Neg Eq, want to move, letting forbidden

M

Money

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Hi,

I'm looking for some advice on an apartment that my wife and I currently live in. The apartment is in about €250k of negative equity and we would like to move to a house.

The apartment is in a very good area in Dublin and has excellent rental potential so we had been intending to rent out the apartment and we would cover the shortfall between rental income and the mortgage. However, I only recently saw a copy of the mortgage offer letter (my wife bought the apartment before we met) that states that any lettings are forbidden.

I have been having a look at the options suggested in Brendan's key post about "House too small for my family - what are our options?" but I'm not sure many of the options are applicable / suitable.

Do you think it would be possible to have the bank remove the clause?
I have read is some posts that banks were willing to let some people rent out their properties if they gave up their tracker mortgage, unfortunately our mortgage is an SVR. If we want to rent I assume the bank will want to move the mortgage to a buy to let rate which would increase the mortgage, and hence the shortfall we would have to cover, significantly.

The mortgage is fully serviced so we would not be looking for any insolvency / split mortgage options. What I am looking for is a way for us to get a house and ensure that we can sustainably service both mortgages. Renting seemed to be a relatively good solution to acheive this but it does not look straightforward now.

Thanks,
Money
 
Hi Money,

Would you need to tell the bank that it is rented?
When I rented out my house I requested that revenue stop TRS.
Never informed the bank - the mortgage is being serviced every month - they're happy and so am I:).

Maggs
 
It's not a major risk if you are on SVR, provided that you maintain your agreed loan repayments. Despite what some posters may think there is no regular trawl of HL's by banks looking for breaches of agreements. If P&I repayments are on line, that is all that the Bank is interested in. However, if you do think that you may need to change your repayment schedule, you will be better off advising the Bank now of your intention to let the property.
 
Hi Maggs & Brendan,

Thanks for the responses.

My concern would be that when I cancel TRS, change insurance and register with the PTRB that the bank will get notification of the changes.

If we notify the bank now would they be likely to force a change to a buy to let rate do you know?

We are servicing the P&I repayments and don't predict any major issues in maintaining it even if we did get a second property and rented the apartment.

If the bank are not informed, could they pursue us in the future for difference in interest between the buy to let and SVR mortgage rates for the time it was rented?

I'm keen to rent out the apartment as it solves a lot problems now but I'm cautious of doing something that could come back to bite us in the future.

Thanks,
Money
 
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No the Bank cannot pursue you in future for any notional difference in interest between the products. BTL loans are so scarce now that there is no real standard rate/margin for them. The Bank will not notice the change in TRS or registration with the PTRB. Change in insurance is common and is unlikely to raise any issues. While I cannot guarantee that at some stage in the future the Bank may approach you on this issue, it is unlikely, as it would not raise any concern in my own organisation. If it were me I would go ahead with the transaction. The worst that can happen is that at some stage in the future the Bank could hit you with this breach. However, there can be no retrospecvtive penalties applied.
 
I don't think that you should worry unduly about it. Most banks admit that they turn a blind eye to it. They might actually prefer not to know.

They might get involved if you had a cheap tracker.

Brendan
 
Money said:
My concern would be that when I cancel TRS, change insurance and register with the PTRB that the bank will get notification of the changes.

If the bank are not informed, could they pursue us in the future for difference in interest between the buy to let and SVR mortgage rates for the time it was rented?
Click to expand...

TRS is cancelled via revenue, it is a tax affair and none of the banks business why TRS is cancelled. It could be for any number of reasons.

PRTB, banks don't even know what this is, nor do they want to, and nor do most landlords. The registration is a private matter between you, the PRTB and the tenant The PRTB will not be informing the bank. Actually it's been hard enough at times to get acknowledgment from the PRTB as a landlord so it's laughable that you think they'd manage to inform the bank.

Insurance, we've had this issue many times, yes you will have to change your house insurance policy, but the bank does not need to know why. All your bank requires is that you be insured.

Is the 'investment interest rate' much higher than the SVR?

Could you post up the actually wording in the mortgage letter please.
 
Thanks both Brendans and Bronte. I really appreciate your comments and advice. It is good to know that this may not be the issue I thought it was.

44brendan said:
The worst that can happen is that at some stage in the future the Bank could hit you with this breach.
Click to expand...

44brendan, what would be the situation if the bank did raise the breach? Would this be the case where they may want to change the mortgage rate or something else?

Thanks to all for the clarification regarding the TRS, PTRB and insurance. I had just (incorrectly) assumed these organisations would contact the bank but I see now that not does really make sense.

Bronte said:
Is the 'investment interest rate' much higher than the SVR?
Click to expand...
The mortgage is with AIB and from their website I see that the Buy-To-Let rate is 0.95% more than the SVR rate. (BTL 5.35%, SVR 4.4%)

Bronte said:
Could you post up the actually wording in the mortgage letter please.
Click to expand...
Under the Purpose heading of the mortgage offer letter it says:
To acquire Freehold/Long Leesehold property at <exact details omitted for privacy> to be used for the Borrowers' personal residential use or that of their dependents.​

And under the Letting heading it states:
The Borrowers are prohibited from granting any tenancy on the property being acquired. The property shall have vacant possession on acquisition.​

Many thanks for all the comments and advice,
Money
 
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