Rental approval on mortgage

[angel-cake]

Hi. I am moving back to my parents and want to let my 1-bed flat out. I know I am supposed to get approval from my lender to do this, but why is this exactly? I will still be paying my mortgage and it will not affect them so why do they want this?

How could they find out if I didn't inform them?

I would be grateful for any comments. Thanks!

[bednobs]

it is because if they need to reposess, its a different propsition if you have tenants there. They may not find out, however depending on if you use an agency, or want to rent to council tenenats they may want to see proof

[hc4361]

It is because if you default on the mortgage and they need to repossess, it becomes very difficult and complicated if there is a tenant in occupation.

Also your buildings insurance. You must inform them if you let your home as they believe a tenant will not take as much care of the property as a home owner.

You have to inform the inland revenue as you will be getting an income from the let, whether you make a profit or not.

Also you have obtained your mortgage on domestic terms - a favourable rate because the property is to be your home. Mortgage companies generally charge a higher rate of interest for properties that are to be rented out.

[angel-cake]

So from legal point of view, it is not 'illegal' ?

My building insurance is through my maintenance company so presume I can just tell them.

I guess these mortgage companies will do anything to get an extra buck out of us!

[hc4361]

It's not the case of getting an extra buck. You were given a contract which you agreed to when you took the mortgage out. You should have read all the terms and conditions.
Some mortgage companies will not charge you any more money but if you don't notify them and they do find out, they can call in the mortgage immediately. If you can't get another mortgage very quickly you would have to sell.
They've played fair by you, there is no reason why you shouldn't play fair with them.

[angel-cake]

I am playing fair. I am trying to make sure I can make the payments by moving back home and getting rental income to cover it. They want �250 just to say I can let someone else live here. If that is not a quick buck then I dont know what is!

[hc4361]

Your other option is to re-mortgage with a buy to let mortgage. Maybe you'd be better off selling.

[bednobs]

the 250 is kind of like an insurance policy for them, as if you defult on the mortgage and have tenants, their costs will be considerably higherto evit and gain possesson of the house.

there is of course always the possiblity they won't find out (although its more likely now you've already discussed it with the). However, if they do, you have broken your side of the contract, and then they are free to break theirs (ie by demanding immediate payment of the entire mortgage) For 250 it's not worth it in my opinion.
They could of course have made you remortgage (and at a higher rate), so taken in that context, �250 is VERY cheap

[gilf]

"So from legal point of view, it is not 'illegal' ?"

It would be illegal as you would be committing fraud. By not telling the mortgage company of the change in circumstances you would be depriving them of money (regardless of whether you think that's fair or not).

Fraud always seems like a strong word, but that is what you would be doing. As mentioned above you would also be committing a tax offence, regardless of whether there would be any tax to pay if you didn't inform the tax office.

I'm not suggesting that you will be hauled off to jail the moment it was discovered but from a stand point of legality, yes what you are proposing would be 'illegal'.

[mandimoo]

i was as indignant as you when my mortgage provider told me i would have to pay this �250 just for their permission to rent out my property. however, i got it back when the first months rent came in and in hindsight it was well worth it for the peace of mind i had that i had done things properly.

[queby]

We've often rented our property as we had to move abroad. Don't even think of not tellling your mortgage company, you will invalidate your insurance if you rent without letting them know. Stick to the rules and you'll sleep better at night!