Renting out your UK property - Did you get consent to let?

[whoiam]

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

 

Hi we let out our property recently. We had an interest only High LTV mortgage. I spoke to the lenders whilst considering letting and they said they would do a consent letter for a sum nearbouts £100 for a year.And I would have to renew this every year. Even encouraged me to let them add this sum onto the mortgage!:biggrin:. No talk of changing the T&C's or converting to Buy to let. I had to let them know when I had a tenant as they would date the consent letter from tenant move in date. Therefore obviously the estate agents did not have a lender consent letter prior to letting. Also cant remember Direct line asking for it also.

Try negotiating with your lender and see if they will let you continue with the same deal--Tell them you are not sure how long u will let and you actually want to sell it and only letting it out in the meantime. Give it a shot and see. Nothing to lose.

Hope this helps.

[Guest Wanna b warm]

Hi we are in same position too. Currently have a base rate tracker mortgage at 2.5% which is great. I called C&G to enquire about getting consent they want £1000 application fee and then our rate will go up to 6.9%. A monthly increase of over £350 so we would be sending hundreds back every month to cover the shortfall once you've added in insurance agents fees etc. Our house is on the Market so fingers crossed it sells. We can't really afford to rent it out with consent but I know if we don't get consent I'm going to constantly worry about it..

[pintpot]

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.

 

That's really out of order if it's deliberate

 

I think you could challenge it. Their surveyor will be a member of a professional body (almost certainly RICS) and be bound by their professional code of conduct, which means they must give honest and impartial advice (including such things as valuations). Or face being chucked out of his professional body. It's worth a letter giving evidence of what other local and comparable houses have recently sold for (Note well, SOLD for, not asking price, so use land registry records only, they're in the public domain), questioning their valuation, and asking for the professional credentials of their valuer. You could offer asking (and paying for, it'll be a couple of hundred but a drop in the ocean compared to what you're faced with) an independent valuer. If they don't play ball and you're sure of your facts, then start upping the ante with regard to their valuers professional quals and get in touch with RICS (assuming he is a member)

 

Don't do this unless you are 100% sure you're being stitched. If it's a borderline case you'll never be able to prove anything and it'll just cause you loads of heartache

[pintpot]

On another matter, it does seem as if the publicly owned lenders are taking a much harsher line than the rest of the market. I suspect they have had a senior management edict to squeeze as much value as possible from customers in order to get the profits back up, the shares re-sold and the government out of an ownership position it doesn't want

 

The C&G is part of the same group as LloydsTSB & HBOS (so also the Halifax) fwiw. It seems like the policy is common

[Rupert]

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.

 

Mine didnt.

[blobby1000]

PDC we are in Torquay about 90km from melbourne. Good luck with everything. I hope you challenge the valuation like pintpot states, you have nothing to lose.

 

What a very helpful post for all of us, thanks Pintpot for your advice which I am sure we will all take on board.

 

Its good to talk to people grappling with the same issues as we were.

[Guest jdee]

Hi All in the UK. 1] I've sent my "Application to Consent to Let" Form off & will let you know what the ML say in due course. 2] Also I was on moneysupermarket to gauge the %rates for BTL and accidentally put in my details last week, then just now, got a call from a bloke [called Peter I think], with regards to BTL offers out there. He seemed non-pushy and could potentially offer alternatives to current lender's, which depending on YOUR circumstances might be useful for you. Obviously he's a Broker & in business but it might not hurt to give him a call; like I said I THINK he called himself Peter [or was it Daphne ??? lol] on...01452-413300.

[LittleLakeGirl]

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

 

Well, sorta. Dependent on the mortgage you're on you could be quids in but in many cases the homeowner mortgages are equivalent to local rental values so people can end up out of pocket, so you offset the expenses against the income & usually it just means you don't pay any tax rather than being taxed on your profits.

