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What would happen if I get caught living in property on buy to let mortgage?

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Author Topic: What would happen if I get caught living in property on buy to let mortgage?  (Read 14887 times)
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« on: October 22, 2014, 10:25:02 PM »

Hi any one knew what would happen to the owner of property if get caught living in property on buy to let mortgage?
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« Reply #1 on: October 22, 2014, 11:07:12 PM »

You would be in breach of your mortgage terms so the lender would have the right to ask you repay the loan in full. To be fair, it's very bad press for banks to do this so they tend not to be draconian with individual investors. Also, it is in their interest for you to not default on the loan as they then need to get an illiquid asset off their books. (I happen to price consumer credit debt products.) Check the Ts&Cs of your mortgage agreement.
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« Reply #2 on: October 23, 2014, 12:22:00 AM »

You would be in breach of your mortgage terms so the lender would have the right to ask you repay the loan in full. To be fair, it's very bad press for banks to do this so they tend not to be draconian with individual investors. Also, it is in their interest for you to not default on the loan as they then need to get an illiquid asset off their books. (I happen to price consumer credit debt products.) Check the Ts&Cs of your mortgage agreement.

Don't forget about sticking you on the nationwide "hunter system" that they use for deception.  Once on the system waive goodbye to dealing with banks/finance companies/credit agencies etc etc.

Pori's advice is very poor indeed "in their interest for you to not default on the loan" is not correct.  They call in the loan, you pay or they repossess the house.  They sell the repossessed house for what you owe them, which would be the price you bought the house for, minus your deposit.  No skin of their nose if they sell it for just the amount owed on the mortgage so say goodbye to your 20, 25 or 30% deposit.

Pori - to suggest that they would turn a blind eye to mortgage fraud/deception or breaking of the T&C's for the fear of having 'bad press' is nievity in the extreme.
« Last Edit: October 23, 2014, 01:15:34 AM by Riptide »
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« Reply #3 on: October 23, 2014, 09:16:02 AM »

Nothing would happen.

Provided you earn enough to pay the monthly amount.

Loans are based on risk, a BTL is more risky than a residential mortgage, and will be more expensive.

I assume though that you have a pre 2008 BTL mortgage where you are just repaying the interest at something like .25% over base.

There is every chance that if you inform them of a change in circumstance they may wish to "renegotiate"

But then again I doubt it.

The other way around is much more of a worry to bank.

Mt little mind would think, at some point you got them to change your postal address from your old home to your BTL address, if challenged I would just say that this constituted you notifying them of the change in circumstance.
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« Reply #4 on: October 23, 2014, 10:35:17 AM »

That's just not correct Boboff.
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« Reply #5 on: October 23, 2014, 10:47:55 AM »

You would think, wouldn't you?, that common sense dictates this is not a big issue?

A BTL mortgage is a more expensive product - the Lender gets more money from it. Isn't it the other way around - when people are letting out their property on a residential mortgage - when Lenders, justifiably, get antsy about it?

This scenario appears to be more like the person paying the mortgage is unnecessarily paying more than they would need to as they could have a cheaper residential mortgage?

It's still obviously not right and if made, or became, aware, you would think the Lender must take some kind of action. Best to do things by the book with mortgages. Is there a reason why you have a BTL mortgage on a property that you are living in and - can it be changed?

Everyone's circumstances change over time and this is why things like CTL exist, right? I bought an apartment in 2010 and lived there for over two years... when I decided to move I wanted to let it out rather than sell-up... so I applied for CTL from my Lender, who were happy to agree (for a nominal admin. fee)... my circumstances changed and there's a process in place to handle it. You would hope that the same would exist, but in some kind of opposite way around.

I suspect the question is deliberately simplistic and the real situation might be much more complex, maybe we will find out.
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« Reply #6 on: October 23, 2014, 12:26:54 PM »

Residential Mortgage are regulated products - Buy to let mortgage are unregulated products, there is a big distinction.
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« Reply #7 on: October 23, 2014, 12:33:22 PM »

Mr Tide

Could you elaborate on your POV on this.

You are a reasonable guy, and your stance on this is not in your normal range as I see it.

There must be a reason.

I cant really understand how a BTL mortgage is not regulated? When the providers are normally ones who do residential lending, commercial, specialist, asset finance etc as well as BTL and these I would assume are regulated also
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« Reply #8 on: October 23, 2014, 12:49:20 PM »

Because it's fraud Boboff.

Yours, Hippos and Poris view is as long as the monthly payment is being made then there won't be a problem is just not true.  If someone fraudulently obtained a mortgage by any means, be that faking payslips, faking identity, complete non disclosure etc, do you think everything would be hunky dory as long as the monthly payment was made?

So whatís the problem?

Taking out a buy-to-let mortgage for a property you will live in is mortgage fraud and breaches the terms and conditions of the loan. In the worst case scenario lenders could demand full and final repayment, which would force many borrowers to default.
Lenders have been cracking down on this for some time and brokers say it is now almost impossible to pull the wool over their eyes. Most now refuse to offer a buy-to-let mortgage to a borrower who does not own their own home.

