Residential mortgage

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    Residential mortgage

    Help/advice needed for a friend please.

    My friend is an "accidental landlord" in that he never intended to rent out.

    He bought a second property with his partner and as the market was slow it wasn't worth selling. Another friend moved into the first property and has been there for many years.

    Now the friend has left he has signed up with an agency who have found a new tenant. All is fine but he admitted to me today that his mortgage is a residential mortgage and his mortgage has been taken over by Lloyds (originally Cheltenham and Gloucester) who state they do not do mortgage to let.

    I'm not convinced but he thinks the property is in negative equity at the very least he would cut even by selling.

    He doesn't have any capital to apply elsewhere but he does have 30k equity in his second property.

    Iv read that the mortgage company can call in the mortgage if they find out if he leaves things as they are, but will he be breaking any laws?

    He has made successful claims on his landlords insurance for building work in the time his friend was there, but is he also on dodgy ground with the insurance?

    What would you do?

    #2
    Lloyds don't do BTL, but they might give consent to let.

    The issue is a breach of mortgage terms, not legal in that sense (although it's called mortgage fraud to be scary).

    The insurance is probably invalid (the terms and conditions are different for every insurer) but they "usually" won't cover a property let with anything other than a BTL mortgage.
    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).

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      #3
      Mortgage fraud does sound scary!

      I did advise he ask for permission to let but he said he was scared incase they said no and then checked up on him!

      I did think that with the insurance too. His friend did have an AST though and he declares all income to inland revenue so everything else has been done properly. The insurance company he uses did do some work to check for subsistence and no questions were asked.

      I think he is more worried that the situation may affect the new tenant in some way as its now a stranger.

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        #4
        I think it would only be mortgage fraud if the property was bought with the intention to let it but the borrower filled up an application form saying he intended to live in it.

        Comment


          #5
          Thank you lawcruncher.

          That definitely wasn't the case and he lived in it for many years before moving out.

          It would seem madness for the mortgage company to refuse permission to let as if it is in negative equity, then their only option on refusal would be to repossess.

          He has always made payments on time and can afford the payment even if the property is empty.

          I'm guessing he will probably take his chances for now until he can save enough deposit for a mortgage to let elsewhere. He doesn't want to take equity and increase the mortgage on his home. That would complicate matters further as I'm assuming he has a joint mortgage anyway.

          I haven't a clue why he didn't sort this all out at the time. His new mortgage lender was aware of the first mortgage i would have thought they should have insisted he had permission?

          Maybe as he had a healthy deposit they weren't too concerned.

          So am I right in thinking that if the insurance is covered his only "threat" is the mortgage company who may decide to call in the mortgage?

          By coincidence he banks with Lloyds who have now taken over the mortgage and so they will be able to confirm the affordability of it all

          Comment


            #6
            Originally posted by Lawcruncher View Post
            I think it would only be mortgage fraud if the property was bought with the intention to let it but the borrower filled up an application form saying he intended to live in it.
            Mortgage fraud is a loose term.
            If you have a residential mortgage with no consent to let and let it out, that's (conventionally) termed a fraud.
            Mortgage fraud is not a legal issue (as far as I know), it's simply a breach of a lender's terms and conditions - the time line isn't important.

            The insurance is unlikely to be covered, althouhj that depends on the exact terms of the insurance (mine wouldn't be, for example).
            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

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