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Moving abroad - mortgage

(25 Posts)
ProbablyBeingASnowflake Wed 02-Aug-17 08:42:56

Hi there.

Our mortgage is due to expire in November, and we are just about to move abroad. A relative will be staying in the property and paying us the current mortgage amount each month. We plan to be back in a year.

But we've had the letter through saying "your mortgage will expire in Nov, this is the new repayment forecast". It's an extra £200/month. We thought we were on a 5 year term, but looking back we went for a 2 year.

What do we do? Move to a BTL mortgage? Will it be even more expensive?

Why is it going up by so much when interest rates are still so low?

I've never owned property before this one and I'm a bit lost. Thanks for any advice.

19lottie82 Wed 02-Aug-17 13:14:42

What do you mean the mortgage will "expire"? Do you mean the fixed rate is coming to an end?

Personally I'd go to the bank, and ask for permission to let and a new residential deal.

ProbablyBeingASnowflake Wed 02-Aug-17 19:14:50

"What do you mean the mortgage will "expire"? Do you mean the fixed rate is coming to an end?"

Yes, sorry, the fixed term is ending.

Do we have to ask for permission to let? What' s involved?

What is a new residential deal?

Thanks for replying!

wheredoesallthetimego Wed 02-Aug-17 21:19:49

yes, you have to ask for permission to change to a BTL mortgage and the rate will go up significantly. you also have to tell your home insurer. you would have had to do that anyway even if the deal wasn't coming to an end as you'll be letting it. It's gone up as you've been moved to the SVR, but no-one stays on that you just need to negotiate a new deal.

19lottie82 Wed 02-Aug-17 21:33:05

A BTL isn't the same as permission to let. With the latter the interest rate won't necessarily jump up.
No point in switching to a BTL mortgage if they will be back in a year.

Op just go see you lender and be honest with them, they will advise you to get permission to let, not a BTL mortgage if you will be back in a year.

You may have to pay a fee (mine was £200) and your interest rate may go under slightly, but some lenders don't increase it (mine did not).

ProbablyBeingASnowflake Fri 04-Aug-17 17:52:06

"It's gone up as you've been moved to the SVR, but no-one stays on that you just need to negotiate a new deal."

I get that the SVR is a sort of "punitive" rate, but shouldn't it work in my favour at the moment, as the interest rate happens to be very low?

venys Fri 04-Aug-17 18:02:38

The fixed rate is called a teaser rate which then switched to an amount above a base rate (which is usually the same as Bank of England base rate currently 0.25%). It has historically been much higher than the teaser rates so for most people it make sense to remortgage. I think in your case you could talk to a mortgage broker to see what mortgages are out there. It's bad timing as you would normally to a let to buy (permission to let the property on your main residence). So they may force you into a BTL mortgage but it's stricter criteria. You might be better to suck up the SVR for a year and remortgage in a year. You will have to work out the sums as you often pay a fee to take out a new mortgage.

ProbablyBeingASnowflake Fri 04-Aug-17 18:43:31

A BTL isn't the same as permission to let. With the latter the interest rate won't necessarily jump up.
No point in switching to a BTL mortgage if they will be back in a year."

Thank you 19lottie82 this is really helpful.

We didn't buy the place with the intention to let it, we have to go abroad to get work. So I don't feel motivated to go onto a rate that is "significantly" higher - we need to be able to cover the mortgage, not be paying for someone else to live in our flat.

Previously we used a mortgage broker, but if we just stay with the current lender then maybe we can go directly to the bank? Can a mortgage broker help us or do we not have much choice?

19lottie82 Fri 04-Aug-17 19:29:49

No need for a broker, just go and see your current lender and see what they say.

venys Fri 04-Aug-17 19:44:32

Either or. A broker will give you whole of market mortgages if you need to remortgage. They can give you cost comparisons of what is available out there and sometimes have better deals than what is available direct. It won't hurt to talk to a broker to compare your options. But if you just want to stay on SVR for a year and get permission to let that's cool too. I have to admit we were accidental landlords, and the process of getting a BtL mortgage took me a year because everyone was so incompetent. We ended up selling the house because we couldn't be doing that every two years or so.

ProbablyBeingASnowflake Sat 05-Aug-17 19:53:45

"But if you just want to stay on SVR for a year and get permission to let that's cool too. I have to admit we were accidental landlords, and the process of getting a BtL mortgage took me a year because everyone was so incompetent."

I don't really want to stay on SVR because it feels punitive, despite interest rates being negligible. (Can anyone explain that?)

But I also don't want to go onto a BTL mortgage. Isn't there a middle ground? A normal mortgage that isn't vulnerable to interest rate fluctuations? This isn't a second home or a Buy to Let - it is our only property, we just can't live in it right now.

