18th Jan

Consent-to-Lease loop hole

Sell your house privately | Bethemiddleman.comWhile at the bank the other day discussing options for my mortgage with one of the banks advisors, we hit upon a ‘grey-area’. I wanted to Let my property but either needed to switch to a Buy-to-Let mortgage or sign a Consent-to-Lease. A Buy-to-Let mortgage wasn’t viable due to the lack of equity in the house so my only option was to talk the bank into allowing what’s called a Consent-to-Lease. A Consent-to-Lease is a legal document that a Lender co-signs with you that says you can let out your property while adhering to the mortgage code. Unfortunately for me it wasn’t that simple…

Background

I used to live in sunny Scarborough, on the East Coast of the UK. I lived there right up until two years ago when I took a new job as Senior Web Designer at 9xb in Harrogate. I own a property on the outskirts of the town in a small village called Staxton, approximately 50 miles away from Harrogate. For the first year in my new role I commuted to and from work on a daily basis and covered over 500 miles a week. In that one year of traveling I owned three different cars…

Car crash

Car 1

A Vauxhall Corsa – Written off!

In short I got side swiped my another motorist at about 50mph, causing an immediate head-on with another car traveling towards me from the other direction.

Well I lived, just, and after having three weeks off returned to work.

Car 2

A Ford Fiesta – Sold!

Once I received a payout from the first accident I bought a economical Diesel Fiesta. Unfortunately after doing 17000 miles in under half a year I ran it into the ground.

Car 3

A Ford Mondeo Sport TDCi

Which I still own, a brilliant long distance cruiser.

Obviously after the year I had it wasn’t sustainable to commit to long distance commuting anymore so I made the decision to move to Harrogate and Let out my house.

Lets have a meeting

I moved to Harrogate and Let the house out to a lovely couple who were both Radio presenters. A year later they moved out, right at the same time my Tracker mortgage deal had ran out. So I decided to go into the bank to check out the latest deals. Which is where the fun began, and conversation went something like this…

Me: I need to Let out my house. I want the best possible deal for my mortgage so my repayments are as small as possible. I understand I can’t have a Buy-to-Let mortgage because I don’t own enough Equity but I was told I could stay on my current deal and sign a Consent-to-Lease form to enable me to Let it out.

Mortgage advisor: Unfortunately since your last meeting with us things have changed in the housing market and our offerings. For us to allow a Consent-to-Lease on a property you need a minimum of 15% Equity in your house (85% LTV). Our house price indexing system currently values your house at a lower price than last year resulting your LTV being over the 85% minimum. We are unable to offer you permission to Let your house out. To fall back under the LTV minimum you would need to put down £*****.00.

Puzzle

In short the bank weren’t allowing me to Let my property out now because of the down turn in the housing market. Now as you can imagine I was a little annoyed and disputed a few things. Firstly their so called ‘property valuation indexing system’. They valued my house at £*****.00 less than a valuation I had from a local estate agent so I told them they were wrong.

Mortgage advisor: You can dispute this automated valuation and pay £***.00 to get it revalued by one of our registered valuers.

Me: £***.00 is too much, surely there’s another way to solve this?

Mortgage advisor: Ok sir our acceptance limit is 85% LTV if you are on one of our products (a fixed mortgage deal for example)

Me: Currently I’m not on one of your products, my Tracker deal has just ended and I’m now on a standard Variable Rate. Does this 85% LTV limit apply?

Mortgage advisor: Oh I’m not sure, I’ve never come across this before. There’s no information on the system about this. I can’t call our usual help department anymore as they have blocked incoming calls so I can only email them for an answer. Unfortunately I doubt we’ll get a response today so we can’t proceed.

I waited a week and finally got a call from the mortgage advisor saying…

Mortgage advisor: Hello Mr Hartley. It seems we hit a bit of a grey-area in our Consent-to-Lease offering. Our 85% LTV limit only applies to our products, Fixed and Tracker deals for example, but you aren’t on a product so we feel we can’t stop you from completing a Consent-to-Lease form on this reason. Using our discretion we are happy to authenticate a Consent-to-Lease on your mortgage if you wish to commence?

Me: F*** Yes I do, I’ll return the form ASAP…

In Summary

In summary, to Let out a property where you still have a mortgage on it you need your banks permission or else you’ll be breaking your mortgage terms and they could take your property off you. A Consent-to-Lease is an option but with the current economical climate hitting a rocky patch and with house prices plummeting most lenders are capping the minimum LTV acceptance to 85%. Now as I discovered with my Lender they may not have applied the same limited on Variable mortgages as you aren’t technically on a Mortgage Product. So if you find yourself in the same scenario there may be a loop hole you can jump through.




Comments

Leave a reply below

  • January 18, 2009 at 7:02 pm // Reply

    Since I only rent a house, I didn’t understand any of that, but I enjoyed the pictures and swearing…

  • October 27, 2009 at 8:33 pm // Reply

    Thats very interesting as i have a meeting on saturday with my bank manager to apply for a consent-to-lease and i deffo dont have enough equity in my property, i am on a fixed rate mortage with them but it expires may 2010. i will let you know the outcome?

    • October 27, 2009 at 8:51 pm // Reply

      Hi Anthony.

      Remember, consent to lease is only available on the normal rate, you can’t be on a product. It’s also limited to just 3 years so it’s not a long term solution. Good luck, let us know how it goes :)

  • Fay Scammell
    March 20, 2010 at 5:40 pm // Reply

    Hi,

    we are now in the same situatuion.
    We have no mortgage product and are on a vriable rate, and our Bank are saying we need to switch to a consent to lease mortgage of 5.49% TRACKER for 3 years.

    Can we get round this as we will be moving back in around 6-12 months.

    • March 20, 2010 at 7:15 pm // Reply

      Hi Fay,

      My experience was with the Halifax so each bank may have their own consent to lease guidelines. Basically if you are planning on renting out your property for any amount of time and you don’t want/can’t get a Buy to Let mortgage then a consent to lease agreement from your bank is the only option. Without this you are breaking the mortgage agreement you have with the bank, giving them the legal right to any proceedings they deem fit to proceed with. The ugly statement all banks have to make when taking out a mortgage applies, “Your home is at risk blah blah blah”.

      Personally I find it strange that the only option is a Tracker mortgage, potentially with a setup fee too? Have you considered remortgaging to another provider who would offer a better consent to lease package? Is that an option? The only other option, one I wouldn’t advice nor champion, is to keep on the variable deal, keep quiet and see if you can get through the rental period undiscovered. Risky but a potential short term solution.

  • Neil
    April 27, 2010 at 6:43 am // Reply

    This is incredibly interesting.

    I too am with the Halifax sat on their standard variable rate but deperate to move house.

    Unfortunatley mine isn’t shifting.

    I don’t actually need what little equity is in the house and so could buy another right now but would potentially stuggle to pay two mortgages for any extended period of time.

    This is somethimg I hadn’t considered. A trip to the bank I feel!!

  • Jen
    June 27, 2012 at 6:05 pm // Reply

    I’m also with the Halifax and came across this problem today, the Halifax told me I had to change from my variable rate mortgage to one of there fixed term, which of course I don’t want to do as that will make my monthly payments on my current home higher AGGRRRRRRRR I hate the Halifax, I hate Banks and it annoy’s me so much that now my 10% deposit is seen as a crap amount when 5 years ago I could put a 3% deposit down no problem.

Leave a Comment