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buy-to-let property on a residential mortgage

Started by propertyfag, February 25, 2009, 09:48:54 AM

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propertyfag

Just read this article on this is money, where this quetsion was asked:

Quote
I bought a studio flat last year which I am letting at the moment. As I don't have a buy-to-let mortgage and I am living with my parents what happens with the electoral roll?

If I register at their address would this cause a massive problem and invalidate my mortgage?

I'm sure a lot of people do it because rates are cheaper to get a regular residential mortgage, but it's probably not worth it because of the risks involved.

Here was the response:

Quote
I am sorry to be the bearer of bad news, but unfortunately, the terms of your mortgage contract have already been broken.

When you arrange a residential mortgage, the lender bases the contract on 'owner occupation'. In other words they expect the borrower to reside in the property.

By breaking these terms without the permission of the lender, you have broken the contract.

In addition, you may find any buildings and contents insurance you hold is equally invalidated, unless you have arranged a specialist 'lettings' policy.

Finally, depending on how long you have rented out the property, you may not be exempt from capital gains tax when you sell the flat as only property that is your main residence is fully exempt from this tax.

In terms of the electoral register, this is really a separate issue. It is a legal requirement to register at your main residence. If this is your parents' house, then you would actually be breaking the law if you failed to register.

Frank

Interesting, I wonder how many people are doing this? Renting a property out and living with parents, seems a bit stupid to me but I 'spose if your folks totally don't care how soft you are...

landlordsjournal


Jools

No, the key is dont do the crime if your not prepared to do the time or more importantly face the consequences of your actions as it is highly likely the mortgage company will call in the debt and you will be stuffed!

There is always someone out there ready to tell tales!!

Jools