Really appreciating this advice, thank you all.

venys Sun 06-Aug-17 00:42:17

If you don't want to stay on SVR then your only other option is to remortgage. I am really unsure if there is any lender who will treat the new mortgage as if it was going to be owner occupied in the knowledge that it is going to be let out almost immediately. They still view the fact that you are not living in it as a higher risk you will default on the debt. So I would ring your current lender and/or mortgage broker. To avoid fluctuations in interest rate you can get a fixed rate mortgage - bearing in mind that the banks more or less predict future interest rate hikes in the pricing. (Although obviously at the moment you can guarantee that any interest rate movement will be upwards - WHEN that will happen is anyone's guess!! ).

ProbablyBeingASnowflake Sun 06-Aug-17 11:23:10

"I am really unsure if there is any lender who will treat the new mortgage as if it was going to be owner occupied in the knowledge that it is going to be let out almost immediately. They still view the fact that you are not living in it as a higher risk you will default on the debt."

Is that true? Is that why BTL mortgages have a higher rate? Interesting.

I'm really regretting not fixing our rate for 5 years now. As you say, the only way is up, so things will only get worse. Won't be an issue if we move back, but if we decide to stay away... eeeek.

ProbablyBeingASnowflake Sun 06-Aug-17 11:30:18

I'm sorry to keep harping on about it, but does anyone have any idea why the repayments would be going up when - as you say venys - our current fixed rate would have some built-in predictions of future interest rates?

So basically when we fixed it, let's say the interest rate was 0.5%. So we fixed for 2 years, at a rate of let's say 4% (I don't have the paperwork right now so can't check). That extra 3.5% was made up mostly of that predicted rate increase, I thought. A buffer for the bank. Fair enough - that's how it works.

So why, when we have now come off that fixed rate, and the current rate is (I think) even lower now than it was in 2015 - 0.25% -

- how do the bank turn that into us owing them an extra £200 a month?? Surely if anything our repayments should go down.

venys Sun 06-Aug-17 15:06:34

It's a little bit complicated. The term of the mortgage is roughly 25-30 years. Banks need to find these mortgages up front often by issuing bonds to investors in various guises and the bank makes a margin between what they receive from you and what they pay out to the investors. Like a retailer selling stuff. It is easier to predict interest rates in the short term and investors would rather get their interest and get their initial capital investment paid back earlier so they can reinvest in another asset. Soo.. bonds are at a much much shorter term than the life of the mortgage. The longer the period that the money is lent out, the higher the interest rate reflecting the inherent risk of interest rate fluctuations and of default over that time. So the banks naturally have to pass on that risk to the consumer. I guess there is also an element of running a promotion to be competitive with other banks in the initial teaser rate. Butt overall banks don't get a that much say in what someone is a lending them the money at now either. Blame the big investment firms/pension funds and capitlaism. I know that is probably not the best answer but I tried to make it succinct.

I know it doesn't seem fair really but I guess most people would have the option to remortgage (and pay some nice fees to the bank to do so) and carry on their merry way. It is just quite bad timing on your part going overseas now. I feel your pain , I really do having been in similar situations in the past myself. You are best to run the figures over a BTL mortgage deal if that is all that is in offer versus just sucking up the additional £2400 for a year. You really need to just ring the banks tomorrow and/or a mortgage broker to compare your options.

ProbablyBeingASnowflake Sun 06-Aug-17 15:56:30

"You are best to run the figures over a BTL mortgage deal if that is all that is in offer versus just sucking up the additional £2400 for a year. You really need to just ring the banks tomorrow and/or a mortgage broker to compare your options."

I am paranoid that if I show my hand, and the BTL options end up being even worse than the SVR repayments would be, we will have even fewer options because the bank will know of our plans blush

Thanks so much for your input venys it is helpful x

venys Sun 06-Aug-17 16:42:14

You can't really not tell them about letting the property out though as it is considered fraud. You also have to tell your house insurer as if anything happens, eg your house burns down, then they may not pay out. Just be up front , just say this is what you are considering. They are not going to change anything on your mortgage until you actually let the property out.

venys Sun 06-Aug-17 16:43:52

The bank will not limit your options because of the potential of you letting to buy is what I am trying to say.

venys Sun 06-Aug-17 16:45:55

Let to buy = permission to let (stupid name I know)

SummerSazz Sun 06-Aug-17 16:46:09

If I were you I would just remortgage onto a new fixed rate asap before you go. If you can get the paperwork done now they will use current payslips/bank statements.

Our fixed rate recently ended and the svr was about 4.5% - we have fixed aganin for 5 years at 1.89%

BritInUS1 Sun 06-Aug-17 16:56:11

You will also need to declare the rental income on a UK tax return

venys Sun 06-Aug-17 17:07:14

That's true BritinUS - you now get taxed on the full income rather than the profit. OK of its your only income and much of it comes under your tax free allowance, but not so good if you are earning as well.

ProbablyBeingASnowflake Sun 06-Aug-17 21:56:00

Thanks so much all. Will talk to the bank.

venys Wed 09-Aug-17 21:04:38

How have you got on?

ProbablyBeingASnowflake Tue 24-Oct-17 21:15:03

Hi venys - sorry for the late reply!

We sorted it. Our mortgage broker got us basically the same deal with our current provider. Thanks so much for your help.

We are actually coming home sooner than planned, so all is well!

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