i have a rental property that is on a "normal" mortgage as it was my house and i asked my lender to allow me to rent out. It is LTV 95%
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Can the interest only mortgage be "pulled" from under me with C&G or i be told to move to a BTL mortgage, as if so i wouldnt meet the lending criteria hence my concern. The property is rented out and in approx 1 year i should have less debts and hope to try and pay lump sums off to get the LTV back down to a sensbile figure, but guess it will take me 4 yrs in total ?
Stantheman
1 year ago
Expert Financial Adviser Answer
Dr David Carter FPFS
answered 1 year ago
Lenders do normally allow people to rent out their property, and will supply a letter confirming their permission for you to do so. However, their permission is not a foregone conclusion; a residential mortgage offer is provided with the condition that the property will not be let out. If you let it out without the permission of the lender, you will be breaking the contract, and (see my answer to your other question) all bets will be off. If you have lived in the property for some time and have kept up your loan payments properly, then you are more likely to succeed than if the mortgage is a new one, because the lender could well consider that you have being deliberately manipulating the system. I personally have no recent experience of anyone doing this with C&G, but can contact them on your behalf if you like and can find out what their criteria are, or perhaps some of the other contributors to the site can throw more light on this.
A very important point is to check with your house insurance whether you are covered to rent it out - you probably are not, so do address this point.
By the way, your other question says that you have a large house with at least £100k of equity, and this question gives an LTV of 95%. Assuming that we are talking about the same property, and both statements are correct, you have a house worth £2m with a mortgage of £1.9m. Hmm.
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A very important point is to check with your house insurance whether you are covered to rent it out - you probably are not, so do address this point.
By the way, your other question says that you have a large house with at least £100k of equity, and this question gives an LTV of 95%. Assuming that we are talking about the same property, and both statements are correct, you have a house worth £2m with a mortgage of £1.9m. Hmm.
Expert Financial Adviser Answer
Darren Smith
answered 1 year ago
David is quite right in what he says.
A lender takes a different view when a residential mortgage is granted over a buy to let deal.
Residential is occupied by you and under normal circumstances you will always keep to your repayment schedule and therefore the risk of default on the loan or damage to the property is minimal.
A buy to let deal is taken by you to make a profit, so why shouldnt the lender profit too? tenants are not usually as careful as an owner with property care/maintenance and they have little financial influence to ensure that they always pay you the rent, to then pay the mortgage.
also a residential mortgage was granted on the basis that you and/or your family would reside in at least 40% of the property - this has legal implications and also regulatory issues as the FSA doesnt regulate buy to let deals but they do on residential, this also impacts on your "protection".
David also identifies a point that i noticed, you seem to ask similar questions but posed on almost opposite circumstances.
many people have had help from these forums but it does require straight talk on both sides. clearly no one would expect you to divulge sensitive information but there are many people able to assist you if you let them.
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A lender takes a different view when a residential mortgage is granted over a buy to let deal.
Residential is occupied by you and under normal circumstances you will always keep to your repayment schedule and therefore the risk of default on the loan or damage to the property is minimal.
A buy to let deal is taken by you to make a profit, so why shouldnt the lender profit too? tenants are not usually as careful as an owner with property care/maintenance and they have little financial influence to ensure that they always pay you the rent, to then pay the mortgage.
also a residential mortgage was granted on the basis that you and/or your family would reside in at least 40% of the property - this has legal implications and also regulatory issues as the FSA doesnt regulate buy to let deals but they do on residential, this also impacts on your "protection".
David also identifies a point that i noticed, you seem to ask similar questions but posed on almost opposite circumstances.
many people have had help from these forums but it does require straight talk on both sides. clearly no one would expect you to divulge sensitive information but there are many people able to assist you if you let them.
Expert Financial Adviser Answer
Paul Ross DipPFS CII(MP&ER)
answered 1 year ago
Yes, you need to be very careful. I have had 2 clients try to gain permission, one with Northern Rock and the other with Chelsea and both were refused.
By coincidence, and this highlights the dangers, I have had a client contact me last week, who had rented out his house without the permission of the lender. The lodger set fire to his kitchen and has vanished from his place without notice, taking some of the owners belongings in the process. He has asked me if he could claim on his house insurance. I explained, to his frustration, that the policy will be void as it only covers him as a owner occupier and lodgers will be exempt.
As David has mentioned, speak to C&G and ask them generically what their view is.
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By coincidence, and this highlights the dangers, I have had a client contact me last week, who had rented out his house without the permission of the lender. The lodger set fire to his kitchen and has vanished from his place without notice, taking some of the owners belongings in the process. He has asked me if he could claim on his house insurance. I explained, to his frustration, that the policy will be void as it only covers him as a owner occupier and lodgers will be exempt.
As David has mentioned, speak to C&G and ask them generically what their view is.