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WHEN “TO-LIVE” TURNS INTO “TO-LET”: PERKS AND PERILS

Posted on Monday, 21 October 2013 04:38PM by Artful Lodger
Purchasing a flat for oneself always seems to be an occasion to celebrate and declares one’s permanent settling down in a particular place. But certain life circumstances, like temporary transfer overseas or moving in with the life partner, could bring up issues of handling your own property and its mortgage in the best possible way. At first glance it makes a lot of sense to rent your accommodation out, but aren’t there some legal points to consider?

First of all, should you get the information concerning your intentions across to your mortgage lender? Remember, if for any reason you terminate your residence in the accommodation bought on trust, you have to impart this decision to the lender without a moment’s hesitation. The thing is interest rate on a buy-to-let mortgage could be twice as high as that on a residential one. This peculiarity is determined by the level of risk that both kinds of borrowers carry – residential ones tend to be more reliable in terms of meeting due deadlines. Obviously, it’s quite natural for building societies to want to earn more as it is for creditors to charge their clients higher payments. So concealing your plans of subletting your flat from whoever has given you the loan might lead to numerous implications and, moreover, pose a threat to the possibility of potential loans in the future. In case your lender decides to officially accuse you of mortgage fraud (and he has a right and a reason to do this), he will either bring you to court or make you pay your debt up right away and this record will be exposed to any future creditor. So, even if surrendering a beneficial mortgage deal doesn’t seem to be a good option, think about the perils of not doing this.

Secondly, will you necessarily be obliged to switch to a buy-to-lend kind of mortgage? Luckily, this issue is negotiable and the outcome will be based on peculiar circumstances and the lender’s decision. If things shape up in your favour, you may arrange a consent-to-let agreement, with or without additional charges (administration fee). However, you are not guaranteed retaining a standard mortgage and there still is a possibility you will have to change it or your rate will remain the same only for a restricted period of time. Generally, there is no time limit before the newly-fledged proprietors are supposed to let a home out but it’s of a great significance for the lenders to be aware of whether immobility is bought as an investment property in the first place. Anyway, if you have veritable motives to request a rental allowance, be sure you and your creditor can concert.

Thirdly, what tax or insurance issues might you face? Of course, lots of people overlook these matters for years, but you don’t want to be hiding from a tax inspector, do you? So just don’t give them a reason for worries. Another thing you should definitely take care of is landlord’s insurance policy because a regular residential one will not be paid out in case of an accident.

And finally, who can you let it out to? In this question your perspectives are wide open. Fortunately, you have a wide variety of sources for finding lodgers these days and provided you settle all the legal matters listed above you are welcome to use any of them, starting from browsing classified websites like Localmart UK and finishing with spreading information word-of-mouth about your accommodation for rent among your acquaintances. Don’t forget to make sure your rental agreement also meets all the legal norms and then you are good to go.

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