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Do you 'have' to let your lender know if you're renting out property.

Last post Sat, Jun 20 2009, 5:02 PM by troyka. 30 replies.
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  •  Sat, Jun 20 2009, 5:02 PM

    Re: Do you 'have' to let your lender know if you're renting out property.

    Hi to all

    I am truly grateful for all the advice given. I'm always one of these honest people to the letter of the law but when you find yourself in such a position I'm trying to protect my family and home which like most people have worked extremely hard for the last 10 years Anyone with any other info. / advice I would be grateful. Many thanks.

    • Post Points: 5
  •  Sat, Jun 20 2009, 2:46 PM

    Re: Do you 'have' to let your lender know if you're renting out property.

    Hi

    Find a broker re Landlord Insurance using http://www.biba.org.uk/ConsumerHome.aspx

    Some Insurers will write to Mortgage Companies when their Interest is added to policies.You could ask them whether they send any letters to the Mortgage company and if so not to do so. As this may sound odd, you could say that the Mortgage company charges an admin fee for such letters which you don't want to pay.

    A word of caution. If you claim on the Buildings Insurance, the Insurance company may send letters to the Mortgage Company at which point the letting situation may be brought to their attention. This probably won't happen for smaller claims but for any significant claim Insurers should normally contact the Mortgage company to let them know. The Mortgage companies used to send out forms to Buildings Insurers, which set out conditions which the Insurance company had to comply with. I believe that these forms have in the main been replaced by a general agreement between mortgage lenders and Insurance companies.

    In the past I did have some dealings with Insurances, relating to Mortgages. I did come across cases where people did not advise Mortgage companies of letting and this led to serious consequences. These generally came to light following claims, where the Mortgage company were notified. From what I remember the Mortgage company did threaten legal proceedings against the mortgage holder, but as I was only briefly involved, I don't know what the outcome was.

    Personally in normal circumstances I would always comply with the conditions I have agreed to. However, from what I have read from this thread, it appears that Mortgage companies make this difficult. I agree with other posts that you should be even more careful with the letting arrangements, if you are not going to advise Mortgage company.

    Huckster

    • Post Points: 20
  •  Sat, Jun 20 2009, 12:52 PM

    Re: Do you 'have' to let your lender know if you're renting out property.

    Thank you for your time. Can you please advise where would be the best place to find a broker that does landlords insurance and also would it not be awkward when trying to ask if they would be contacting my mortgage company or how do I get round this.
    • Post Points: 20
  •  Sat, Jun 20 2009, 12:32 PM

    Re: Do you 'have' to let your lender know if you're renting out property.

    Hi

    Most people have gone ahead [from the earliest posts], It used to be that all policy schedules [copies] were supplied to all lenders re buildings insurance to make sure the cover was adequate and index linked. Most now don't! The insurance provider may note the interest of your lender but not necessarily contact them. I'm a broker and know this!! Brokers usually only deal with 2 or 3 providers as most insurance companies don't do landlords insurance

    If you haven't got the equity its not really worthwhile contacting your lender!!

    Tax situation, I covered this in an earlier post but all your reasonable expenses can be claimed [you can't claim for improvements], interest element of your mortgage, insurance, management fees etc plus wear and tear each year so if you do declare it your tax liability will be negligable!

    Remember there are hundreds maybe thousands of people in your situation all doing the same thing!!

    .

    • Post Points: 20
  •  Sat, Jun 20 2009, 10:45 AM

    Re: Do you 'have' to let your lender know if you're renting out property.

    Many thanks again for all the help from everyone. Another couple of details that I need advice on.

    If I did apply to the morgage company and they refused consent to let (I have the paper work) then I would have no option but to sell. If I was forced to sell and couldn't get a buyer in this climate I would find myself in an even worse situation.

    If I do go ahead I don't intend to rent the property myself. Our local estate agent would be taking on the property. When viewing the property they stated there is a high demand for my type of property as a family home. The last type of home like this (which they have none on their books at present) rented in 10 days. I can put all this in place in plenty of time. They would be doing all the checks regarding the tennant(s). They even stated if I was a little unsure then I can actually meet the tennant(s) first.

