Reluctant Landlords Give Banks A Headache

[cashinmattress]

Reluctant landlords give banks a headache

Reluctant landlords – homeowners who let their property because they can’t get a good price by selling – are causing headaches for banks and building societies. Many haven’t bothered to inform their lender that the house is being rented out because, if they do, the lender might insist they switch to a buy-to-let mortgage, which is likely to be more expensive.

‘Homeowners who don’t tell their lender they have let out their property are in a potentially dangerous position, because they are in breach of their mortgage terms and the lender could insist that they redeem the mortgage,’ explains Lee Grandin, managing director of broker Landlord Mortgages. ‘If they have little or no equity, they could find it impossible to remortgage, although it would be difficult for their existing lender to justify repossession in these circumstances.’

For borrowers with little or no equity in their property, and therefore unable to remortgage with another lender, if their existing lender doesn’t offer buy-to-let loans, it’s likely that they will be charged a premium of 1% or more on their existing loan.

‘We are seeing a lot of enquiries from homeowners who have let out their property. When they come to the end of their existing mortgage deal they often come to us to sort out a buy-to-let mortgage, because they feel they ought to come clean and make the switch. But when they realise how much more they have to pay, they often don’t come back,’ says Grandin.

So what’s on offer for landlords – reluctant or otherwise – who need to remortgage? ‘The market has eased in the past few days with Nationwide’s buy-to-let subsidiary, The Mortgage Works, reducing rates,’ says Grandin. He believes that other lenders may follow suit and says, ‘there is a bit of optimism around now’.

For a landlord wanting up to 75% loan to value, Grandin is recommending a three-year tracker from C&G at 4.99%. Unfortunately, it has a hefty fee of 2.5% of the amount borrowed.

Depending on how much you need to borrow and the loan to value, it might be cheaper to go for the buy-to let-offer from Godiva, which is a three-year fix at 5.9%, with a fee of £1,749 and a booking fee of £250 – but free valuation and legals. To qualify you will need 40% deposit, as maximum loan to value is 60%.

I smell a state sponsored 'tattle-tale' phone service getting introduced.

Ultimately, the bankers are rubbing their hands with joy, salivating ravenously, etc...at the thought of legally getting to up the interest rates on folks mortgages. I really don't see many of the 'Krusty' era landlords having 25% equity in their properties. Sucks to be them.

Meh, serves folks right. If people think they can curtail the laws in this country just because you made a bad bet with property, well, they can collectively go get stuffed.

There is also the other little issue, of not paying the taxes on the 'rent', but that is another can of worms.

Ahh, the next few years are going to be very interesting in the UK. Very interesting indeed.

[TheCountOfNowhere]

Great bargaining position for tennants..."hello, i received a letter today addressed to 'the occupier' saying it was illegal for landlords to rent houses out to tennants unless the mortgage provider is informed....I'd like you to confirm immediately, in writing, that you have in fact notified your lender as I'd expect my rent to be MUCH lower if you havent as the BTL mortgage rates are MUCH MUCH higher and I would feel obliged to inform the bank as I feel our contract would be null and void......"

And the BTL landlords think tenants are their for their privellege....think again.

Let us know if you do this...it would make me laugh for several months....:-)

Edited August 9, 2009 by TheCountOfNowhere

[Saving For a Space Ship]

So what is the insurance situation for both landlord and tenant. Is it voided ?

Edited August 9, 2009 by Saving For a Space Ship

[NotMyHouse]

Sounds like a few tenants are in for a rent hike.

Or maybe they'll be moving to somewhere cheaper?

[Umiapik]

Or maybe they'll be moving to somewhere cheaper?

Like where? It's not as though the rental market's been flooded with cheap properties recently.

[expatowner]

I smell a state sponsored 'tattle-tale' phone service getting introduced.

You are probably right.