 

Thanks for all the feedback folks. This is causing real tension in our household & I'm still not sure what to do for the best. If we were going out on a PR visa I'd agree that the best thing to do would be to just sell the property. But we're not, we're going on a 457 and despite Mr LLG's confidence that he can do the job & it will all be fine & we won't need the house, he's not actually the one taking the biggest risk, I am. I'll be leaving a secure job to have to go & find work again & coming up against potential prejudice because of the eyesight condition I mentioned in the health threads, additionally, because he's going on a 457 we won't have the luxury of waiting for the house to sell so we may still have the mortgage to deal with whatever happens. The must frustrating thing about this whole situation is that, because I (we) have other products with the bank & have a longstanding relationship with them every other department seems to want to throw money at me, be it upping the credit limit on my cards & overdraft or offering me personal loans by post, phone & every time I go into the branch. Yet they won't do the one thing we'd like them to do.

 

EDIT: I realise perhaps that my post sounds a little negative. I really don't want it to be as I'm as keen to make this move & try something completely new.

[belaroy]

I have a nationwide mortgage and have just been granted consent to let. It is a simple form, cost me £50 and as I am letting it for 12 months they will put the rate up by 1.5% after 6 months. I got landlords insurance from Directline which costs £202 per year or about £16 per month. I am still waiting for a reply from the tax office for the estate agent to not take the tax out of any rental income.

Its a big weight off my mind having the consent to let, just one less thing to worry about.

[Guest Wanna b warm]

For those who have let without consent what have you done about council tax payments? Have you included in rent or have your occupier details been changed with the council tax dept?

I'm worried if we were to let without consent and the tenants were on the voting pole and taken over council tax it would be far easier for ML to find out you were no longer living in your house. My OH thinks I'm over thinking things as per usual..

[pintpot]

It's unlikely a lender would go to the extent of checking electoral registers but of course, as a public document they easily could. And whether nor not your tenant puts themselves on it is not something you have any control over

 

Council tax is normally a tenant responsibility in the UK but I suppose you could draw up your contracts to make it your issue instead. Who is paying the council tax, AFAIK, is *not* something that's in the public domain though, so I don't think that would make it easier for your lender to find out. There's nowt you can do about the electoral roll and it's not linked to the council tax register fwiw (not sure if you were suggesting it might be, but it sounded a bit like it)

[Guest Wanna b warm]

Thanks for that pint pot.. I didn't know if it were linked or not. So that's put at rest half the worry!

[Katkat]

HSBC gave us consent for 2 yrs with no additional fees or interest rate charges. I just had to put it in writing every 12 months for them. Guess it depends on the bank.

[Guest jdee]

Hi KitKat, CONGRATULATIONS THATS THE BEST NEWS. BUT [1] do you think after 2yrs, HSBC may say "Times up" and change your rate etc OR do you feel like you could keep your mortgage AS IS for the next 25yrs etc, so long as you you keep writing to them every 12mths? [2] what do you have to write? rgds J

[Katkat]

I don't know what will happen on an ongoing basis- they certainly had no issue with a couple of years, and we just wrote and said we were going temporarily and wanted to rent out the house. They said they would review it annually and we had to put it in writing every year. We are planning to go back soon so probably won't find out what would happen if we asked for a third year. The info we have to provide in the letter is how long we intend to be away, the name of the letting agent we use, how much rent we are getting.

[Slean Wolfhead]

In regards to what pintpot says, no mortage company in their right mind would ever cancel a mortgage that is being paid.

 

Not if they're only getting a low return from somebody on a good deal. Some UK banks are in such a state their best interest is in grabbing money back, building capital and not actually doing any lending.

[Slean Wolfhead]

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.

 

We had virtually the same spiel in December with Nationwide, who we subsequently found out from various mortgage brokers are the absolute pits and would rather not be in the business at all.....they've stuffed up their business so badly they would be better off having no customers and calling in all their loans. Everything had a huge fee, and they were going to sting us on much higher interest rates and make us insure through them.

It was a shock, because we'd always found them to be a decent building society/bank and they turned into these complete, callous ?!**?!!'s.

When i complained about the really poor deals, I was simply told "well you signed the mortgage". My only answer was "Well yes, but i didn't know then that greedy companies like yours were going to destroy the country and put us all out of work!"

What we did in the end was pay the mortgage off and just get rid of them.

We decided we were going to have to pay anyway.....but I was darn sure i wasn't going to give Nationwide any more business.

