Q In 2006 I bought a flat on the south coast. Looking back, I had no idea what I was doing and got caught up in an unrealistic bubble that burst shortly after. I live in a rental house in the south and couldn’t really buy anything. But I thought I would get a mortgage for rental and vacation rental would pay the mortgage and I would own it at some point because otherwise I would never be able to buy in the area where I live because my job has always been unstable freelancer.
I didn’t get a mortgage for rental (they said there was no guarantee it would be rented out for enough weeks, but I knew it would because of its seaside location), so I asked for a domestic mortgage, intending to live there in a few days. years and thought it wasn’t too bad. But my circumstances have changed and I have not moved.
Now 15 years later it has been a successful rental, with interest-free payments and management costs covered. But it barely reduced most of the mortgage, which I probably more than paid for.
My question is, should I keep it in the hope that in 10 years there will be more money in it so that I have more for my retirement? My other main concern is that the flat is registered as a business and that I pay taxes on it, but the mortgage lender thinks I live there. I am concerned that if I do anything I will shake the boat and report the matter, I have read that the mortgage company can demand the full payment (I owe £190,000). If I sell, does my mortgage lender know anything other than I am selling? If I keep it and try to get a new mortgage with another lender, will it be marked as living somewhere else?
If I sell, I won’t buy anything else. I will cut my low income and have a better life for a few years. It won’t be enough in old age, but at least I can enjoy a few years that I may or may not live. I would appreciate any reality check you can give me.
A I am not surprised that you were refused a rental mortgage in the beginning, as this is the case for properties that are rented to permanent tenants rather than to holidaymakers. I’m stunned that you got a home mortgage since they already knew you had no intention of living there.
I’m also not surprised that the majority of the mortgage has not been phased out since you clearly have an interest-only mortgage where – unlike with a repayment mortgage – no part of the monthly mortgage payments is used to pay off the original mortgage loan. And you’re right to worry that if you let your mortgage lender know that you don’t live in the property, you may have to repay the mortgage in full because you’ve breached the terms of the loan.
If you don’t say anything to your current lender and sell the condo, the lender won’t necessarily know anything other than that you’re selling and will settle the mortgage. Trying to get a new mortgage with a new lender will of course indicate that you live somewhere else because you must tell the truth with every mortgage application.
The (much) longer version of your question asks if you can try a rental mortgage, but for the reasons already mentioned, the answer is no. It may be worth approaching a lender that specializes in vacation rental loans, but you may find it too expensive compared to your current mortgage.
The reality is that, even if it’s accidental, you’re currently committing mortgage fraud, which is a criminal offence. I suggest you find a lawyer who specializes in mortgage fraud for advice on how to set things right.