    I would have to shop arround and find a broker to provide the correct landlords insurance.

    I would not default on any mortgage payments plus I would make sure I got the necessary landlords safety checks/certificates each year.

    The only point I would omit is to tell the mortgage company.

    What have other people done in these circumstances as I can't be the only one. Any more advice would be gratefully appreciated.

    • Post Points: 20
  •  Sat, Jun 20 2009, 8:51 AM

    Re: Do you 'have' to let your lender know if you're renting out property.

    To understand this you have to put yourselves in the lenders shoes, say you rented out your property and the tenant didn't pay the rent, for whatever reason, you now can't pay the mortgage and default, the lender is in the position where they want to repossess the property but the property is now occupied by squatters who can only be evicted by court order!

    In ''normal'' circumstances most lenders are happy to let owners rent their properties, the basic safeguards they need are a reasonable amount of equity, when the market was stable 15% was deemed adequate, They would normally ask for affordability assurance, for times when the property is empty, most specialist lenders would just require you to state that you could afford it!!

    A normal buy to let requires

    A shorthold tenancy

    Landlords safety certificates mainly for gas appliances, local councils will fine landlords who do not have these certificates, if, there were an incident of carbon monoxide escape or poisoning.

    In a practical situation you would want to find the ''best'' tenant you can find by doing adequate history and financial checks, if you [one] decides to use a managing agent, do as many checks on these as you can as 80% are useless, they are happy to take the rent but most [there are some good ones] do little for the management fees once the tenant is installed. You need to ask them what they will do and what they won't do then check this against their agreement with you!

    Also remember bonds must now be paid into a guarantee scheme, you CAN do this independantly!

    For the inexperienced 'landlord' all this seems forbidding but it is fairly straightforward, BUT you MUST get everything right from the start!! Good luck!

    • Post Points: 20
  •  Sat, Jun 20 2009, 8:16 AM

    Re: Do you 'have' to let your lender know if you're renting out property.

    Any mortgage broker can sort that out!

    You will also need safety certificates! o

    • Post Points: 5
  •  Fri, Jun 19 2009, 10:10 PM

    Re: Do you 'have' to let your lender know if you're renting out property.

    We need help to find a landlord insurance broker while renting our property that will not liase with our mortgage company.

    Any help would be gratefully appreciated.

    • Post Points: 35
  •  Thu, Jun 18 2009, 5:06 PM

    Re: Do you 'have' to let your lender know if you're renting out property.

    Many thanks for your advice, That's exactly what I will do. It's not as if I want to take the option of selling just now, (but may have to) it's just how to work round the NR and landlords insurance and keep the house as an investment as we have nearly 1/2 and1/2 equity in the house. Just having a tough time just now trying to work it all out and need some time to get back on my feet. I would be grateful for any other help and advise from anyone. Many thanks once again.

    • Post Points: 5
  •  Thu, Jun 18 2009, 12:16 PM

    Re: Do you 'have' to let your lender know if you're renting out property.

    troyka

    I rented out residential property a few years ago and managed to speak to a broker who was quite helpful, he arranged to have the interest of the mortgage lender noted on the policy but as the broker printed off the policy schedules and certificate he just ensured that both copies were sent direct to me. That worked for the 3 years before I sold the house.

    It should just be a case of speaking to a couple of brokers who specialise in Landlord's Insurance policies and finding out if they can help before you give the details to get a quote. Looks like there are lots of people doing the same thing these days.

    • Post Points: 20
  •  Wed, Jun 17 2009, 10:15 PM

    Re: Do you 'have' to let your lender know if you're renting out property.

