Renting without telling my bank - Will the council tell them?

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    Renting without telling my bank - Will the council tell them?

    I hope it's OK to ask this here.

    I'm going to be renting out my house for 2 years while I move overseas with work. I remortgaged only a few months ago and hadn't known then, so I am on a standard residential 3 year fix mortgage. To change to a BTL mortgage costs £500 plus 1% extra interest. That would make my mortgage more than I can get in rent.

    I was going to just not tell the bank and hope they dont find out. They wouldn't have any reason to, given I won't change the correspondence address.

    I will of course get proper landlord insurance. Will that be invalid though if I dont tell the bank?

    Would really appreciate some advice. Thanks!

    #2
    They will discover somehow - better be open, try to get "consent to let" and not carrying risk. (my opinion)

    Comment


      #3
      Failure to obtain Consent could mean Lender will foreclose,
      As a non-resident LL, T is entitled to know you haeve 'permission to rent'.

      Also if you are working abroad for 2 years, I suggest you engage a UK agent to collect rent/provide UK address for 'Serevice of Notices' or reach an agreement with HMRC oevevr deductions from rent.

      (Keyboard playing up

      Comment


        #4
        could you sell your house to a limited company (yourself) that agrees to pay penalty charges (to cover your 'losses') as an operating/start up cost?

        it might be an option, but NOT telling your current provider is an option I wouldn't consider ! many landlords are considering limited companies as a way of avoiding costs that are being introduced, stamp duty etc - you may be ahead of the game if you went down that route, but of course you MUST take legal/financial expert advice

        Comment


          #5
          and if you engage an agent (which is advice I second) you'll lose up to 10% of your takings so figure that in. Make sure you complete a non-resident landlord application before you go so that you can prevent the agent deducting tax to help make up for that.

          It's common to move overseas for a better salary. If that's the case, then you should assume that even though you're having to pay out something on a BTL mortgage despite having a tenant you are in fact better off anyway and are retaining an asset that is probably going to increase in value during that time in any case. Look at the bigger financial picture.

          I've lived as an expat most of my life and emigrated for work to five different countries. In each case, along with the vast majority of expats we meet overseas, we always started out with the "just for two years" idea. From my experience, that happens very very rarely. You would be wise to consider now what would happen if you ended up staying for longer than two years. On that basis, doing right by your lender now won't compromise any opportunities that may come your way overseas which could make it worthwhile to extend your stay.

          Comment


            #6
            Originally posted by LondonSW View Post
            They will discover somehow
            I'd be more tempted to say that they are unlikely to discover as long as you are moderately sensible and not particularly unlucky. But it still remains that they might. If you are considering it, you need to be sure that you understand what the possible consequences are should they do so. The bank might just penalise you and manage you onto another rate. It is not unrealistic to expect that they might take more drastic action and foreclose.

            In the course of juggling properties and finance I've known those who have taken the risk for extended periods in the past (longer than 2 years) and it's been fine. (In fact I cannot think of anyone I know personally who has been caught out). But quite rightly no one has ever advised me to do it and any responsible advice would be that you should be entirely above board.

            Whilst foreclosure is not the only possible consequence, the potential downside is considerably reduced if you know you would be able to raise funds quickly to pay the mortgage off on demand if required.

            As specifically regards the council telling the bank, I don't see why that would happen.
            Assume I know nothing.

            Comment


              #7
              Although you may not see it this way, you have effectively come onto a public forum full of professionals and asked their advice on he best way of committing a fraud.
              I understand your reasoning behind the question, but you have signed a contract which you are obliged to honour. I'm sure you will expect no less from your prospective tenants. Way to go.
              I may be a housing professional but my views, thoughts, opinions, advice, criticisms or otherwise on this board are mine and are not representative of my company, colleagues, managers. I am here as an independent human being who simply wants to learn new stuff, share ideas and interact with like minded people.

              Comment


                #8
                As noted above, no one's going to advise you to do this.
                What you're essentially balancing is the risk of being found out with the consequences of a) being found out or b) something going wrong.

                Your insurance will almost certainly be invalid, for example, so a fire would be a disaster, but how likely is that? - No idea.
                But there are lots of fire stations around, so it's not unheard of.

                It's quite likely that insurance companies and lenders share data.
                Lenders are not as tolerant of this as they used to be, the rules regarding the lending risk they're allowed have changed, and they're not going to shrug their shoulders and send you a snotty note.
                And a black mark from a lender can end your ability to borrow for ever.

                So risk vs reward...
                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


                  #9
                  I'm not sure what lenders do to check on this, but an easy way for them to find out is to look at who is registered on the Electoral roll at each address, also who has got a credit reference at each address.

                  I think it's a legal requirement to be registered on the Electoral roll so you tenants will be but you won't. Also they'll notice if other people have recent credit records at the address, they may ask if you've got lodger (s) or tenants. Even a lodger may require consent though.

                  That information is freely available to them and presumably they do check though I have no idea how frequently. I doubt they'd ask the council.

                  I wouldn't take the risk myself.

                  Comment


                    #10
                    Mr. Bombastic writes again.

                    Just so there is no confusion in the titles of messages.

                    Landlords LET, ( Landlords do not - rent )
                    Tenants RENT ( Tenants do not - let )

                    Example, you don't say tenants are letting my property,
                    you say tenants are renting my property, therefore the landlord cannot rent as well as the tenants renting.

                    Comment


                      #11
                      As of date of OP, you will not be able to claim ignorance when caught. Lender may not demand B2L for 2 year gap.

                      Comment


                        #12
                        Have you actually asked for permission to let. Most bank agree to it. As far as I know Nationwide are the problem one as they allow it with a 1% increase. The issue you could have is if they were to suspect that you knew you were planning on letting the property when you went for your residential mortgage.

                        Comment


                          #13
                          Thanks. I realise this is a forum of professionals, so I didn't know if I should even ask. But I'm not the only one with this moral dilemma.

                          I have just checked the Mortgage terms. It's Yorkshire Building Society. They state: "The mortgage interest rate on a borrower's mortgage will be increased by 1% where the borrower has agreed with the Society the terms of an authorized let. Where a borrower lets the property and the Society has not agreed to the letting, it will be treated as unauthorized, and the mortgage interest rate on the borrower's account will be increased by 2%.

                          At least in the worst case that means it won't be foreclosed I guess.

                          My bigger worry would now be that insurance would be invalid if I didn't tell them.

                          Comment


                            #14
                            Originally posted by dominoman View Post
                            ................... But I'm not the only one with this moral dilemma....................
                            If you think this is simply a 'moral' dilemma, you are setting yourself up for a serious fall.
                            Breaking contracts with people may lead to civil proceedings. Obtaining credit by deception may be a criminal act. Killing your tenants and being uninsured due to invalidation of your claim by fraudulent application may be both. Allowing your prospective tenants to take on a property that may be repossessed through no fault of their own is immoral (there's one you're right about) will land you in court. Need I go on?

                            There is nothing remotely moral in your intentions.
                            I may be a housing professional but my views, thoughts, opinions, advice, criticisms or otherwise on this board are mine and are not representative of my company, colleagues, managers. I am here as an independent human being who simply wants to learn new stuff, share ideas and interact with like minded people.

                            Comment


                              #15
                              Morals can be good or bad.

                              Ending up on a mortgage industry blacklist through cheating by breaking contract terms may make getting any further mortgage (residential or B2L) nigh on impossible.

                              Experian (?) have a service to spot change of occupants indicating breaking contract. Used by most lenders.

                              How would you feel if tenant felt they didn't need to respect contract terms -eg not paying rent, wreaking the place?
                              I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

                              Comment

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