Hi - What Kind of measures could a mortgage company take against other for not declaring that we now rent our flat out?

[lawrieisluckybutnickyisnicer]

Hiya,,

We moved into DH's work 2 years ago and started leasing our flat. Applied to mortgage company for approval and they said yes, for £500 and here is a form to send back. Which we never did .

So now DH wants to sell the flat (only reason: hate being landlords. i want to keep it but it makes him very unhappy). he wants to just be able to take out capital and save a set sum every month. At the moment we have short mortgage term, but low rent. So we top up mortgage by £350 each month, but pay off £500.

Sorry, i digress! Right, I rang mortgage company to find out about extending term of mortgage. Turns out by extending to max, we can get rent to cover mortgage and also work towards saving too.

BUT - and this is DH's point, they are going to send us form to extend mortgage term. in this we will have to declare in and out goings. Really don't want to lie on this form.

ARGH. what to do?

** sell flat. part of hating being landlords is the admin, and the tax returns etc.
** tell mortgage company? just fess up and see what they do?
** ring up mortgage company and act dumb as if we sent that form back ages ago?

what could they do? i know a couple of other people who haven't told mortgage lenders they rent. seems not uncommon. they have that our correspondence address is different to rental property. always been surprised they havnt chased us earlier.

all advice welcomed

oooh, that "yes you may rent out flat for £500" form was just for a short term period of 6 months.

is fifteen min later too soon for a bump?

Um. Basically you have breached the terms of your mortgage by renting out without approval.

Which gives the mortgage company quite a lot of leeway if they find out. I suspect what they are likely to do is demand the £500 immediately or put you onto a higher mortgage rate. They might well refuse the term extension too as they will see a let property as a higher financial risk.

Are you willing to pay the £500? If so you could try the "act dumb" approach.

Do I understand from your OP that you are subsidising the mortgage on the flat, i.e. the rent doesn't cover the mortgage?

If that's the case then I would sell it - it is a money drain.

Why do you want to keep it? do you intend to move back? do you think it will grow in value (personally I suspect unlikely over the next few years)?

Sorry more questions than answers here!

I have absolutely no idea but loved your name too much not to reply. (Chas Dodd. Out of the mouths of babes...). So Bump and maybe just make a post from the relevant points in your OP, as its a bit confusing getting all the extra details that arent so relevant to your question, and try posting perhaps somewhere busy like Chat.

By extending your mortgage term you will massively increase the amount you pay in interest over the life of the mortgage. Although it might not seem like it, that £350 you top it up by each month is still savings because you're paying off more of the capital. Unless you can get an account that pays a higher rate of interest than your mortgage it will actually cost you more in the long run.

Just sell it. You hate being landlords and it's a liability in all sorts of ways.

ok, ok, will sell . poor dh's face this afternoon when i told him i had changed mind was almost enough to settle me anyway.

i just feel a bit gutted that we will get less than we paid for and wish we had guts to manage it more effectively. but it's just the kind of responsibility that dh and i are both rubbish with (we are great with all other types of responsibility, naturally!)

daisy, know i do count that £350 as saving. i pat myself on back about it at least once a week one of the reasons i want to keep flat is that it forces us to save IYKWIM. understand what you saying about interest in long term, but if we sold in 5 years, then it wouldn't make a difference, right? we would just be slashing the repayments on the mortgage to a minimum. also when we bought flat 5 years ago, we went for a 17 year mortgage. just was thinking of increasing to 25 years (so 20 from now) - which i kind of think ok cause is standard duration.

ach, i wish we had sent that form two years ago, cause i would willingly take all the responsibility of this off dh and keep flat but do all of it myself, but now we are stuck

and hello leavingonajetplane have never seen you on any AF threads here. there are quite a few fans on MN... tho' am yet to meet a fan in RL

All the AF threads hadnt been updated in so long when i found them that I didnt post, but I must check again. I was very excited to see them. Was having a great re-read recently. Have never met a real-life fan either but was happy to see Lucy Mangan include them in her childrens library with fulsome praise ('Natch)

It would still make a difference if you sold in 5 years time. Less of a difference than over a 20 year period, yes, but you will still be paying more in interest.

Imagine you were putting £500 away in savings every month and then changed to saving only £100 a month (when you save you're effectively loaning the bank your money and they pay you interest for the privilege, just like a mortgage but the other way round.) You would of course at the end of 5 years have been paid considerably less in interest than if you'd been saving £500 a month.

Have a look at this website It shows you how much of your monthly repayment is interest over different length terms. Being an anal person I just worked out how much difference it would make if you (for eg) were borrowing £100,000 over 25 years compared with 17 and paying 5% interest. Over the first 5 years of the mortgage you'd pay £1378 more in interest by extending the term.

daisy, please be anal. i need anal. me and dh just talk shite about flat all the time and just go round in circles. we always just chose the path of least resistance.

here are my reasons for keeping. could you quickly debunk them for me:

** scared we won't save at all if we sell. at least now we are putting money aside. and still would be even on longer term mortgage with lower repayments.

** scared property prices will recover and we will be unable to get back on ladder.

** feel like i don't want to take less than we paid for it. an emotional consideration i know. not by much, i reckon maybe £5k less than the £153 we paid.

gah. sorry, boring, i know. have i scared you off? .

i try to live by ethos that there are rarely right decisions about some things. you can just do your best with what you know at the time and then the onus is on making your decision the right one. does that make sense? i think i need to do that now.

Gawd, I don't feel anything like enough of an expert to tell you what to do, I just read Robert Peston and am semi-OK at Maths!

If you want to know what I would do, I would keep the flat and I would keep the repayment term as it is unless it's making your quality of life really shit. Unless you can find an investment which will give you a higher % return on your money than your mortgage interest rate you are always going to be better off repaying the debt as soon as you possibly can.

Property prices probably will recover in the long term. It is possible that you might be better off selling now in the expectation of price falls in the future and so would minimise your losses and would then be able to buy another property more cheaply in the future. That would be a big gamble IMHO. Lots of people have sold up in the past few years expecting prices to fall and now can't afford to buy. Maybe they will have the last laugh and snap up a bargain in the future, but who knows? If you keep the flat you're playing safe. You will always have that to fall back on (as long as you can keep up the repayments).

I think in all likelihood prices will recover eventually, but nobody knows how quickly. If you sell now you will definitely lose money; if you keep hold of it you at least have a chance of regaining the money you have currently lost in its value.

Like I said, I would keep the flat because I think it would (IMHO) be the most sensible financial course of action over the long term. Only time will tell whether that would be the right thing financially, but my personal opinion is that it's probably the safest thing to do. However, if in the short term it's making you miserable then you might be better off selling.

HTH.