    Is anyone actually solvent out there. I find myself in the same situation as probably thousands of hard working people. I was recently made redundant and made a few enquiries with my morgage provider NR . When applying for landlords insurance do you need to nominate your morgage company as the interested party when you are not going to obtain consent in case they refuse as I am going to Scotland in the next few months. Also if I purchase landlords insurance are they obliged to contact the NR.
    • Post Points: 20
  •  Tue, Jan 20 2009, 9:40 PM

    Re: Do you 'have' to let your lender know if you're renting out property.

    Hi Shelle

    I just found this site and read your post, it sounds like you are in the same situation as us. I was just wondering if you went ahead and rented out your property without telling your mortgage company? And if so, how are you getting on with it?

    We are in a terrible situation, I'm so worried and can't sleep at night for thinking about it. We have had to relocate due to my husband being offered a new job, it was either that or face redundancy at a later date, and we could not afford our mortgage without the 2 salaries. We put our house up for sale in August 2008 but can't sell it, we have had a couple of offers but they were way below what we paid for the house 2 years ago, so we couldn't accept them, as we have no equity in the house due to the poor market at the moment. (We originally had a 95 % mortgage anyway, but are now in negative equity)

    We contacted out mortage company to ask about renting it out, but they said we would have to go through the application process, and their criteria is for those who have 75% LTV or less, so they said it would be unlikely we would be approved for it. I didn't tell them we were having to relocate as we are considering renting it out without telling them, because what choice do we have? We can't sell it and certainly can't afford to pay the mortgage plus the rent on our new house.

    We only took out the mortgage with them in Jan 2008 and are tied in for the next 2 years, else we would have to pay 7 thousand pounds in penalty fees, so remortgaging is not an option. We have always paid our mortgage on time and have never missed a payment, and now due to the length of time our house has been on the market without being able to sell, we have been forced to use up all our savings in paying our mortgage on an empty house plus the rent on our new one. Now our savings have disappeared and we can't keep on paying our mortgage, so we absolutely must rent it out, or default on the mortgage, which I am loathe to do.

    Please let me know how things turned out for you. Also if anyone else reading this has any advice, we'd really appreciate it, as we are at our wits end!

    • Post Points: 5
  •  Tue, Jan 20 2009, 3:46 PM

    Re: Do you 'have' to let your lender know if you're renting out property.

    I am in the same position as several other people that have written on here - I want to rent my property out but Northern Rock have declined as I don't have 30% equity etc etc...

    I am considering going ahead any way but don't see a way of getting round the insurance issue - Northern Rock needing to see proof on Buildings insurance (but me having to get a buy to let insurance policy if I am to let it out). Does you know of an insurance company that does buy to let insurance but that doesn't mention that it's for a property that is being let out on the cover note? Can any one help please? I'm really at a loose end! Thanks.

    • Post Points: 5
  •  Tue, Jan 20 2009, 3:43 PM

    Re: Do you 'have' to let your lender know if you're renting out property.

    I am in the same position as several other people that have written on here - I want to rent my property out but Northern Rock have declined as I don't have 30% equity etc etc...

    I am considering going ahead any way but don't see a way of getting round the insurance issue - Northern Rock needing to see proof on Buildings insurance (but me having to get a buy to let insurance policy if I am to let it out). Does anyone know of an insurance company that does buy to let insurance but that doesn't mention that it's for a property that is being let out on the cover note? How have other people over come this problem? Can any one help please? I'm really at a loose end! Thanks.

    • Post Points: 5
  •  Fri, Jan 02 2009, 8:51 AM

    Re: Do you 'have' to let your lender know if you're renting out property.

    All income is subject to tax [with few exceptions] but if you have a mortgage the interest element can be offset as can costs [insurance] other costs can be offset also, repairs and renewals and you can claim the standard 10% wear and tear which when you add it up means you will pay little tax.

    Bear in mind that you will be subject to capital gains tax when you come to sell but this liability will be greatly reduced as you have lived in the property. the inland revenue have leaflets explaining both aspects of this.

    Bear in mind that you will need safety certificates for your gas appliances [by law] and you now have to have an energy certificate

    • Post Points: 5
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