Dear Holiday Let Mortgages
We have a question for you, but first a little background to assist you. My wife and I moved home about 9 months ago, from one village to another, literally two miles down the road. The reason for the move was to acquire some more land, so that my wife could build a portable home office outside of the main house.
At the time we decided that it would be a rather good idea to retain our previous home as an investment property.
As we had ample cash at the time for a large deposit on the purchase, we had looked into switching our residential mortgage, on a pound for pound basis, to a buy to let mortgage.
When comparing the interest rates available on buy to let schemes, they seemed awfully expensive when compared against the 0.75% over base lifetime tracker scheme that we were enjoying at the time. I mentioned this to a solicitor friend of ours and he recommended that we ask our existing lender if they would allow us a “consent to let”.
They gave us permission to let, but said that our base rate tracker would be loaded by 1% on the margin over base for the privilege. This still seemed liked the best option at the time, particularly as there were no set up costs.
As we are located in the Lake District and the house is on our doorstep so to speak, on further investigation it appears that we could secure a much better return using the property as a holiday let investment.
Our question to you is, as we already have consent to let, would we be doing anything wrong by letting on a holiday basis?
We are often asked this question.
You are quite right to ask it and yes using a property other than in accordance with the mortgage conditions is regarded as dishonest and various unpleasant sanctions can be applied to those that are not upfront with their lender.
The first thing that you should do is obtain the original consent to let paperwork. We have heard that in some cases paperwork for such consent was not issued; however, in your case because the margin over base was loaded, such paperwork is likely to exist.
In our experience most lenders specifically exclude using the property for holiday letting or bed and breakfast. Even if not specifically excluded, it would be a good idea to ask your solicitor friend for his legal interpretation of the wording.
Unfortunately if the consent does not allow for using your investment property as a holiday let, the only option available if you are unable to redeem the mortgage (not recommended), is to convert the loan to a fit for purpose holiday let mortgage.
If on investigation you find that the consent to let is not worded in your favour, do please ring us for more advice