Consent-to-Lease loop hole
While 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…
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…
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.
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.
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.
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, 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.