Mortgage Question

[Mx_Stu]

Afternoon all,

Very quick mortgage question so that I understand the position before we sit down with an IFA.

Three years ago my girlfriend and her brother purchased a house together to get a foot on the property ladder. A year ago my girlfriend moved in with me and her bother decided he didn't want to live in the house anymore so moved in with a friend. With permission from the mortgage company they were allowed to let it for the rest of the term of the mortgage and tenants have been in since.

In June this year the fixed term will be up and the permission to let the house will expire. With house prices as they are there is no point them selling the house and instead they want to try and fix the mortgage for another couple of years.

The problem is that they put down about a 15% deposit on the house but at current prices their equity in the house is nearer to 5%.

I know traditionally you needed a hefty deposit to get a buy to let mortgage so in the current climate where will they stand? I can't imagine that the mortgage company would let them take out another fixed mortgage and allow them to let the house again?

Does anyone have personal or professional experience of this type of situation?

Stu

[Percy Flage]

If it was a fixed rate the term of which is about to end, (so in normal circumstances it is about to go on to the lender's standard variable rate) I can't see a problem, unless the SVR is higher and the rent will not cover the mortgage costs.

It is possible the lender will switch the loan to a (higher) BTL rate, but I would be very surprised if the lender wanted out if payments have been made consistently and on time. Beware the IFA trying to get fees out of you for unnecessary work; I would recommend contacting the lender to see how the land lies before committing to any fees.

[FinancialAdviser]

This is becoming a common issue. I can help if you want.

[Percy Flage]

You might want to spell check you website. "Available".

[skwdenyer]

Percy Flage said:

You might want to spell check you website. "Available".

Perhaps "your website" would be better?

[Groober]

Keep letting it out and the rate will just revert to the lenders SVR. Which will probably be lower than what you are paying at the moment, and just keep your eye on the market for a decent rate/product to jump on to when the time is right. As long as the rent covers the mortgage I would say hold on to the property.

Edited by Groober on Monday 6th April 10:53

[scotal]

Groober said:

Keep letting it out and the rate will just revert to the lenders SVR. Which will probably be lower than what you are paying at the moment, and just keep your eye on the market for a decent rate/product to jump on to when the time is right. As long as the rent covers the mortgage I would say hold on to the property.

Edited by Groober on Monday 6th April 10:53

What rate/product are they going to put it on. The LTV isn't there to do a BTL.
There's very few lenders who are going to accept a let property on a Resi basis.

[Mx_Stu]

scotal said:

Groober said:

Keep letting it out and the rate will just revert to the lenders SVR. Which will probably be lower than what you are paying at the moment, and just keep your eye on the market for a decent rate/product to jump on to when the time is right. As long as the rent covers the mortgage I would say hold on to the property.

Edited by Groober on Monday 6th April 10:53

What rate/product are they going to put it on. The LTV isn't there to do a BTL.
There's very few lenders who are going to accept a let property on a Resi basis.

Yep thats the concern and if they keep letting out without permission from the lenders then they will be in a fair bit of trouble should the lenders find out.

Thanks everyone for the PM's. I'm happy enough to go direct to the lender on their behalf but if we have any trouble I'll give you a shout.

Edited by Mx_Stu on Monday 6th April 11:24

[skwdenyer]

Mx_Stu said:

scotal said:

Groober said:

Keep letting it out and the rate will just revert to the lenders SVR. Which will probably be lower than what you are paying at the moment, and just keep your eye on the market for a decent rate/product to jump on to when the time is right. As long as the rent covers the mortgage I would say hold on to the property.

Edited by Groober on Monday 6th April 10:53

What rate/product are they going to put it on. The LTV isn't there to do a BTL.
There's very few lenders who are going to accept a let property on a Resi basis.

Yep thats the concern and if they keep letting out without permission from the lenders then they will be in a fair bit of trouble should the lenders find out.

Thanks everyone for the PM's. I'm happy enough to go direct to the lender on their behalf but if we have any trouble I'll give you a shout.

Edited by Mx_Stu on Monday 6th April 11:24

A few years ago, a fair few letting agents started sending notifications to lenders that they were letting-out a property (the lenders' name can be got from the Land Registry search). This was a due dilligence move on the agents' part, to make sure that the tenant couldn't be thrown out on the basis that the tenancy was invalid. I don't know if that still happens, but there is always a risk, which is probably not worth taking in the current climate.

[M400 NBL]

Have they checked their lenders btl rate? The reason i ask is that my (comparatively expensive) lender northern rock have the same btl and residential svr, but obviously different criteria. Also, do they have landlord buildings insurance for the place they let out? i would suggest evaluating it at 125% of the outstanding loan and seeing if they agree to keep a good customer, if they don't charge for it. This is based on my experiences when remortgaging, i am not an expert like at least one other poster. Of course lenders aren't throwing money around like they once were, but they will have at least one person who can say yay or neigh without having to use a mortgage calculator. That's not to suggest that i plucked a number out of the sky when completing my application, but the chap at nr pretty much rubber stamped my application before they evaluated my place themselves. They have nothing to lose from asking a few questions. One more thing. Do they not automatically go to an svr when the fixed rate ends. That's when lenders make their millions, or so they thought. Have they actually received a letter, stating that they need to apply again, or is it an assumption?Sorry for the lack of paragraphs but ph is the only site that won't allow line breaks when using a playstation..... and the missus dropped my laptop down the stairs!