Consent to Let and Buy to Let Mortgages
Readers of this blog will know that I have consistently questioned why the rates on buy to let mortgage mortgages are so much higher than standard residential ones – a differential that does not seem justified by a worse arrears experience.
Well, I am very pleased to see that the Post Office Financial Services have done some sums and realised that there must be a veritable pot of gold in buy to let mortgage lending and have come out with a more competitive rate and mortgage fee to shake up what must be a profitable market that is currently dominated by a very small number of players.
I rather like the Post Offices 5 year fixed rate of 5.89%, not so much for that rate itself (which is OK all the same) but mainly for the “follow on” rate of 3.49% (or 2.99% above current base rate.) And the fee of £1495 is low too.
Sure, this is not great shakes compared to what was available up until the end of 2007, but it is a well overdue move and may even force the big players to lower their rates. Who knows it may even coax Barclays-Woolwich and the likes of Santander out of their buy to let mortgage hibernation and set off yet more competition?
Not Available Through Mortgage Brokers
The Post Office product is not available through mortgage brokers, so I don’t suppose the usual brokers that many personal finance journalists always seem to go to for a comment are going to give it a big high five, but this product is worth checking out.
(Digression – If you are one of those journalists who are not yet aware of our work, do feel free to ask an independent, non-broker-linked-private rented-sector chap like me for thoughts on new mortgage rates. Now we have comparison sites like Moneyfacts, it’s not rocket science to do this and independent landlord experts like me and Tom Entwistle at LandlordZone are always happy to comment.)
Consent to Let – Don’t Cheat
Today, most people on standard residential mortgages who decide, for whatever reason, they want to let their property will nearly always face a higher mortgage rate to do so.
Getting your mortgage lenders consent to do this is sometimes called “Consent to Let” and whilst it used to often be Okayed for free, the higher mortgage rates on buy to let means that these days, nearly all mortgage companies will now either charge a higher mortgage rate premium on top or make you move to a specific buy to let mortgage product (which will always be at a higher rate.)
One consequence of this is that the temptation is now more enhanced for people to try to cheat by not telling their mortgage lender they have let out the property.
They do this by having post redirected (as post going to a different address from the property with the mortgage on it may lead a mortgage company to ask questions) and of course, getting landlords insurance with someone other than the mortgage lender.
The trouble is, if you get found out, it puts you in breach of your mortgage conditions, is technically fraud and you may have to face whatever penalty the mortgage lender tries to impose on you – which can be draconian. I would advise against doing this.
At a National Landlords Association event a few days ago, where I saw the excellent tax expert Carl Bayley speak, I got talking to a couple whose kids go to my son’s school and who have a very large and successful buy to let business generating about £80,000 of profit and who have millions of pounds of equity in their properties.
Just as they were about to exchange on their next buy to let, someone at the bank who was lending them the money suddenly noticed that their chunky income was all from property letting and investment income and told them that, as they did not have £30,000 of employment income, they would not lend to them after all.
No amount of upward referral of the matter would help and the purchase was lost – the bank in question even agreeing to refund their legal fees and valuation fees rather than honour the deal.
This is dumb “Computer Says No” lending at its worst and I hope is a rare aberration from this particular lender.
If you have had a bad experience at the hands of a bank or building society who should really know better, write and tell us. (I’m afraid we will never print the name of any bank in question but I’m always interested in your stories and if LettingFocus are in discussion with the lender as part of our corporate consulting work, we may be able to raise the matter – with your consent, of course.)
MORE ABOUT LETTINGFOCUS AND WHAT WE DO
LettingFocus.com is the home of Private Rented Sector and Landlord Information.
I’m David Lawrenson, a landlord and property investor myself for over 25 years and author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years. 25,000 copies sold.
Services to Businesses and the Public Sector
Primarily I am a consultant to a range of organisations including banks, building societies, local authorities, social housing providers, institutional investors in build to let and insurers – helping them with their landlord facing or buy to let product strategies, marketing and services.
For example, I help banks improve their buy to let mortgage lending practices and I help housing associations / local authorities find private landlords (private rented access schemes, local letting agency models etc.)
I also write for property websites and am regularly quoted by the media.
Services for Private Landlords
We also find a limited amount of time to help landlords and property investors by coaching them in how to make money in the private rented sector using ways that work, which are ethical, fair to tenants and which involve minimal risk to the investor. We pride ourselves on giving independent unbiased Buy to Let Advice on a one-to-one mentoring / coaching basis or through our (very occasional) group seminars.
AT OUR WEBSITE LETTINGFOCUS.COM:
TO GO TO THE HOME PAGE OF THIS BLOG click here: Blog
You can also use the tags and categories at the bottom of each post to read blog posts on related posts or click on the categories pull down menu over to the top right. (If you want to find relevant posts from before 30 April 2010 you can also click on LettingFocus’s Old Blog – Categories, then search from the list for a topic that interests you.)
THE HOME PAGE OF OUR MAIN SITE click here: LettingFocus Home Page
For general info on our CONSULTING SERVICES and also to find a small sample of links to articles where our comments have been featured in the National Press please click here: Consultancy and Seminars
For ONE TO ONE PRIVATE CONSULTANCY FOR PRIVATE LANDLORDS click here: Property Mentoring
NEXT SEMINAR AND NETWORKING EVENT for Landlords and Property Investors (which now take place just once or twice a year): Next Property Investment Seminar and Networking Event
We have OFFERS on a few services and products here: Services and Products for Landlords
TO READ CLIENT TESTIMONIALS – from both organisations and private landlords click here: Testimonials
BUY “SUCCESSFUL PROPERTY LETTING” click here to Buy the Book at Amazon plus anything else at that Amazon sell. (If you are from an organisation and would like to bulk buy at least 50 books please ask us for special rates (which are lower than Amazon)).
To JOIN our Free QUARTERLY NEWSLETTER simply send an email to [email protected] – Please note we WILL NOT send spam or sell our mailing list to advertisers but please put us on your “white list” to ensure you receive our emails!
IF YOU HAVE A SITE WHY NOT LINK TO THIS BLOG OR TO OUR WEBSITE?
IF YOU SELL SERVICES TO LANDLORDS, YOU COULD BE A PARTNER ON OUR AFFILIATE PROGRAMME. PLEASE GET IN TOUCH!
This blog is updated once a week, usually on a Monday or Tuesday.
For my random thoughts on property and various other things that typically make me grumpy, please see our TWITTER PAGE: Twitter
Copyright of Blog: David Lawrenson 2010.