Taking on a lodger and interpreting mortgage terms

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    Taking on a lodger and interpreting mortgage terms

    Hi,

    I'm new to this forum and to the world of property investment. I've recently purchased a second property on a residential mortgage for the purposes of being closer to my workplace for most of the week and also to ease myself into understanding the world of property investment. It's more than I first realised but I'm willing to invest the time and get the operation right! The first area I'm looking at is taking in a lodger. I've read countless articles and some people's experience on this and it seems to be a grey area on how best to approach lodging for homeowners. My main objective in this is to be as legit as possible with all parties that have a stake in my second property. I'm getting this sorted from a building perspective as I'm renovating the property and making it as safe as possible (including electrical rewiring) and I have checked the insurance company are ok with lodgers, and reading as much regulation as I can to put myself on a good footing when a lodger does arrive. To cut to the chase, I'm currently on the fence with the mortgage lender's view. I won't name the mortgage lender, unless I have to, but I telephoned them to ask what their position was on lodgers and renting rooms on a residential mortgage and with no hesitation I was given an instant negative on the basis I was on a residential mortgage, and they could in no way not let any part of the property. I then followed up asking if there are mortgage terms and conditions I could refer to, again I was rudely not to pursue this, and the conversation just strangely ended like he just didn't want to speak to me. I felt disgusted and didn't want to speak to this representative and put the phone down. Pathetic. After that brief episode, from the mortgage lenders website I spent some time over the next week reading more about letting and lodging while living in a residential mortgage. I eventually found my mortgage terms and it stated the following relevant paragraphs:

    - You will notify the insurers each time the Property is let (tick, I've confirmed this is ok)

    - giving up or sharing possession of the Property, or granting any lease, easement, licence or right to occupy the whole or any part of the Property. (currently debating)

    Despite the rude reception over the telephone, should I still obtain the mortgage's permission when taking in a lodger? Do the two mortgage terms stated above suggest I need to contact the mortgage lender for a verdict? It seems to me in my brief research on this, there are three camps 1) Those that inform their mortgage 2) Those that don't bother to inform their mortgage lender, and 3) Those that are oblivious to step in this issue when taking in a lodger.

    Curious to know if anyone has or is in a similar situation. What has your experience been when taking in a lodger and considering mortgage terms ?

    Thank for taking an interest!

    #2
    A perm resident house owner can take in a lodger, and benefit from HMG Rent a Room Tax Allowance.
    For a Tenant, the LL First needs permission from Lender

    Comment


      #3
      For tax purposes, you will have to select which of the two properties you own is your main residence (as CGT is payable on the other one).

      Your mortgage terms may not allow the situation anyway, as normally a residential mortgage is assumed to be on your main residence, not somewhere you stay from time to time.

      It's remarkably odd that someone in a lender's call centre would be rude - they're normally simply following a script.
      But if the mortgage says you can't share any of the property, you can't have lodgers, because that's what a lodger does.
      It's an odd term for a mortgage though.
      When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
      Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

      Comment


        #4
        jpkeates - Thanks for the information. Sorry it's been 3 months I've been occupied with decorating the property, it's looking in good shape now and I'm having estate agents give their opinion on rental rates, etc. I'm in the process of looking to refinance the property for rental.
        mariner - Thanks, yes my first preference to find a mortgage provider that is lodger friendly - if you're aware of any lenders I could approach, then let me know. It's like the underworld.

        Comment


          #5
          Your #1 of this thread does not convey the reasons for your query and cannot follow simple Forum rules, written in English, to keep all related posts to same thread, or at least provide a link to avoid confusion.
          What are you attempting to achieve?

          Comment


            #6
            My point was that your lodger is not a normal lodger, as they are alone in the house for much longer periods than a normal lodger. As such, I would expect them to be treated as a rather higher risk.

            Comment


              #7
              leaseholder64 - what is a normal lodger?

              Comment


                #8
                A normal lodger is someone who has shared access to a house in which you are actually living, and therefore unlikely to do anything drastic because you would know abut it in less than a day.

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