A reader from Scotland wants to move in with her partner and rent out her flat.
However, she is in negative equity and is worried about getting a buy-to-let mortgage.
Drawing on years of experience, mortgage adviser Katie Tucker – of mortgage broker Mortgageforce – tackles the problem.
Karen from Edinburgh asks:
I’ve owned and lived in my flat for two years and originally put down a 10% deposit.
I expect I’m nearly in negative equity now.
I’ve just moved in with my partner and hope to rent out the flat.
I’m told I need to advise my mortgage lender but will they want me to have a lower loan to value ratio because it’s now, in effect, a buy-to-let mortgage?
Officially speaking you are breaking the terms of your mortgage by letting the property, and you are expected to contact the lender for “permission to let”.
They may charge a fee, or add another per cent or two onto your mortgage interest rate.
Given the circumstances, they are obliged to look upon your situation favourably and may give you permission.
They might also turn you down.
Overall, the lenders make very little money from permitting to let, as few people actually own up, knowing that lenders don’t tend to do drive-round inspections unless you start missing mortgage payments.
If you have a question for Katie, go to the myfinances.co.uk Ask the Mortgage Expert section.
For more information on the issues discussed here, go to www.mortgageforce.co.uk.
Mortgage Force Ltd is authorised and regulated by the Financial Services Authority, and is entered on the FSA register (www.fsa.gov.uk/register) under reference 301046.
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