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Thomas
Thomas, Solicitor
Category: Property Law
Satisfied Customers: 7602
Experience:  UK solicitor holding an England and Wales practising Certificate.
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We let our our property in March this year and move out to

Customer Question

Hi,
We let our our property in March this year and move out to rented property ourselves without telling the bank. It was only when we started discussing with our bank and mortgage advisor on whether to remortgage or stick to variable rate that we found out that letting out without informing the bank was a breach of the Mortgage Conditions.
We now want to make it right, but are unsure of what to do and how to do it.
Thanks,
Submitted: 11 months ago.
Category: Property Law
Expert:  Thomas replied 11 months ago.

Hi,

Do you intend to move back in to the property to use it as your residential home? If so, when is this likely to happen?

Kind regards,

Tom

Customer: replied 11 months ago.
No we are not intending to move back.
Expert:  Thomas replied 11 months ago.

Hi

Thanks for your question. I will try to help.

Unfortunately, what you have done is a breach of your residential mortgage conditions. It is a condition of your mortgage that you must advise them when you move out and a further breach to let the property without the lender’s consent.

It is technically a form of mortgage fraud, albeit not as serious as other forms of mortgage fraud.

Basically, it would be up for the lender to decide what to do once they found out. They may decide to issue you with a consent to let and charge you their fees for this with possibly an increased premium to your interest rate. In the long run, they will also require you to either repay the mortgage (ie by remortgaging with someone else) or by switching to a buy-to-let mortgage (at a higher interest rate) with someone else.

You are basically going to have to (1) allow the fraud to continue (risky if they find out because they are likely to take a less sympathetic view than if you disclosed), (2) remortgage to a buy to let with another lender and repay their charge, (3) disclose the letting to your current lender and see what they propose to do or (4) sell the property.

It’s also important to note that it could affect your future ability to get a mortgage if a breach of a mortgage condition is noted against your file.

I am could not have better news for you.

My goal is to provide you with a good service. If you feel you have received anything less, please reply back. Please remember to leave positive feedback using the stars at the top of the page.

Kind regards,

Tom

Customer: replied 11 months ago.
Would you be able to discuss in a bit more detail over the phone?
Expert:  Thomas replied 11 months ago.

I'm afraid not, but I am happy to reply to any directly related follow up questions on this thread..

Customer: replied 11 months ago.
Thanks Thomas, a few more questions:- #1 is not an option for us, we just want to have the peace of mind that we are not in breach of contract.
- #2 sounds like the most sensible option considering the risks involved. Although I do not understand what you mean by "repay their charge" Does that mean we'd need to disclose we were in breach with our previous lender? I assume we just need tell the new lender that we are currently letting and that we want a buy to let straight away, correct? If we go down this route, would there be any chance that our current lender finds out?
- #3, Would you actually recommend disclosing the breach to our current bank? Mortgage conditions state that Nationwide can even bring our lease to an end...Also, you ask about us coming back to our property. If we do that, would that mean we will not be in breach anymore?Jorge
Expert:  Thomas replied 11 months ago.

Hi,

2. When you - or anybody - remortgages upon completion of the remortgage the current mortgage is repaid from teh proceeds of the new mortgage. I do not know whether or not you would have to disclose the breach in the new mortgage application, you would have to speak with a mortgage broker about that.

3. If you are not going to go with any of the other options then I would probably would and plead ignorance. If you didn't and they found out then the consequences would be much worse. The lender reserves (correctly) all enforcement options in the mortgage conditions, it does not mean they will use them.

If you returned to the property and lived it in as your residential home then you would no longer be in breach and so could not tell them.

Please remember to leave feedback.

Tom

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Customer: replied 11 months ago.
Thanks
Customer: replied 11 months ago.
Hi Thomas,We've found a lender who would offer us a Buy to Let mortgage, but before moving forward with this option I'd like to make you a few more question:
- Would you agree this is our best option?
- To your knowledge, are there chances that our current lender finds out during the transfer process and then takes action against us?Thanks again
Expert:  Thomas replied 11 months ago.

Hi,

I can't provide you with answers on those points. It would be for your broker/solicitor to answer when you instruct them.

Tom

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