through this and it was sorted within weeks, the letting agents can give you all the details. With a property let out you will also have to do a self assesment tax return if you dont already, especially if you want to get back any that has been paid. Link to comment Share on other sites More sharing options...
LittleLakeGirl Posted March 4, 2012 Author Share Posted March 4, 2012 Also, if you use an agent and they know you are overseas you are listed as an Absent Landlord and they will pay HMRC full tax on the gross amount until you register with HMRC who will then tell them they dont have to. I just went through this and it was sorted within weeks, the letting agents can give you all the details.With a property let out you will also have to do a self assesment tax return if you dont already, especially if you want to get back any that has been paid. This bit I knew about (work for an accountant) but thanks for the heads up about agents deducting the gross figure. Link to comment Share on other sites More sharing options...
frostie Posted March 7, 2012 Share Posted March 7, 2012 Do you have any family at all who would rent it from you? That way the insurance is still valid ( it is with ours as I have checked). Link to comment Share on other sites More sharing options...
pintpot Posted March 7, 2012 Share Posted March 7, 2012 Do you have any family at all who would rent it from you? That way the insurance is still valid ( it is with ours as I have checked). You still need consent to let from your mortgage lender. Actually they are more likely to refuse this if they know/think you are "letting" it to family, they would prefer a clean commercial arrangement Link to comment Share on other sites More sharing options...
thepallis Posted March 7, 2012 Share Posted March 7, 2012 Directline do not want to see a consent to let for them to issue landlords insurance I checked. We are just in the process of sorting our house out and mortgage co won't give us consent to let for 6 months. I have spoken to accountant who said we need form NR1 (i think) with regards tax issues. Agent we are using didn't ask for consent to let either, I think it depends on which agent you use, as long as they know you own the property some are not too bothered they are not the ones who will suffer financially it will be the landlord who is renting the property out. Link to comment Share on other sites More sharing options...
flybyknight Posted March 7, 2012 Share Posted March 7, 2012 get a consent, insure everything boilers posessions buildings etc, get a management agent. then rent it out.... then, claim the cost of all of the above and more back on your uk (or oz if on a 176) tax return. maybe this is why everyone's doing it Link to comment Share on other sites More sharing options...
pintpot Posted March 7, 2012 Share Posted March 7, 2012 Directline do not want to see a consent to let for them to issue landlords insurance I checked. We are just in the process of sorting our house out and mortgage co won't give us consent to let for 6 months. I have spoken to accountant who said we need form NR1 (i think) with regards tax issues. Agent we are using didn't ask for consent to let either, I think it depends on which agent you use, as long as they know you own the property some are not too bothered they are not the ones who will suffer financially it will be the landlord who is renting the property out. You sure about that? http://www.directlineforbusiness.co.uk/residentialproperty/landlord-insurance-articles/consent-to-let-faq.htm Insurance companies don't tend to refuse insurance or demand to see consent to let, they prefer to keep at arm's length and not get directly involved. The crunch may come if you need to claim. Standard claims you might be OK, claims due to tenant action are a bit more debatable, claims involving a tenant who's stopped paying and you want to evict are very likely to be refused. Why? If you don't have consent, then any tenancy agreement you sign with a tenant has no basis in law and is effectively worthless. Which is OK so long as things are going swimmingly, but it's when they go pear-shaped and you want to take enforcement action that you're in trouble - you can't enforce a contract that doesn't exist All that is on top of the other risks of not getting your lender's consent, like them cancelling your mortgage I always advise people not to do this (let without permission). It's too risky. If you live elsewhere in the UK, doing it and getting caught out will be a pain in the arse at best, could be a lot worse. Trying to manage that from the other side of the world? Rather you than me Link to comment Share on other sites More sharing options...
blobby1000 Posted March 7, 2012 Share Posted March 7, 2012 Whatever you do you MUST get proper insurance that states the property is let out. Link to comment Share on other sites More sharing options...
blobby1000 Posted March 7, 2012 Share Posted March 7, 2012 In regards to what pintpot says, no mortage company in their right mind would ever cancel a mortgage that is being paid. Link to comment Share on other sites More sharing options...
pintpot Posted March 7, 2012 Share Posted March 7, 2012 Sorry, but I've known it happen. I used to help with CAB on housing because of my background (long story). I've seen numerous cases where mortgage companies have done it, it is a real risk. They are unlikely to do it straight away without warning but it's a weapon they have and they are prepared to use it. What usually happens is that the lender finds out the property is being let without permission, puts you on a BtL mortgage and sends you a bill for the extra interest and fees you have dodged (some might argue defrauded them of) by not getting their permission. You can try and negotiate them down but you're in a pretty weak position, but be contrite and reasonable and you can usually get a better settlement somehow (that's where I used to come in) If you get on your high horse about it though and start a war, then they'll either pursue you for that money or if you can't pay it, threaten to cancel the mortgage and insist you get someone else to lend, and if you still dig your heels in they will cancel it and demand their money back. If you don't have any means of paying them they'll then move to repossess I've seen it happen and it's not pretty. They (lenders) are not always reasonable in their additional costs for landlords, but it is perfectly reasonable for them to insist you get their permission to let out. In most cases the big majority of the money that's tied up in the property is theirs and they are entitled to a say in how that risk is managed Link to comment Share on other sites More sharing options...
