Penalty If Mortgage Company Finds Out Potential Btl Fraud

[StevieK]

Quick question. I found out that a person who I shall describe as an "adversary" of mine bought a house, lived in it for about 2 months, and has since bought himself a larger place which he moved into about a year ago. He now rents out the first place, still paying the original mortgage rate on that one. The mortgage bank does not know he rents it out. What are the consequences, if any, should the bank find out about this arrangement?

[northern numpty]

Quick question. I found out that a person who I shall describe as an "adversary" of mine bought a house, lived in it for about 2 months, and has since bought himself a larger place which he moved into about a year ago. He now rents out the first place, still paying the original mortgage rate on that one. The mortgage bank does not know he rents it out. What are the consequences, if any, should the bank find out about this arrangement?

They probably know about this as its not possible to get second mortgage with one outstanding.....unless its a BTL.

[OzzMosiz]

They probably know about this as its not possible to get second mortgage with one outstanding.....unless its a BTL.

What if he got the second mortgage with a different provider?

[StevieK]

No, I don't believe the first mortgage lender knows. I think the 2nd poster was right...he got the second mortgage with another provider.

[JohnG]

So long as he keeps up the payments the original lender won't give a shi care.

[Red Baron]

So long as he keeps up the payments the original lender won't give a shi care.

Sad but true.

In this era of irresponsible lending they won't give a damn as long as the payments are met.

[sun n sea]

From what some of my mates tell me if you keep your first flat and rent it whilst living in your 2nd flat you need to tell the lenders on mortgage 1 what you are doing. If you don't you are breaking the conditions of the agreement and can be liable for all sorts of things- higher interest rates which are backdated etc.

BTL mortgages are sold as specific products with different interest rates- if you think about it there must be a need to say you are renting flat 1 or what's the point of BTL mortgages?

Banks never miss a trick to squeeze more cash outta you so they won't take kindly to you running on a cheap standard mortgage when they could have charged you more for a BTL.

[Badlad1967]

Why don't you just tell the bank and then sit back and see what happens?

Please let us all know

[the end is a bit nigher]

Quick question. I found out that a person who I shall describe as an "adversary" of mine bought a house, lived in it for about 2 months, and has since bought himself a larger place which he moved into about a year ago. He now rents out the first place, still paying the original mortgage rate on that one. The mortgage bank does not know he rents it out. What are the consequences, if any, should the bank find out about this arrangement?

if you're not comfortable about telling them then drop me his details and I'll do it for you

[backtoparents]

if you're not comfortable about telling them then drop me his details and I'll do it for you

Nice!

I think we should concentrate the ones renting out their council properties illegally first.

btp

[needle]

Dont know, but I expect the taxman wouldnt be too pleased....

[Immigrant]

I bought my house with a normal mortgage and then let the house after I moved abroad. All I had to do was notify the lender that I was letting the house. The interest rate etc stayed the same. It was a formality except that I had to change my insurance (my normal insurer doesn't insure rental properties) and of course the lender wanted to see the insurance certificate. Also, they wrote to me a few months later, advising me that I could no longer MEW on the house.

I can't see how it would be the crime of the century if the first lender in this case was not told of the change of status. However, if the second lender was misled at the time the documents were signed then that would be more serious as it would be fraud. I suspect in practice, as has been suggested, the lenders won't know or care as long as the payments are made on time.

It makes you wonder how many people have done this (why get an expensive BTL mortgage if you can safely fiddle the system like this?) Maybe the lenders are getting concerned about this as they are losing out overall.

[FTBagain]

I think the lenders may start to care in the nearish future as the bad debt problem continues to escalate. They will be looking to recoup their loses in anyway they can, and that will include court action.

[MadJock]

I bought my house with a normal mortgage and then let the house after I moved abroad. All I had to do was notify the lender that I was letting the house. The interest rate etc stayed the same. It was a formality except that I had to change my insurance (my normal insurer doesn't insure rental properties) and of course the lender wanted to see the insurance certificate. Also, they wrote to me a few months later, advising me that I could no longer MEW on the house.

I can't see how it would be the crime of the century if the first lender in this case was not told of the change of status. However, if the second lender was misled at the time the documents were signed then that would be more serious as it would be fraud. I suspect in practice, as has been suggested, the lenders won't know or care as long as the payments are made on time.

It makes you wonder how many people have done this (why get an expensive BTL mortgage if you can safely fiddle the system like this?) Maybe the lenders are getting concerned about this as they are losing out overall.

I did the same with my place when I moved abroad. They let me keep the fixed rate I had at the time, which has since expired - but try to get it back onto a fixed rate deal now. They won't let you until you tell them you're living there again - so I pay a higher interest rate because I'm not willing to commit fraud.

So to me, this man is competition, yet he has lower costs due to his breaking the law (minor or not, the law is that the lender must get full disclosure). I am at a competetive disadvantage because I follow the law, and he does not.

I won't shed a tear for him if he has to play on a level playing field, plus back charges and penalty.

[SHERWICK]

I did the same with my place when I moved abroad. They let me keep the fixed rate I had at the time, which has since expired - but try to get it back onto a fixed rate deal now. They won't let you until you tell them you're living there again - so I pay a higher interest rate because I'm not willing to commit fraud.

So to me, this man is competition, yet he has lower costs due to his breaking the law (minor or not, the law is that the lender must get full disclosure). I am at a competetive disadvantage because I follow the law, and he does not.

I won't shed a tear for him if he has to play on a level playing field, plus back charges and penalty.

of course he should be declaring the income to the Inland Revenue too... which I am sure he i doing.. as I am sure all the other B2Lers are doing...

[Immigrant]

I did the same with my place when I moved abroad. They let me keep the fixed rate I had at the time, which has since expired - but try to get it back onto a fixed rate deal now. They won't let you until you tell them you're living there again - so I pay a higher interest rate because I'm not willing to commit fraud.

Fortunately for me, I have a good tracker mortgage (BOE base rate + 0.45% for the lifetime of the mortgage, so there is no need for me to remortgage at any point.

of course he should be declaring the income to the Inland Revenue too... which I am sure he i doing.. as I am sure all the other B2Lers are doing...

I'm sure you are right that there are BTLers who do not pay their taxes. I am not one of them.

Edited August 16, 2006 by Immigrant

[tenroom]

Yep. If he tells the lender he's renting it out they don't automatically change the rate but the insurance will have to be modified and that's only if it's a freehold house. The building insurance on leasehold flats are the repsonsibility of the freeholder.

As far as his second mortgage is concerned, he could have told them he wasn't a homeowner and as he was only living there for 2 months, chances are he's not have had any credit or registered for council tax there. In all likelihood, he told them he was living at the same address he was at before he bought the first property cos that's where they'd be more likely to find any credit or voter's roll info.

Frankly, even if you know who his lender is, it's unlikely they'd take any action as long as he's making the repayments. If he did tell them about the first property he might still have got the mortgage if he could show enough income to cover both sets of repayments.

[MadJock]

of course he should be declaring the income to the Inland Revenue too... which I am sure he i doing.. as I am sure all the other B2Lers are doing...

Yes, that pisses me off too. As a landlord I don't have to pay tax on the income while living abroad, but I still have to send them a self-assesment form every year of what it took in. And on top of that I declare it on my US taxes (can't escape the taxman anywhere!) although US rules are better on what you can claim as expenses etc.

So if my competition is dodging a 1% difference in IR, and a 20% difference in tax, that's quite the margin he has on me there as a reward for breaking multiple laws. Given yields on most properties are single digit %, that's significant.