Do I need to tell my mortgage lender

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  • Do I need to tell my mortgage lender

    I've been working abroad for a couple of years now and renting the flat I lived in for five years out. Would anyone be able to advise me on the following:

    1. I haven't told my lender that my property is being rented out and I've never missed a payment. If I do so now will my mortage rate go up or are there any other penalties?
    2. Will they backdate any of these to when I left the UK.

    Any advice appreciated. I'm asking because I'd like to remortgage my property to try and finance buying somewhere abroad and assume I'll have to tell them then.

    Cheers.

  • #2
    Your mortgagees will do one or more of the following things:-

    1. Call in your mortgage (i.e. demand immediate repayment of the whole sum borrowed with accumulated interest)

    2. Allow you to continue letting the property, but demand an increase in interest which they may impose either a) from the date you tell them, or b) backdated to the date you commenced letting.

    3. Demand that you terminate the letting and completely disallow you letting in the future.

    They can do any of these things when and if they find out without you telling them.

    You don't say which lender is involved - different lenders have different policies and one "trick" might be to phone your lender up anonymously with a "hypothetical" question to see what guidance they would offer or what tack they would take a) if you told them, and b) if you did not tell them and they found out.

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    • #3
      Yes you definitely need to tell them; you're on very thin ice at the moment. Have you taken the same approach with your buildings insurers by the way? If so they would certainly decline any claim you made on the policy.

      If you're remortgaging, then surely the thing to do is just to do this through a different lender, and be up front with them from the start (ie, obtain a kosher buy-to-let mortage, which will cost a bit more than a normal residential one.)

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      • #4
        I've found Cheltenham & Gloucester offer the same rates whether it's BTL or not. They also offer an offset mortgage, which can be used as a BTL, so if you keep a UK account for the rental payments etc and don't convert the income to your local currency, it may be worth having the rent paid into the offset account to keep your interest expenses down.
        I don't know whether their rates are competitive, but at least you won't have any issues switching between BTL and residential if you decide to move back to the UK.

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        • #5
          Thanks for the info. I was on;y ever going to be away for 6 mths so never thought about renting officially

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          • #6
            Robm, please be warned that if you allow another person to occupy your house and receive some rent either in cash or kind then whether you like it or not, you ARE renting it officially. You will have granted an assured shorthold tenancy agreement and your tenant will have security of tenure of six months. If he gets nasty and refuses to leave when you want him to, then you will have to go to court to get him out which could easily take another three months or more, particularly as you will not have a written tenancy agreement. It will also be an expensive exercise.

            P.P.
            Any information given in this post is based on my personal experience as a landlord, what I have learned from this and other boards and elsewhere. It is not to be relied on. Definitive advice is only available from a Solicitor or other appropriately qualified person.

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            • #7
              And, you will also need to notify and register with the Inland Revenue in respect of rental profits. Otherwise, the agent or the tenant are obliged to deduct tax at source and pass it on to the Inland Revenue. This tax will not take account of any expenses which you can offset against the rental income, eg loan interest, insurance, service charges, repairs, furnishings wear & tear allowance, agents letting fees etc. Therefore it is best to complete the appropriate form giving assurance that you will complete the tax return each year and send in an account of your rental income and expenses and pay the correct amount of tax on due dates.

              Ramnik
              Private advice is available for a fee by sending a private message.

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