Guest jdee Posted March 8, 2012 Share Posted March 8, 2012 Hi LittleLakeGirl, This is a very interesting thread for me as I'm in the same situation as you though not started the visa process...hhhhhmmm its a tough call for us both. I've got a cracking lifetime mortgage [v.low rate%, hi LTV, lifetime, portable, hi salary multiple] & I dont want to convert to BTL and get charged another £350/mth as the rent does not quite cover it all. Plus if things dont work out in Oz we would be subject to what new mortage products are out there at that time of returning back UK. HOWVER i did contact my Lender about a 'speculative interest in renting out' and they sent me an Assessment Form to fill in wrt renting. From this form they "MAY" allow me to sub-let 6-24mths, WITHOUT changing the T+C's...YIPPEE!!...and then...in theory at the end of the 24mths...go thro' the Assessment again and continue on my current mortgage for another 24mths. so far, I haven't filled in this assessment as I am debating NOT telling them when the time comes; though reading this thread I think I may send it off to find out what they say. Personally I think they'll want to convert to BTL, why wouldn't they??? And even if they agree to leave the mortgage as is...what happens in 24mths time when I'm in Oz & re-assesses??? I'll be well and truly backed into a corner. A letting agent I've approached said OFF-THE-RECORD, "its up to you if you inform your M.L - I rent out my personal property & I haven't told the ML, plus they'll be no communication between LandlordInsurer & ML; so its do-able, as how are they going to find out? provided the mortgage gets paid ML wont take much notice" [agent would also org. the landlord Insurance+gurantee rental income minus 10%]. so end result... I really dont know. If I send off the form I will post the outcome here. Good Luck Sorry, but I've known it happen. I used to help with CAB on housing because of my background (long story). I've seen numerous cases where mortgage companies have done it, it is a real risk. They are unlikely to do it straight away without warning but it's a weapon they have and they are prepared to use it. What usually happens is that the lender finds out the property is being let without permission, puts you on a BtL mortgage and sends you a bill for the extra interest and fees you have dodged (some might argue defrauded them of) by not getting their permission. You can try and negotiate them down but you're in a pretty weak position, but be contrite and reasonable and you can usually get a better settlement somehow (that's where I used to come in) If you get on your high horse about it though and start a war, then they'll either pursue you for that money or if you can't pay it, threaten to cancel the mortgage and insist you get someone else to lend, and if you still dig your heels in they will cancel it and demand their money back. If you don't have any means of paying them they'll then move to repossess I've seen it happen and it's not pretty. They (lenders) are not always reasonable in their additional costs for landlords, but it is perfectly reasonable for them to insist you get their permission to let out. In most cases the big majority of the money that's tied up in the property is theirs and they are entitled to a say in how that risk is managed Link to comment Share on other sites More sharing options...
blobby1000 Posted March 8, 2012 Share Posted March 8, 2012 Thank you pintpot for your information. It certainly makes interesting reading and will give anyone considering renting out their property without consent something to think about. 2 points really: 1. If the worst case scenario is they find out and fine you the amount you would have paid extra than I would argue that you are no worse off taking the risk. If and when they find out you can say "oh sorry didnt realise" and then pay up if you think this is the way to go/haggle the fine down etc and you are no worse off than if you just offered to pay their rip off fees in the first place. 2. The reason the banks want extra money is not really due to managing risk, its because they are greedy and they think (and historically it was true) that renting out properties led to riches and the banks what a piece of it. Also, I accept that its hard for the banks to evict a tennent and repossess if the rent/mortgage is not paid, although by increasing the payments surely they increase the risk of non payment. Finally, we still need to establish if the letting agent look after the property, the insurance company do not ask for the mortgage company name and you redirect the post to Australia and the mortgage is always paid on time how on earth will the mortagage company ever find out? In your experience Pintpot, how did the unfortunate people you mention get rumbled?? Link to comment Share on other sites More sharing options...