Ultimately, the bankers are rubbing their hands with joy, salivating ravenously, etc...at the thought of legally getting to up the interest rates on folks mortgages. I really don't see many of the 'Krusty' era landlords having 25% equity in their properties. Sucks to be them.

If the people aint got it what can the banks do?

Meh, serves folks right. If people think they can curtail the laws in this country just because you made a bad bet with property, well, they can collectively go get stuffed.

There is also the other little issue, of not paying the taxes on the 'rent', but that is another can of worms.

To be honest banks and Inland Revenue have traditionally both been very slow to pursue these kinds of misdemeaners.

[Radge]

Like where? It's not as though the rental market's been flooded with cheap properties recently.

It has here! (Edinburgh).

[HPCbeliever]

Where i live there are loads of houses for rent. They have all been on the market for months.

[Frank Hovis]

Where i live there are loads of houses for rent. They have all been on the market for months.

Well that's entirely the fault of the tenants for refusing to pay the rent that the landlord "knows" these properties are worth.

They have mortgages to pay don't you know.

[NotMyHouse]

Within 5 miles of Manchester city centre, I find 500+ properties to rent of two bedrooms or more for £400PCM or less.

Whopping shortage there.

[@contradevian]

Within 5 miles of Manchester city centre, I find 500+ properties to rent of two bedrooms or more for £400PCM or less.

Whopping shortage there.

Not even £400 PCM or less being affordable. Oh dear. Pressure on lower rents, and more expensive BTL mortgages.

[NotMyHouse]

Not even £400 PCM or less being affordable. Oh dear. Pressure on lower rents, and more expensive BTL mortgages.

I'm just loving some of the terraced brick houses in Oldham (decently put together houses, mind, I lived in one in the 1980s) with the horrible laminate flooring like they're some WAGs bling-palace. Say hello to Mr and Mrs Dust-Ball.

[bomberbrown]

Sounds like a few tenants are in for a rent hike.

Then it sounds like a few landlords will be having some voids.

[eric pebble]

Where i live there are loads of houses for rent. They have all been on the market for months.

Me too!! TONS of houses - many unsold in 2 years!!!!

[Lepista]

Like where? It's not as though the rental market's been flooded with cheap properties recently.

Yes, plenty of properties for rent in my area too (Middlesborough and N Yorks).

Where is theis land barren of rentals that you speak of, Umiapik? I suspect you're telling porkies...

[helenreed]

I cannot work out where the rental market is for certain places. Here in the south east I keep seeing the same large, expensive houses (previously in the £750,000-1.5m bracket) up for rent at ridiculous prices - £4,000 per month. The amount of these properties on for rent is increasing all the time. Many of these places are in the middle of nowhere, miles from a town or even a station to enable getting into London easily. Who wants to rent these places, where are the tenants, who has this sort of money to spend? After seeing many of these places advertised month after month these tenants obviously don't exist. But how long can these owners keep these properties on? What is the breaking point? Where have the owners gone?

I remember a lecture given by an American woman on a thread here a few months ago where she stated (quite rightly) that everyone knows when you get divorced but nobody knows when you go broke.

[iLegallyBlonde]

I cannot work out where the rental market is for certain places. Here in the south east I keep seeing the same large, expensive houses (previously in the £750,000-1.5m bracket) up for rent at ridiculous prices - £4,000 per month. The amount of these properties on for rent is increasing all the time. Many of these places are in the middle of nowhere, miles from a town or even a station to enable getting into London easily. Who wants to rent these places, where are the tenants, who has this sort of money to spend? After seeing many of these places advertised month after month these tenants obviously don't exist. But how long can these owners keep these properties on? What is the breaking point? Where have the owners gone?

I remember a lecture given by an American woman on a thread here a few months ago where she stated (quite rightly) that everyone knows when you get divorced but nobody knows when you go broke.

I imagine that would suit somebody who's had to sell their £1.5 million pad quite nicely, they can keep up appearances in the rented place, happy days.