Extract from this article http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/11031884/Desperate-first-time-buyers-warned-over-attempts-to-use-buy-to-let-mortgages.html

And the fraud wouldn't stop at living in the buy to let.  If you wanted to continue living in the property and have no trace of you at that property then any credit searches and legal documents any address you give to an institution would have to be something else than the BTL address.  This would include lying to your car insurance company about the address where the insured car lives as they do credit/address checks (another fraud), not changing the address on your driving licence (Potential £1000 fine)

I'm not saying you won't get away with it 1000's of people get away with fraud on a daily basis.  Hell, you could even be renting a house off the council, why not buy a bigger house on a BTL, interest only and then sub let your council house out to pay for it (another fraud, but why stop there?)
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« Reply #9 on: October 23, 2014, 01:12:55 PM »

Thanks

See it never crossed my mind that you would prefer, or even could get a BTL mortgage and not a "normal" one.

I saw it more as circumstances changing, got two houses, ones let out on a BTL mortgage, you sell your home and move to the one you previously let out, as your circumstances have changed.


Obviously setting out in the beginning to defraud the bank is not right in any way shape or form.
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« Reply #10 on: October 23, 2014, 01:13:46 PM »

Yours, Hippos and Poris view is as long as the monthly payment is being made then there won't be a problem is just not true.

I would add - for the record - that that isn't my point of view... you should see that I said it's not right and it's best to do things by the book. I merely questioned the downside for the Lender, as a BTL mortgage would bring in more money than a residential mortgage, that is all. I then admitted curiosity as to the reasoning behind the request... expecting to be advised it was due to a change of circumstances, not an intentional (and rather odd, you've got to admit?) attempt at fraud from the outset.

I'm certainly not advocating trying to get away with it.
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« Reply #11 on: October 23, 2014, 01:16:00 PM »

I don't see any advantages here.

Residential mortgages are a lot cheaper, so why not switch if you can? And why "get caught"? Why not just inform the lender of the situation? Lenders worry more about BTL properties than residential.

There may also be problems with the building insurance if it doesn't all add up. Insurers already make it difficult enough to claim, I doubt they'd hesitate to void the policy if you were to claim and there are incorrect declarations (fraud).
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« Reply #12 on: October 23, 2014, 01:18:46 PM »

I don't see any advantages here.

With current criteria getting an interest only residential mortgage is virtually impossible.  The same is not true for a buy to let mortgage.
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« Reply #13 on: October 23, 2014, 01:21:48 PM »

With current criteria getting an interest only residential mortgage is virtually impossible.

EDYT1912 would need to corroborate that assumption, it could easily be a repayment BTL, but I'm not sure whether EDYT1912 will be back.
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« Reply #14 on: October 23, 2014, 01:21:49 PM »

With current criteria getting an interest only residential mortgage is virtually impossible.  The same is not true for a buy to let mortgage.

OP needs to clarify whether this is an existing policy or a new policy...

I automatically assumed this is an existing policy.
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« Reply #15 on: October 23, 2014, 01:25:25 PM »

True.


Which is what I had summised in the first place.

My Mums in this situation. She got an interest only BTL back in the day, when they ran and lived in a pub. When they moved out of the Pub, they were better off renting, and keeping the favorable mortgage on the BTL, than selling it, and using the equity in a place of there own.

I personally dont agree with that either, but in fairness it is just stupidity rather than fraud.

I hope he comes back and gives us more detail now, it's been worthwhile and it's opened up a new line of thinking about these situations.
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« Reply #16 on: October 24, 2014, 01:45:10 PM »

Hi thanks for an answers.
We have got residential mortgage right now, but if I do re-mortgage with another lender on BTL  I can release some money from my property.
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« Reply #17 on: October 24, 2014, 01:56:01 PM »

OK, on the face of it that sounds like the intentional path to mortgage fraud that was warned of by Riptide. The forum cannot advise you any other way than say - do not do this.
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« Reply #18 on: October 24, 2014, 02:14:36 PM »

Hi thanks for an answers.
We have got residential mortgage right now, but if I do re-mortgage with another lender on BTL  I can release some money from my property.

Don't understand that, the loan to value on a residential mortgage is higher than what you can get on a buy to let mortgage and the rates are lower aswell and what you propose IS OUT AND OUT MORTGAGE FRAUD.
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« Reply #19 on: October 24, 2014, 02:55:35 PM »

Alight Tidy boy, calm down! 8)

He's only asking.
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« Reply #20 on: October 24, 2014, 03:50:56 PM »

It's fine, first of all he will have to get a broker to do it, which if any broker values their career, won't.  Next he has to put the address of where he's living and the address of the BTL mortgage property on the application (those being the same) which won't get past underwriting at the bank/BS and if by some miracle it did would be flagged up for a persons/property check on a regular basis from that point forward.
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« Reply #21 on: January 24, 2015, 02:13:26 PM »

This is a criminal offence, so the answer to the question is that you could be fined or go to prison. The value of any mortgage obtained can be treated as the proceeds of crime, and if you can't pay back the money your property could be confiscated.

Of course this is the worst case scenario and I dare say it's very unlikely - but you did ask!
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« Reply #22 on: March 01, 2020, 09:49:46 PM »

Hi all,
I bought a house with an unregulated BTL mortgage using my divorce settlement as deposit with a fixed five years mortgage.
I also have a residential mortgage on a small flat where I reside.
Now my partner who lives separately decided to move in with me. My flat is too small for us.
We would like to move into my house. I have two questions:
1. I canít pass the residential Mortgage affordability on this big house.  I mean I can easily afford the payments , given my life style and the fact my partner will share half the living cost, but my sole income wouldnít qualify for this amount of residential mortgage. Can I still change my mortgage to residential?
2. Iím turning the loft into a separate flat to rent out. What would happen to that if I switch to residential?

Thanks in advance. Too complicated I know.

« Last Edit: March 01, 2020, 09:58:16 PM by Sara »
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