cazmayo Posted March 8, 2012 Share Posted March 8, 2012 Have a read through your mortgage agreement! Most have stated,if you rent, you have to ask permission. Then what happens? Some banks have given agreement at the same rate for a certain period (I heard of AIB irish bank giving 24 months permission initially). Some convert it to a buy to let and charge a higher interest rate (espec if your on a good tracker). I have also read of some banks coming to an agreement and accepted whatever the rent was. Say your going to OZ, I have a tenant at 700 per month and will be unable to meet any shortfall. They agree rather than have the person take off and leave them with an empty house and no money coming in.!! Im going to have a good read of my mortgage agreement. One person said it depends on the year you took out your mortgage, a few years back, there wasnt much difference from a residential to a buy to let, so there wasnt any clause written in. My house is worth 50% of its value a few years ago, so we have no choice but to try and rent. Cheers Cazmayo Link to comment Share on other sites More sharing options...
pintpot Posted March 8, 2012 Share Posted March 8, 2012 Thank you pintpot for your information. It certainly makes interesting reading and will give anyone considering renting out their property without consent something to think about. 2 points really: 1. If the worst case scenario is they find out and fine you the amount you would have paid extra than I would argue that you are no worse off taking the risk. If and when they find out you can say "oh sorry didnt realise" and then pay up if you think this is the way to go/haggle the fine down etc and you are no worse off than if you just offered to pay their rip off fees in the first place. Yeah, unfortunately that's not the worst case scenario. As per jdee's post, it's common (in fact most do it) for lenders to allow you to let the property on your existing deal for a period, or for a lesser increase in interest rate than their BtL rate they offer new borrowers. If you get caught out, you can expect that they *will* apply the maximum in terms of fees and backdate it, whereas if you'd talked to them in advance, you probably wouldn't have had to pay that. If they ask permission and they are dicks about it, then yes, you've not that much to lose Although, be aware that they can take additional steps like cancelling the mortgage. This is extreme action but it does happen, and even though it's unlikely, the impact if they do take these steps is such that I, personally, wouldn't take the chance. On the subject of insurance, it's the risk of non-paying tenants that you also need to consider. As per above, if you don't have consent then your tenancy agreement is pretty much worthless, so you can't enforce it. This can cause you big problems if you have to try and evict someone, it's like getting rid of squatters. Another thing I wouldn't want to do from the other side of the world 2. The reason the banks want extra money is not really due to managing risk, its because they are greedy and they think (and historically it was true) that renting out properties led to riches and the banks what a piece of it. Whatever. I know people like to make out banks are the big evil, it all helps them justify themselves a bit better. But they are commercial organisations, managing risk is exactly what they are about. And of course they've all been caught with their pants down in the past few years, so they are a lot more risk-averse than they used to be. You can spin it to ascribe human emotions to them if it makes you feel better. (Apologies, I know that sounds harsh but I can't be doing with all the "banks=baddies" stuff, it's just a bit childish) Also, I accept that its hard for the banks to evict a tennent and repossess if the rent/mortgage is not paid, although by increasing the payments surely they increase the risk of non payment. Actually it's quite easy for them to evist these tenants because they're not actually tenants (see above). All they have to do is get the court repossessionorder and send the bailiffs round. Ironically, it's much easier for *them* to evict tenants because they will have a court order allowing them to do so. *You* would have much more difficulty evicting tenants because you will struggle to get a court order, because you don't have a legal contract with your tenants. The order the bank gets refers to teh contract between you and them (that you have broken), for you to evict tenants you'd need an order referring to the contract between you and the tenants (which doesn't exist). See what I mean? I know this because I was the victim of it when I was 21 - it's one of the things (as well as being in later life a property investor and someone who deals with commercial law) that got me into helping out the CAB years later. I had a flat in London that, unbeknownst to me, the landlord didn't have permission to let. The bank had found out and because she refused to pay additional fees, they were reposessing. The first I knew about it was when a letter arrived addressed to "the occupier" on a Wednesday stating that on the Friday repossession proceeedings would be heard in court and if the court so ordered, it would be repo'd immediately afterwards. I had to go and see a solicitor who advised me the only thing I could do was "join the action" by putting myself on the repo case as a co-defendant, and asking for an emergency hearing, which I got on the same Friday. The judge took 1 minute and told me that as I didn't have a legal contract, I didn't have a tenancy and therefore had no rights. He granted the repo order but gave me a stay of execution of 2 weeks to find somewhere else to live and get out (which he didn't have to do) Finally, we still need to establish if the letting agent look after the property, the insurance company do not ask for the mortgage company name and you redirect the post to Australia and the mortgage is always paid on time how on earth will the mortagage company ever find out? In your experience Pintpot, how did the unfortunate people you mention get rumbled?? Generally they got rumbled because correspondence sent to the address wasn't answered and then they started ringing up. In some cases they were grassed up by their tenants or someone else they'd upset. If you're careful you should avoid getting caught, like I say, teh chances of getting caught out are small but the potential consequences can be quite large, so be careful Link to comment Share on other sites More sharing options...
