Renting out home on a short-term basis whilst on a fixed rate

by ysanthe2 16 August 2012 |

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We pay £650 a month on our high interest rate mortgage (around 6.5%) and we have hit financial difficulties. We are considering renting out our house and moving back in with my parents temporarily.

We would only receive around £550 a month in rental income, but we could easily afford the difference from the £650 mortgage (as we still have one income and would have to pay little to my parents). We have already had a 3 month mortgage break last year and missed, but then repaid, a couple of monthly mortgage payments the year before.

I doubt we have more than around 5% equity. I am worried about telling the lender, Halifax, and being denied 'consent to let'. We would possibly lose the house if that were the case.

I have read many people do not tell their mortgage lender and the worst they can do is switch you to a higher rate (and make you pay however much you would have missed on this rate). Although our rate is already high.

Can anyone please offer me any advice?

Thanks

Laura

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Comments (5)

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MikeGG1 posted
How long have you had this mortgage and how long has the fixed rate still to run?

Could you afford to pay interest-only until it expires?

Mike
Posted on 16 August 2012 | Love 0 loves Report
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ysanthe2 posted
We started it at the Feb 2009 and were on an even higher interest rate- 7.5%. My parents have recently spent £4000 on it so it is now reduced, but still a lot. It's 5 years fixed rate, finishing the start of 2014. Would we be eligible to pay just interest only? I'm not sure how much that would be. That may be an option. Would there be any fees for switching to interest only until then do you think?

Thanks very much for your advice, I hadn't considered that as an option so far

Laura
Posted on 16 August 2012 | Love 0 loves Report
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MikeGG1 posted
If you are on 6,5% interest, take the latest outstanding mortgage amount and multiply it by 6.5% and divide by 12 to get the monthly amount. If the mortgage only started in 2009, you won't have reduced it by very much. Also, there won't be a big reduction.

If you can afford that route, ask the lender for a temporary switch to interest-only until the end of the fixed rate period. I am sure that they would not want you to default.

Mike
Posted on 17 August 2012 | Love 0 loves Report
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ysanthe2 posted
Ah in that case I don't think we could afford that option. What do you think our chances are of getting permission to let do you think?

Thanks

Laura
Posted on 17 August 2012 | Love 0 loves Report
879

MikeGG1 posted
Laura

It is probably best to discuss all the options with the lender. They would probably allow it for the 18 months. However, they might also allow you to roll over some of the interest until SVR kicks in.

This all assumes that you could afford the payments on SVR. You also need to be aware that interest rates must eventually increase so you need to think about a second income.

Mike
Posted on 17 August 2012 | Love 0 loves Report

Renting out home on a short-term basis whilst on a fixed rate

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