 

We appointed a broker and he found us a deal where we changed from a repayment to a 2 yr interest only mortgage, accessible to non-residents and with the agreement that we could let the property (which is rare). This was with Saffron Building Society, who I'd never heard of but were superb (the other one who are fair to non-residents is Ipswich Building Society i think...)

We filled in the NRL1 form and insured the property as landlords through Direct Line. Everything is legal and we feel more comfortbale.

 

We dropped the interest rate by about 4%, rented out the property and can put the whole rental receipt as a tax break against the mortgage...because it's all interest and we're not getting any "income".

All this does is buy us 2 yrs of security where we decide whether we want to stay in Australia or not. If we do...we'll sell the property. If we don't...well it's still there to go back to.

 

Having been here a few months I wish we'd have sold the house and brought the money over right away into a nice 6% savings account......but hindsight is a great thing. Something could happen in the next 2 years which means we have to go home and will be glad of having a house....but who knows.

[mxh]

Hi KitKat, CONGRATULATIONS THATS THE BEST NEWS. BUT [1] do you think after 2yrs, HSBC may say "Times up" and change your rate etc OR do you feel like you could keep your mortgage AS IS for the next 25yrs etc, so long as you you keep writing to them every 12mths? rgds J

 

I'll soon find out the answer to that question, albeit with Barclays not HSBC

 

I got a 'consent to let' 2 years ago (for 2 years), so phoned them a couple of weeks ago to see what to do next. They initially said that I'd have to move to a BTL mortgage, but when I queried this saying that I was told I'd be able to renew the agreement, the girl I was speaking to checked with her manager and came back saying that they'd send me another application form. So fingers crossed for another 2 years!!

[DaveS]

I started looking into this. Interesting thread... quite a mix of experiences.

 

My mortgage is with BOS and I believe I will get consent to let for free until the end of my product (Summer 2013).... not sure what ill do then. Maybe they will forget about me at that point.

[Guest jdee]

Update from me: I have just received they OK from ML to let my property WITHOUT any changes to my Mortgage = good news. 2yrs max, then need to re-apply BUT that's when we could all get stung!!

 

MXH: great news for you! Please, Please, Please reply to this thread when you get an answer back from ML wrt re-newing your Permission-to-Let. Do they have your Aussie address?

 

SLEAN WOLFHEAD: could you clarify something for me please? Might be hard to ask in writing but here goes...

1] you say: [can put the whole rental receipt as a tax break against the mortgage...because it's all interest and we're not getting any "income".]Does this mean your Rental Receipt MATCHES your Interest Only Mortgage Payments each month? therefore not getting any "income/profit" ?? Or is it more to do with your mortgage being Interest Only? As I read elsewhere: [if you let out a property in the UK (incl.your home), tax is payable on the rental income] which I presume means Rental Receipt only, NOT Rental Receipt minus Mortage Payment.

2] BUT you've got 2yrs of not paying off the Capital portion of your mortgage. Does this bother you?

3] If you could get a Rental Receipt which is greater than Interest Only Mortgage Payments, in an ideal world would it have been more desirable for you to get a REPAYMENT mortgage? [with all the good conditions wrt letting etc that you have]; or would you be Taxed on that??

Not sure I've asked my questions very clearly, however if I explain my situation; perhaps this would help... I have a Repayment Tracker Mortgage. And have been given an estimate from a Lettings Agent wrt Rental Receipt. In theory: Rental Receipt-Mortgage Payments = £2,000 profit a year. A nice position until I get stung with tax [tax is payable on the rental income]. Regards to all.

[pintpot]

Tax is payable on the rental profit you make

 

This isn't the same as rental income. It is rental income less any allowable costs

 

Allowable costs include:

Mortgage interest payments (NOT capital repayments)

Agent's fees

Repairs/maintenance

Any other bills you pay (eg some landlords pay water rates or council tax, most choose not to)

Wear and tear allowances for fixtures/fittings/furnishings (but be careful not to double count with actual spends on repairs/maintenance, there are guidance notes from HMRC to help)

 

If your profit from this rental business is less than your personal tax allowance (which is usually going to be the case with one property unless you have a low LTV ratio, and assuming you don't have other UK income that has to be included in that allowance), then no worries, no tax. You'll have to do a tax return to show this

[Slean Wolfhead]

Yep, Pintpot explains it better than me.

