Think your lender won’t care if you let out your home? Think again

Martina LeesMortgages, Property marketLeave a Comment

In over your head: Lenders could call in your mortgage if you let out your home without their consent (Phoebe Dill/Unsplash)

In over your head: Lenders could call in your mortgage if you let out your home without their consent (Phoebe Dill/Unsplash)

After two collapsed chains, 14 months in limbo, £2,000 in lost fees and one rogue sighting of Japanese knotweed, friends in west London were on tenterhooks last week as they finalised the sale of their three-bedroom home. Would this be third time lucky? Alas, one piece of paper was missing down the chain.

“It’s really stressful,” says the mother of two teenage sons. “Until we’ve closed the door of the new house behind us, I won’t believe it.” They’ve lost out on one dream home and were forced to cough up an extra £20,000 on their current purchase to avoid being gazumped.

Such are the perils of our archaic home-buying process, in which a deal is binding only at exchange of contracts, after months of slow-dancing solicitors. (There’s a different system in Scotland.) thinks it has the answer: Clicktopurchase, an internet platform that makes the all-important exchange as soon as an offer is accepted. It claims to be the first estate agent offering such security.

“This is a game-changer,” Rob Ellice, the chief executive, tells me as I get a first look. The buyer can’t be gazumped for a higher offer; the vendor can’t be gazundered with a price that is chipped away at the end. “Everyone is committed to that price.” He says it cuts out time-wasters who are testing the water, as both sides must appoint solicitors beforehand. Pull out and you lose your deposit of 5%-10%.

Though Clicktopurchase has transacted on £150m in commercial property plus homes in Ireland, the first British home up for sale this way is a one-bedroom new-build flat in central Croydon, with a guide price of £275,000 (sold by a developer, not a homeowner, note). When I dig deeper, it becomes clear that the system won’t help the many buyers in chains, like my friends, unless the whole chain uses the system. Clicktopurchase offers can (and should) be made subject to surveys and financing, allowing you to back out if your lender says you’re paying too much or if the survey spots, say, dry rot.

We’ve been here before. Remember home information packs? Then Veyo, the Law Society’s online conveyancing portal, was scrapped, despite pitchside advertising at a Six Nations rugby match.

This year, the government is due to consult on the buying process, which costs us £270m a year, as almost one in five deals falls through. Here’s my submission: money talks. Lettings agents often ask for holding deposits, subject to checks — why don’t we do that as a rule for sales? That would have spared my friends months of heartache.

• You might think that, as long as you pay your residential mortgage, your lender won’t care if you start letting your home. Think again. Apart from the fact that you’d be committing fraud, your bank can call in the loan. It’s happening more and more, says Lisa Orme, managing director of Keys Mortgages, who has picked up the pieces in many cases. “Lenders most definitely do care and do take action.”

One accidental landlord who let her home without consent was given three months to pay off her loan or sell — no negotiation. Another client, who had several mortgages with the same lender, breached the terms of one by letting a property by room to sharers. All the loans were called in, with redemption penalties charged on the lot.

• How often do you eat off your floor? With two under-threes in our home, the “five-second rule” very much applies. (That’s despite findings by Dr Ronald Cutler, a microbiologist from Queen Mary University of London, that pizza dropped on a floor contaminated with E coli was covered in the germs, even if picked up quickly. Oops.) Thanks to a poll of 1,009 adults — half with offspring — by, I can reveal that 91% of the nation’s parents do the same. Their excuse? More than half didn’t want to cook again. Now I feel slightly less guilty about our E coli diet.

This column was published in The Sunday Times Home on 31 July 2016

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