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Remus2004
Remus2004, Barrister
Category: Property Law
Satisfied Customers: 70519
Experience:  Over 5 years in practice.
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I am in the process of buying a buy to let property which I

Customer Question

I am in the process of buying a buy to let property which I planned to let you, however my tenancy is nearly up where I currently let and I'm thinking of moving into my buy to let property. I know this would be a breach of my BTL mortgage, however as long as I pay the rent would the lender ever find out? It's only a 2 year BTL, after which I plan to remortgage to a residential, but I can't do this at the moment as I have a residential mortgage for a flat that my gran lives in. My questions is, how likely is it that I will get found out?
Submitted: 2 years ago.
Category: Property Law
Expert:  Remus2004 replied 2 years ago.
Thank you for your question. My name is ***** ***** I will try to help with this.
This is what is known as running the risk. Whether they will find out or not cannot be predicted. It is quite unlikely obviously but you would be in breach if they did.
If you tell them about it though they will just vary the rate of interest maybe to reflect the change in use. They will not stop you doing it.
It is possible in theory for them to demand all the money on any mortgage immediately but I have never heard of a case of any company doing it.
They want you to retain the mortgage as they are earning interest on it which is fair enough. Investors have to make money.
Can I clarify anything for you?
Jo
Remus2004 and other Property Law Specialists are ready to help you
Customer: replied 2 years ago.

Hi Jo,

Thanks for this. My understanding is that if I pay the mortgage the lenders don't really mind and I shouldn't have any issues (although technically i will be in breach of my mortgage). What is the worst case scenario, would they just make me pay a penalty fee and hike up the interest rate? Also when i remortgage to a residential will the new lender ask to see tenancy agreements or any proof that the flat was let out previously. Also if I'm not receiving income from the property will i get in trouble if I don't declare this and pay tax?

Thanks

Jamie

Expert:  Remus2004 replied 2 years ago.
Yes, that is basically right but you should really inform them for two reasons really. Firstly it is the ethical thing to do. Secondly, if you tell them what you are doing then there can be no retribution when you have done it.
In fact, the interest rate should go down if it is a residential mortgage not a buy to let so that will obviously not happen.
I am not sure anybody would be interested in previous tenancy agreements. They would just look at your income to see whether you can pay.
The revenue though do watch any wealth creator in this country with fairly hawk like attention. You do need to declare this to the revenue obviously.
Customer: replied 2 years ago.

The problem is I already have a residential mortgage for the flat my gran lives in so I wouldn't be able to get a second residential mortgage. I'm planning on perhaps residing in the property for a few months to a year and then maybe let it out. I purposely got a by to let mortgage of just 2 years as I plan to change this to residential as soon as my gran sells her flat next year.

As I won't be receiving rent (i.e. income) surely I don't need to declare this and pay tax for this? As i haven't rented the property previously I assume HRMC won't have on file that I own the property as a BTL? I have another BTL property that is BTL that I pay tax on so if I lived there then perhaps HRMC would question this but not for somewhere I haven't previously paid tax on... am i wrong?

Expert:  Remus2004 replied 2 years ago.
If you are not receiving income you don't need to pay tax. We all have gaps in our buy to lets for lots of reasons.
Customer: replied 2 years ago.

Great, thank you for your advice!

Expert:  Remus2004 replied 2 years ago.
No problem and all the best.
Please remember to rate my answer.
Remember that I am always available to help with your questions. Even if I am in Court I will usually pick up a question within 12 hours. For future information, please start your question with ‘For Jomo1972’.
Customer: replied 2 years ago.

will do, thank you

Expert:  Remus2004 replied 2 years ago.
Thanks.