blobby1000 Posted March 9, 2012 Share Posted March 9, 2012 Well there is not much I can say to that! Thanks for all the information. The only thing I would argue is that banks are remarkably greedy, bank of interest base rate 0.5% and a variable rate of 5% thats a 900% profit as far as I can see although I dont pretend to completely understand how these things work. In terms of your experience years ago, that is rather scary. Although I wonder if your landlord had other issues, perhaps she was not paying the mortgage fully? I think your suggestion of "if the mortgage company are being dicks about it you have no choice" is precisely correct. I know of someone who's house was worth 200k at least, I mean the house next door was identical and sold for 225k a week earlier and when they came to ask permission to let the mortage company said it was worth $160k.. They pointed out all the sales in the area at that time but the banks just basically lied and then asked for an extra 300 quid a month in order to consent to let. Its a rip off. Its criminal really. I actually have consent to let becasue my house is on a buy to let mortgage but I dont blame anyone for taking their chances in regard to letting out without consent. Link to comment Share on other sites More sharing options...
PDC Posted March 9, 2012 Share Posted March 9, 2012 We have been granted a consent to lease on our property, as I wanted to go down the 'honest' route. However, we too were hit with a GBP1499 fee and an increase of over 2.5% interest - hiking the repayments by GBP200 a month. When I questioned why we weren't being given more favourable rates (loyal customer and have overpaid every single month that we have had the mortgage etc) they said that we didn't have 75% LTV. I disagreed, only to be told that they valued the house at GBP20K less than others in the street have recently been sold for. All of this was done over the phone, as you can no longer actually see a 'real' person to discuss your case, so, when I disagreed with their valuation they said that they could send out their surveyor, at my cost, and he would explain why they valued it at the price they did. We have no choice but to make up the shortfall each month when we get to Oz, but I can 'honestly' say that I feel that Halifax has completely and utterly shafted us. Link to comment Share on other sites More sharing options...
blobby1000 Posted March 9, 2012 Share Posted March 9, 2012 Yes you have been absolutely done over I am afraid. Honesty may be the best policy but it is also the most expensive one in many cases. They don't give a monkies about loyal customers. The fact they underestimate the value of properties and then increase your repayments based upon that false valuation (and you have to pay for a new valuation- done by their company, which I bet will still be low- if you disagree) is basically fraud on the banks part. It's appalling and I am sorry (as I am sure you are) that you ever bothered to ask permission. Link to comment Share on other sites More sharing options...
blobby1000 Posted March 9, 2012 Share Posted March 9, 2012 And another thing.... The fact they increase the payments means you are less likely to ever get the mortgage down to 75% LTV and so may never get consent (so more money for the bank) Why dont you remortgage with a friendlier bank?? Link to comment Share on other sites More sharing options...
PDC Posted March 9, 2012 Share Posted March 9, 2012 We thought about it, but time is against us, as are interest rates now! I think we may have to stick it for a few years. We've had several estate agents out this week to value the property for letting, and have asked them all to value it for sale as well. They all agreed on the higher sale costs (which mean nothing to the bank) and so when our Consent to Lease ends I will pay for their surveyor - hopefully house prices will have moved slightly in that time (we are luckily to b in an area where property was never hugely over-valued so the drops have not been so great) and then we will have more room for negotiation. From what I hear, Halifax seems particularly harse on Consent to Leases. However, saying all of that, each estate agent has also asked us to prove we have a Consent to Lease so I am glad that we have it - just not happy at what we had to do to get it! Link to comment Share on other sites More sharing options...
blobby1000 Posted March 9, 2012 Share Posted March 9, 2012 Yeah its entirely outrageous. I remortgaged 2 properites at the same time (including 5 grand of fees for banks plus thousands to solicitors!) because we went on to a variable rate of 9%, our lender didnt do remortgages at the end of a fixed rate period (they wanted soemone else to take over the loan) and we could not get a fixed rate as we had drifted into negative equity. This would not have been something I would have wanted to be doing whilst organising our move to Australia so I dont blame you at all for not going down that road. When are you setting off for Oz and where are you heading? Excited? One good thing, if you have to send money home, with this exchange rate you will only need about 300 bucks a month to make up that 200 quid and depending on your occupation the wages 9when converted to pounds) are much higher here. Link to comment Share on other sites More sharing options...
PDC Posted March 9, 2012 Share Posted March 9, 2012 Yes, the exchange rate works well for us - we need to send some money home every month so we get a good rate, and we have very little savings to take to Oz so we don't lose out too much! We're heading to Sydney, probably Central Coast. I'll be working in the north suburbs of the city. My husband's an Aussie and we've been here 6 years now, so time to take the kids back for an adventure. Not sure how long we'll be there, we never like saying 'forever' but we think it's a good time for us to move, and a good time for the kids to experience Australia while they are still primary age. We're off mid-May - it did feel like an age away but it's creeping up very quickly. What about you? Link to comment Share on other sites More sharing options...
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