OT - First time landlord - telling the mortgage company

[Charlie]

Sorry this is off topic but as a number of you seem to be landlords judging by previous posts you may be able to help.

I apologise in advance if this is a naive question.

I shall be renting out my house for 12 months whilst I backpack round the world.

The T&Cs of my mortgage state that mortgage will go up by 1% if the property is rented out.

What's the best strategy to avoid this increase? Should I threaten to switch to another provider? I currently have a redemption penalty so this is and idle threat, plus I haven't got time to remortgage before I go away. Should I argue that there is no increase in risk - insurance cover will be extended - it's a company let etc.

Should I just not tell them. What are the ramifications if I don't tell them? I know I'd be absolutely insane to not to tell the insurance company, but are there any specific tax implications related the type of mortgage I have. (This is a one off let).

Any thoughts/words of wisdom would be welcome

Charlie

[[news]]

take the 1% hit, the rent will cover it. keep it simple and legal.

enjoy your trip

RT

[Owain]

A criminal conviction for obtaining pecuniary advantage by deception? Or more likely a note on your credit report that deception was used to obtain a financial service.

Pass on tax, but it is probably a condition of buy-to-let insurance that the mortgagor has consented to the property being let. Not telling the mortgagor could therefore invalidate the insurance.

Owain

[TheScullster]

Create a highly realistic looking form to "prove" these are house sitters. Claim the cost against tax somehow!

Only joking............

Phil

[bigcat]

Clearly there isnt one thats legal. Many people simply dont tell them, but others have explained the results of that approach.

which part of '1% extra if you let' are you struggling with? We're talking about a 6 figure mortgage, with written and signed documents, not Joe on the street that you can bullshit over a fiver.

would make the insurance invalid, and might be fraud or something similar.

Grow up

NT

[Mike]

Threaten to switch to C&G even if it's an idle one.

[Charlie]

Crikey sounds pretty serious - I'm guessing a prison sentance would be involved here.

OK - that's why I asked. I'll ring the insurance company and check if it is a condition.

[Charlie]

Sounds like this is the best option. I'm guessing they want to increase the mortgage because they see the risk as being greater. What do you think would be a useful counter? Informing them that

- the property if fully managed

- it is a company let so the income is safer

- more comprehensive insurance will be taken out on the property.

I guess the threat to switch is the last option. Just interested if anyone else has managed to convince their mortgage company not increase their payments.

[Owain]

Probably not - you have to do something really bad to get chokey for a first offencel the effect on your credit (and possibly employment, as some employers do credit / fidelity check their prospective employees) would probably be worse.

And they will log your enquiry and if there is a claim will ask for sight of buy-to-let mortgage before paying. ... Bear in mind too that you will need buy-to-let insurance specifically to cover you against tenant liability.

For 1% difference in mortgage costs, which should be generously covered by the rent anyway, it really isn't worth fiddling it.

Owain

[Owain]

They want to increase the mortage because (a) in the event of default, repossession will be harder, and the value of the property markedly reduced, by the presence of tenants (b) they know you'll be making a profit on the rent so they are treating it as a business mortgage (c) the market for buy-to-let mortgages is not as large, and therefore competitive, as owner-occupier

Irrelevant.

Is it? Companies can go bust or be slow paying. The issue is the ability to repossess the property in extremis, not a few months' payments being late.

Irrelevant. The property should already be covered by rebuilding insurance -- which WILL be invalidated if you don't tell the ins. co you are letting.

Owain

[rrh]

Agree with other posters: don't try to hide what you are doing. But certainly threaten your mortgage company with moving if they want to charge you the extra 1%. I have argued mine out of this on several occasions. Use of a professional letting and management company etc may help in this respect. However barriers to entry in this "industry" are low and "professional" tends to mean little more than you pay them (too much) for what they do. Stay hands on.

By the way in over ten years of letting my London house to (usually) expatriate professionals via (always) a big-name agency I have yet to come across a "company let" - or to see why it should be better than a let to individuals (OK may be different if you get Shell or Microsoft).

In most cases you are taking a large risk with your largest asset and should not expect even to pay the mortgage in return. Do it because because you want to return to live there and, with luck, keep hold of the capital appreciation. Do not expect anything other than rubbish service from estate agents, letting and management people and so on.

[Mike]

No. Simply get a quote from C&G (who IMO offer the best such mortgages) and invite them to match it. I don't know how much of your lock in term is left but if it isn't too long it would actually be in their interest to get you locked into a new mortgage BUT at a sensible unloaded rate.

We make sure our mortgages are with companies who don't.

>

[Charlie]

treating

therefore

Thanks Owain, that's interesting to note. A colleague of mine did use this to convince his mortgage company not to bother increasing his payments. Which sort of why I askedd I wanted to sound out other people's experiences.

Charlie

[Charlie]

counter?

mortgages) and

Thanks for the advice Mike,

I'll have a look at C&G quotes. FWIW I'm halfway through a 2 year fix with Portman, which of course I took out before I realised I would be going travelling. They say experience is the thing you gain just after you most needed it!

Out of interest has anybody managed to convince their mortgage company not to increase the payments due. There must be somebody.....