velohead66

A friend has a house in the UK, that is mortgaged but is 50% paid off.
If this guy emigrates from the UK but rents his house out, should he advise his bank.

If so, are they likely to raise the interest rate by much, or not at all.
His bank is a main-stream, high street lender.

Look forward to your comments.

Leslie

All depends on the rules they laid down when he took the mortgage on. Best to be honest and ask them,saves the possibilty of a seriously bad position later.

Les

rkbycrof

I'm interested in this also as I'm thinking about jumping ship, although my equity is somewhat less. A friend suggested that my mortgage wouldn't need to be changed to a buy to let as it is my main home, ie I am not buying an additional property so presumably no additional risk.

Not sure if this is true, I'm trying to find out before tackling my mortgage provider.

hodgy0_2

if you take professional advice they will strongly advise you to convert your mortgage to a BTL one

otherwise you may well find you are breaking the existing mortgage contract

whether this means an increase in the interest rate depends on the usual factors of equity and risk to the lender

you will also need to inform your buildings insurance company aswell

and the Taxman

urban

iTrader: (1)

We'll I'd say yes, but it depends on your terms as stated.

I have a 25% mortgage on another house and the terms are very specific around renting.
Its with the woolwich.

ChrisB

I got permission in writing from my mortgage provider. They had some stipulations - I can remember what they were without checking the letter but they related to what sort of rental contract the propery is rented under.

There was no change in interest rates, payment terms etc. I've even continued to overpay and have a lopped a few years off the overal term so far.

As Hodgy says you should declare the income to the taxman (welcome to Self Assessment) and buildings insurance. I have a specialist landloards policy via PaymentShield.

rkbycrof

I've had some professional advice now, they've advised me to write a letter to the mortgage provider asking for permission to let the property out (explaining circumstances etc.), they will review this case by case and the likely outcome is that they will give permission for a limited period, circa 2 years. No increase in interest rate etc. although maybe a fee for approval.

This will be fine for me as my contract abroad is only for 2 years, I will just ask again in 2 years if my contract is extended. I guess if it is a more permanent move then BTL is the way to go.

hodgy0_2

and if you will be paying Tax on the income

It is much much more efficient to turn it into an interest only mortgage -- as you get 100% tax relief on the interest payments

SamUK

iTrader: (1)

I know someone who did this and has not told the bank...the house is on rent...a relative looks after the property...

MMT WRX

I used to rent out a house about 15 years ago. I had to do exactly as you have been advised. I dont recall any major tax issues and I was obviously upfront about it all. I did have to do it formally through an estate agent and it was for 12 month periods which they extended for about 4 years. I got fed up with skanky *******, all looked good on paper, destroying the house, in the end I sold it.

cookstar

iTrader: (6)

I had this recently on a "second home" mortgage, the stipulations (lender was Halifax) were that it was to be let on a AST max 12 months, and there was a £95 fee.

I'm not sure if this would be any different if I was moving abroad but I doubt it.

With 50% equity in the property the risk is minimal to the bank so I should imagine they would be fine about it as long as your upfront about it.

velohead66

What is an AST, please ???




The rental will be through an agency, so all tenancy agreements will be professional, rather than DIY.

But it seems if he asks his lender and they are awkward or unhelpful, he may be put in a situation that is less than ideal, ie he has fewer options available to him.

Anyone able to recomend a good Buy To Let lender, as I think he has to do some research.

cookstar

iTrader: (6)

Assured short-hold tenancy, the norm for residential lettings, (under 20k P/A I think).

As long as the buildings insurance know about it, how is the lender ever going to find out anyway?

Like I said before with 50% in the house, the bank should be fine about it all, if he remortgages with a BtL (if he can get one that is) then expect rates of 7%+ at the moment, and ridiculous arrangement fees.