/ renting your house without a buy-to-let mortgage

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adstapleton - on 02 Dec 2012
We have a house. We don't live in it. We rent it. We don't have a buy to let mortgage.

How 'sketchy' is this? do the banks really give a shit? What would happen if we got found out? Are we likely to get found out?

Thanks in advance for any helpful insights and anecdotes.
smallclimber - on 02 Dec 2012
In reply to adstapleton:
If you always pay your mortgage it's unlikely to ever be an issue. Did you live in the house when you first got the mortgage. Ie did you tell fibs when you got it, or have your circumstances changed. We rented our house for three years while we worked abroad and I don't recall we told the mortgage company. We did change our insurance to property only, rather than house and contents.
The issue would be if you default on your mortgage payments and the mortgage company wants to repossess the house, your tenants have rights and cannot just be evicted right away if they have been paying their rent. So,then the mortgage company loses out.
Ciro - on 02 Dec 2012
In reply to adstapleton:

You're almost certainly breaking the terms and conditions of your mortgage, so to all intents and purposes you're committing fraud... if the bank does find out they may recall the debt, and you might find it rather difficult to get a mortgage again in future.

You're also invalidating your insurance, which is bad news if your house burns down.

stroppygob - on 02 Dec 2012
In reply to adstapleton: I'm in the same position as you. When I emigrated, I contacted my mortgage company, Halifax, and informed them. They wrote back, giving me permission to do so.
deanr - on 02 Dec 2012
In reply to adstapleton:
I had the same too, but when I spoke to my insurance company, they said the insurance would be void if I hadn't declared it as buy-to-let to the mortgage company. I thnk they said it was becasue the mortgage company has an interest in the house.

Speak to your mortgage company as it may not be a problem to convert. The mortgage on my flat (Halifax) converted with no extra penalties and I then transferred to a buy-to-let mortgage later.

Interestingly, when we moved abroard, I wanted to do the same on my house. Initially they (ING) wanted to charge me an extra 2%, but I then found out that if you tell them you have moved away for a fixed short term period (up to two years) and that you had to move because of work, they view it favourably and didn't charge me the premium.
featuresforfeet - on 02 Dec 2012
In reply to adstapleton:

I do this. Santander charge me 100 quid a year for the 'permission to let' but otherwise mortgage terms stayed the same fortunately.

The only point that could prove problematic is all my tenancies have been for longer than a year, so theoretically if they denied me permission I could have a problem.

I also switched the mortgage to interest only when I let the property which doesn't seem to be a problem (though there is quite a lot of equity in it , so maybe this helps).
Run_Ross_Run - on 02 Dec 2012
In reply to adstapleton:

Just ring the mortgage provider and tell them.

We had the same situation and the mortgage lender slapped a lovely % on top of the normal rate for no reason what-so-ever.

Also consider that you may have to pay tax on the income.
andy - on 02 Dec 2012
In reply to Darren09:
> (In reply to adstapleton)
>
> Just ring the mortgage provider and tell them.
>
> We had the same situation and the mortgage lender slapped a lovely % on top of the normal rate for no reason what-so-ever.
>

It's not really "no reason whatsoever", is it? The risk is different - you're not living there, so you have less incentive to pay (as you're not going to get evicted). Payment of the mortgage is dependent on someone else (your tenant) who they don't know anything about. And if it did go tots up they have to wait til the tenancy runs out to get possession. Higher risk loans carry a higher rate - so some lenders recognise this by adding a bit to the rate. Check your t@cs to see how much it is.

I assume the OP is doing the letting properly (ie deposit guarantee scheme, annual gas safety check etc)? Assuming you are, then you might as well do the whole thing properly and tell your lender and your insurer - it's not likely to be massively expensive and could save a lot of hassle of things went wrong.
John_Hat - on 02 Dec 2012
In reply to featuresforfeet:

Same here. Rang Santander and a small-ish charge (70 or 100, can't recall), and they give permission.
vark - on 02 Dec 2012
In reply to adstapleton:
I am about to do the same. The Alliance and Leicester charge a fee of 95 per annum to do so. There is no change to the interest rate and they have stated no approval process ie I only have to ask and it is granted and renewed each year.
chris_r - on 02 Dec 2012
In reply to adstapleton:
You don't need a specific "buy to let" mortgage, but you need to tell your mortgage company and get "permission to let". They'll usually charge a small admin fee (< 100) and possibly increase your interest rate. My mortgage company gave me 6 months at the current rate and then increased it by 1% to account for the extra risk of non-payment.

You also need to tell your buildings insurance company or the policy will certainly be invalid. I use a specific landlord insurance these days, just google it.

Most importantly, you have certain responsibilities to your tenants. Get an annual gas safety certificate. If you don't and anything goes wrong you could be up for manslaughter. Also make sure there are working smoke alarms and a handrail on the stairs.

Chris
Orgsm on 02 Dec 2012
In reply to adstapleton:

Hat do you think we did before buy to let mortgages existed? Check t&cs to see if mortgage agreement mentions it at all. They didn't used to. Tell insurance but when I did it over a decade ago it didn't change premium at all, just what was and wasn't covered.
andy - on 02 Dec 2012
In reply to A Game of Chance:
> (In reply to adstapleton)
>
> Hat do you think we did before buy to let mortgages existed?

You used a commercial mortgage.

> Check t&cs to see if mortgage agreement mentions it at all. They didn't used to.

They certainly have since 1999 (well Halifax ones have anyway).
Bimbler - on 02 Dec 2012
In reply to adstapleton:

> How 'sketchy' is this?
If you get found out.. Very!

> do the banks really give a shit?
Only if it goes pear shaped.

> What would happen if we got found out?
Depends on circumstances of being found out. Sliding scale from inconvenient to very expensive!

> Are we likely to get found out?
Only if it goes pear shaped.


Orgsm on 02 Dec 2012
In reply to andy:

Nope standard mortgage (mine was per 1999)
paul walters - on 03 Dec 2012
In reply to adstapleton: I have my mortgage with the Coventry BS. They've told me I can rent out with their permission for one year, after which I must convert to a buy to let mortgage. Arrangement fee was circa 1200 IIRC and interest %'age is much higher. Other lenders wanted corca 4000 arrangement fee for a lower %'age. Still haven't decided what to do. Probably sell up and take the hit on the decreased value :-(

I agree with all comments above... best do it properly. An acquaintance lost the income from renting his house when the tennants discovered there was no gas test cert for the place.... they simply refused to pay the rent for 3 months and then left... he couldn't do anything as he couldn't legally have let the place without the cert in place ! They trashed the place before leaving too. Cost him loads.
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LastBoyScout on 03 Dec 2012
In reply to adstapleton:

I am about to start renting my house. My mortgage is with Nationwide and I can rent it for 2 years without any penalty.

After that, I will need to reconsider what to do...

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