mortgage-permission to let

[twig55]

hi,what happens if u dont tell your mortgage company that you intend to let your property and for example there is a major water leak or fire with a tenent in it,im applying for permission to let and most people who i speak to think im mad for doing so,could you lose any insurance claim??? Paul

[Matt Churchill]

I would not think that you are in danger with any insurance claim if you do not tell your bank. But, you do need to tell the insurance company.

Technically, you will no doubt be in breach of your mortgage terms and conditions, there will be some small claue somewhere which will mean you were meant to disclose it.

It depends what sort of lender you have. Some will simply thank you for telling them and leave it at that, others will want to change the loan you have and probably charge you more - the perception is that rented properties are more of a risk for a lender than owner occupied.

Whether you tell them or not, is a personal choice I guess, and is the sort of thing that people will always tell you not to disclose - like having too many fags when you come back through duty free - if you follow my analogy.

[twig55]

Thanks for your reply,i will chew on that over the next few days!!!!

[Smiler]

You have a mortgage with an express condition in it. You can not rent the property out without permission.

If you do and something nasty happens then the insurance co could turn around and say your not insured.

Is it really worth it? For a sake of a few quid to know you're fully insured.

[Matt Churchill]

If you do and something nasty happens then the insurance co could turn around and say your not insured.Think the OP was asking if there were insurance issues with not disclosing rentals to your lender. There are not, if you disclose the rental to your insurers, then if you need to claim they should (all things being equal) pay up.

Disclosing the rental to a lender and an insurance company are not related.

[lee2309]

HI,

I've had a few cases like this. On enquiring on behalf of clients these were the responses:-

1. Lender will change your rate (higher ofcourse) and depending on what deal you have becasue you will change the product you will have to pay the redemption penalty.

2. Some lenders will leave the rate as is but will want some forms to be completed and will want confirmation from an ARLA or NAEA agent regarding rental income.

3. Some lenders just allow you to let it out as this could be due to change in circumstance and don't penalise you and don't change the rate.

4. Finally some lenders will not be happy and make you pay the redemption penalty and change your mortgage lender.

In all fairness lenders would rather not lose you and looking at the change from traditional mortgages over the years they will work to some compromise.

My advice would be to call your lender without giving them your account details and ask if your circumstances were to change and you have to move & let it out what is the procedure and ask if they change the rate as well. This way you will get first hand info and can make an informed decision.

Leanne
Majestic Finance

[lina]

Hi to all,
iam lina from florida,just logged into this forum.
unfortunately ur lost ur property,u don't inform to the bank or money lender,inform to the insurance company.if he knows that depends upon the lender.

[muser]

I am actually involved in a similar predicament at the moment. Call this a case study if you like.

I own my residential property - a house, and sought the lender permission to let it out so I could downsize without selling. The permission was given at no cost.

I found a flat and took out a residential mortgage on it (fixed for 5 years) with the belief that I would encounter similar luck with the new (different) lender. The purchase and refurbishment took much much longer than anticipated, by which time, i had lost interest in moving to the new flat. I wanted to let out the flat instead and stay at my current residence.

So I approached the lender for the flat and explained the situation to them. They decided to withdraw the 5 yr fixed offer (which was quite good) and put me on their variable rate plus 1% extra on top. I protested and wrote a series of letters but they would not budge. The catch now is that the ERC is quite hefty.

I have 3 options -

(1) Pay the ERC and (then sell the flat or move it to a BTL product)
(2) Tell the lender that I will move in as planned but let the flat out.

The ERC is quite hefty and I am strongly tempted to go for option (2). This is quite risky because they know already that I want to let the flat out.

My questions are these - How can they find out if I go for option (2). More importantly what is the worst case scenario for me if they find out?

Thanks,
Muser.

[pootle]

My lender (A&L) charged me a one-off fee of £200 for permission to let. When I was looking for a mortgage I asked every lender what their charges would be if I needed to let and chose my lender around this.

You could find out what they charge by posing as a potential customer then make your decision on whether it's worth telling them or not.

From my experience, most added 1% to your current rate.