We changed our mortgage to interest only so we only show a profit of £300 per month. My partner and I split that in half, then put £150 each on our tax returns...and we can also put the cost of all the expenses against it, such as Estate Agent fees, insurances, repairs.....which should put us way under the personal tax threshold so we pay no tax on it.

The other option was to retain our repayment mortgage at a much higher interest rate with higher repayments, then we would have had to self-fund extra payments from Australia which we didn't know if we could do immediately, and pay more tax because we would have been making more profit. Plus there was the problem of our existing mortgage lender being very unhelpful and not friendly to non-residents....it would have been a nightmare staying with them because their service was just awful and we would have been stung for a lot of money and jumping through hoops (Nationwide).

 

With our new "interest only" mortgage, it means that our UK mortgage will have the same outstanding capital sum in 2 years time (we've paid nothing off the total), but we have the peace of mind that we can handle the repayments and it's more tax efficient....basically we can forget about it while we settle into Oz, it pays it's way, we don't have to send money home and pay bank fees every month.

 

The other option would have been to sell the property and transfer all the equity to Oz and put it in a 6% savings account. The risk with that is that we might have come here, hated Australia, gone back to the UK and then not be able to get back into the housing market or be eligible for a mortgage.

It all depends on personal circumstances, how much your house is worth, how much equity you have, how your current mortgage is structured, and who your lender is. Everyone is different.

Best thing is to get professional mortgage and tax advice.

 

There's a big untapped market of expats who are very low-risk and require a new UK mortgage....they have lots of equity in their UK properties, a great credit record, they've probably passed professional skill assessments so should find a job fairly easily in Oz....they're less risk to a lender than a lot of UK residents who apply for mortgages. The only problem is a lot of lenders just have a policy to be unhelpful to non-residents or dismiss them completely without even examining the finances (computer says no), so you need to find a specialist lender/broker who hasn't got a problem with non-residents, it's a pretty small market and they're normally small independents who can see the niche and have done their homework.

There are a few mortgage lenders who are helpful to non-residents, but you often need to research or go through a broker to access them (Ipswich and Saffron are two BS's who seem to be recommended...we went with Saffron and they have been brilliant and very fair).

[Guest jdee]

Thanks alot Pintpot + Slean, that clears alot up.

I wonder if I can keep my Repayment mortgage, but get a handle on the split between interest + capital repayments; which will be more interest than capital as I'm only 2yrs into it. Thanks again; I think i need to re-visit the letting agent with a Fist Full of Questions. KR J

[Jobo]

This thread is interesting to read as we rent out our UK property. We had planned the move for some time so factored renting into our plans, we chose (well in advance) a lender who we knew would grant consent to let with minimum fuss and fees. When the time finally came to get consent it was pretty easy...we have now paid £250 and have consent to let for the life of the mortgage with no fees or additional interest. Our only queries will come when it comes to doing our Aussie tax return...can you get the same tax breaks for investment properties if your property if overseas?

 

In answer to the original post, for me its a no brainer. Your mortgage terms state you need permission, you choose to ignore this and go alone then if it all goes Pete Tong you have no comeback. yes it may cost some more now but surely its not worth the risk? If you really can't afford to top up the mortgage then sell the place or postpone the move. What if things don't work out in Oz, do you really want to go back and have money troubles and a legal battle with your mortgage company for money owed because you've been dishonest?

 

PS - have you tried explaining to them that you've been given the opportunity to go overseas temporarily and would like to rent for short term so the property is occupied and protected while you go? Say its an opportunity of a lifetime...it may work, I know others who have done this and it's worked in their favour.

 

all the best

[bensym]

I sent off my consent to let application to NRAM (the bad bank created out of Northern Rock) today. They have £100 admin fee and I can keep my original rate which is stupidly low. As a "bank" whose aim is to recover debts rather than write new business, I have had a result. I have asked them numerous times if there will be any change to my rate in the future and they said no, it stays for the life of the mortgage as they don't do buy-to-let. I can't go interest only though, so my mortgage stays P&I, but that is cool for me given rental rates in London. I have also taken a two month mortgage holiday with them while I pay out the costs of our move to Oz. Fingers crossed they yes to the CTL now.