I also doubt they'd get £4,000 a month for it, we offered £900 on a place advertised at £2,200 and they accepted and this was back in 2006 so well before any "crash" and still everything was negotiable.

[iLegallyBlonde]

Reluctant landlords – homeowners who let their property because they can’t get a good price by selling – are causing headaches for banks and building societies. Many haven’t bothered to inform their lender that the house is being rented out because, if they do, the lender might insist they switch to a buy-to-let mortgage, which is likely to be more expensive.

Understandable - But it is FRAUD !

Send a few fraudsters to the slammer, and the practice will quickly disappear

At a minimum, they should be made to pay a penalty = the interest rate differential

Why are you so inerested in punishing the individual ? Actually they should pay 1% less because of all the costs and red tape they now find themselves with due to the banks ******ing them over.

I do not understand the mentality on this site of some poor ******* who just wanted a roof over their heads being so hated, they didn't cause HPI the banks did, end of.

[non frog]

...they didn't cause HPI the banks did, end of.

Yeah sure

All the Lloyds gestapo there in their leather trench coats with a Luger at people's head forcing them to sign the documents.

Greed caused the current crash. Sure the banks are greedy, sure the government are a bit slack at regulation, but no-one - absolutely no-one forced anyone to buy.

[iLegallyBlonde]

Yeah sure

All the Lloyds gestapo there in their leather trench coats with a Luger at people's head forcing them to sign the documents.

Greed caused the current crash. Sure the banks are greedy, sure the government are a bit slack at regulation, but no-one - absolutely no-one forced anyone to buy.

But it's hardly an unreasonable expectation is it really ? After all no doubt you'd like to buy too ?

Your "anger" is misdirected IMO

[non frog]

... After all no doubt you'd like to buy too ?

No thanks.

(Not angry either - just watching with interest)

[Flying Dutchman]

For a landlord wanting up to 75% loan to value, Grandin is recommending a three-year tracker from C&G at 4.99%. Unfortunately, it has a hefty fee of 2.5% of the amount borrowed.

Not so sure that this is solid advice. Many unplannedlords probably view their current predicament as being a short-term fix and that they will simply exit the market in 6 months time when this all blows over. Despite the BoE assurances that low I.Rs are here to stay, I can't help but feel that many will live to regret the day that they tracked a base rate that can only go one way.

All IMO, of course.

FD

[non frog]

... Many unplannedlords probably view their current predicament as being a short-term fix and that they will simply exit the market in 6 months time when this all blows over. ...

This is the case for the chap we rented from a while back. However, as it seems fairly likely that prices will return to a general downward trend after the current rally most people will still be left with the decision of whether to take the loss or continue to hope that inflation or growth in property prices will bail them out.

Remember that for many of these people the gap is between their unrealistic expectation of "profit" on their sale and the overpayment they made on their purchase.

I do genuinely find it hard to muster much sympathy for people this stupid with such large sums of money relative to their income.

[MississippiJohnHurt]

Sounds like a few tenants are in for a rent hike.

Have a go with your tenants, let us know how you get on...

[jcpricewatcher]

Yeah sure

All the Lloyds gestapo there in their leather trench coats with a Luger at people's head forcing them to sign the documents.

Greed caused the current crash. Sure the banks are greedy, sure the government are a bit slack at regulation, but no-one - absolutely no-one forced anyone to buy.

What about fear?

I know people who bought, because they could only just afford to and were scared at the time that the prices would go higher and be unaffordable to them since houses were rising in price quicker than their salaries.

Yes, the housing crash happened, but before it happened, most people saw 10 years of continual growth, and got scared they'd never get a place.

Like in all situations like this, it's the average guy who pays the price in the end...

Arguably, couldn't you say all these 'evil' STR people were the greedy ones and took the profits at the cost of the poor mugs who bought the properties off them??? - I mean, who are the people holding the cash now???