Threatened with repossession - No arrears

[007flyingfish]

In 1999 I bought a 1 bedroom flat in the south of England for £80K. In 2004 I changed employer and was posted overseas to Spain. At the time I wrote to my mortgage company, Direct Line to ask whether they would grant permission for the property to be let. They did. (I don't have a copy of that letter). In 2005 I left that job and remained in Spain, still making regular monthly repayments, I haven't missed a single repayment, and have made some capital repayments. The anount outstanding is now about £22K, and the property is worth about £120k.

When I received my latest mortgage statement in August 2008 I wrote to Direct Line as I had moved within Spain and updated my Spanish address. They then wrote back and told me that they would not permit any further letting of the property. They said that Direct Line provides mortgages for people to live in, and that they are not a buy to let lender.

Several letters have been exchanged since, and I have been granted a reprieve until early September when the current tenancy agreement ends. However they have stated quite clearly that they will apply for a repossession order if I continue to let the property after this date as I will be in breach of the terms and conditions of the mortgage.

It is interesting to note that if I board up the property Direct Line have indicated that I will not be in breach of their T&C's but I would really like to keep the rental income, as it is supporting my partner who is currently employed.

Does anyone out there have any advice?

[enaid]

Re: Threatened with repossession - No arrears

Hello flyingfish and a warm welcome to beagles,
I am not an expert on this matter at all, I would however in this instance send them an SAR (subject access request) this will instruct them to send all the info they hold on you.
Here is a link for the info you need on this and also the letters you need to send. Legal Beagles
Hope this helps .
Enaid x

Think this is the bit you should be most interested in receiving, they should have copies.

wrote to my mortgage company, Direct Line to ask whether they would grant permission for the property to be let. They did. (I don't have a copy of that letter)

[Amethyst]

Re: Threatened with repossession - No arrears

Can you move your mortgage to a buy to let provider or are there early payment clauses etc?

[007flyingfish]

Re: Threatened with repossession - No arrears

Enaid & Amethyst, Thank you both for your quick replies. I will send the SAR and update the forum in due course. Re-mortgaging unfortunately isn't an option for us as we can't find a mortgage. I am currently self employed and living in Spain and my partner, whose name the UK mortgage is also in, is currently unemployed - so we're not a good risk. Letting the UK property is really the only thing keeping our heads above water at the moment!

Any other advice or comments from other members would still be appreciated whilst I submit the SAR.

Thanks!

[natweststaffmember]

Re: Threatened with repossession - No arrears

I would probably disagree with the risk aspect to it because of this bit in your post.

"The anount outstanding is now about £22K, and the property is worth about £120k."

The equity in the house is in itself a positive and the fact that the property has been let out for most of the time you have had it is another positive.

[Happyolddog]

Re: Threatened with repossession - No arrears

I tend to agree with Nattie on this one, you have kept up payments and are therefore a low risk borrower. Have you tried other lenders? I am sure there are some out there waiting for your business.

Good Luck,
Hod..Liam.

[007flyingfish]

Re: Threatened with repossession - No arrears

We have tried so many different lenders, and all have said no. We've also contacted a couple of Financial Advisers, including one linked to the agency we let the property through - all have come back with a resounding NO! In spite of the equity, and that fact that the property is in a sought after location for rental, the sticking point seems to be that we are both overseas and only have one income through self-employment. Re-mortgaging would be the most practical solution, but trying to get Direct Line to reverse their decision is the only action we can take as we have exhausted the re-mortgaging option.

[Sapphire]

Re: Threatened with repossession - No arrears

If I were you I'd write and explain all this to Direct Line and emphasise the fact that you've never been behind and only have a small amount outstanding on the mortgage etc.
If you want do a draft letter on here and one or another of us will pop along and check and adapt it for you, between us all we could get somewhere. I'm not promising anything but its worth a try isn't it.

[Paule]

Re: Threatened with repossession - No arrears

Letting the UK property is really the only thing keeping our heads above water at the moment!!

If youre figures are right, and the bit above is correct.

Why dont you put it on the market for sale, which would leave you with an amount which you could buy another house outright, mortgage free, and then you can rent it out.

ie:
Worth 120K
Owe 20K
Sell it for 110K - 20K you owe leaves you with 90K to either support you through your current financial situation or to buy another house outright.

How have you been applying for mortgages? You, your partner or joint?
Which lenders have you approached? Mainstream or specialist
Which Financial Advsiors? UKwide or local agents

PKea

[007flyingfish]

Re: Threatened with repossession - No arrears

Hi Sapphire - This is the letter we wrote to Direct Line:-

I refer to your correspondence of 30 December 2008.

Thank you for continuing to grant permission for the above property to being let until 03 September 2009. My understanding is that the following options will be available to us from this date:-

1.Return to the property.
2.Re-mortgage with another lender.
3.Pay off the mortgage.
4.Leave the property vacant whilst continuing to pay the mortgage.

Whilst we intend to return to the property at some stage in the future it is difficult to predict when this would be. It could be within 12 months or within several years.

We have tried to obtain a mortgage with other lenders, however in the current financial climate this has been impossible, and it looks unlikely that this situation will change in the near future.

Paying off the mortgage looks the most feasible option, and you will notice that we have already made a capital repayment of £20,000 equivalent to almost 50% of the remaining debt. We will probably be able to find another £5,000 - £10,000 by the 3rd of September, however this will still leave a small but significant shortfall. (The property is valued at approximately £130k, and the remaining debt could be in the region of 10% of the value of the property.)

Therefore leaving the property vacant whilst continuing to pay the mortgage seems to be the best option for us. The lower monthly mortgage repayments mean that we no longer have to rely on the rental income, and presumably we will not be in breach of the terms and conditions of the mortgage? I hasten to add that this is not our preferred course of action, but seems to be the best course of action given your current refusal to agree to further letting after the 3rd of September.

As mentioned in previous correspondence I would like to re-emphasise that your decision to refuse to permit any further lets was a surprise to us. Particularly as we have continuously let the property for the last 4 years following your permission, and when the mortgage has always been paid on time and in full. The statement that Direct Line is not a buy to let lender, was neither outlined to us at the time we accepted the mortgage, nor at the time we were initially granted permission to let the property. Furthermore you have our complete assurance that we did not enter into an agreement with Direct Line knowing that 4 or 5 years later we would temporarily move to Spain.

I am sure you would also agree that your decision to rescind permission to let and to enforce the Terms and Conditions of our mortgage at this stage is particularly frustrating when there is a global banking crisis and when there are fewer re-financing options for people in 'non-standard' circumstances such as ourselves. From Direct Line's perspective there also seems to be little or no acknowledgement that people's circumstances will change during a 25 year mortgage period, nor does there seem to be any considered decision making by the company in respect of customers such as ourselves whose mortgage account you acknowledge has been conducted in an impeccable manner for many years, especially when there is a large amount of residual capital in the mortgaged property.

I would be particularly grateful to receive your comments in respect of the paragraph above, as well as whether it would be acceptable for us to leave the property vacant whilst the mortgage is repaid.

Finally in light of our recent capital repayment and with your knowledge of our impeccable payment history, I would ask that you reconsider your decision and continue to allow us to let the property."


This is their reply:-


"We refer to your corrspondence of 30 December 2008.


We write to advise that Direct Line hereby consent to the above property being let until the end of the current agreement on 03 Sepetember 2009.


After this time we will no longer be in a position to agree to any future lets as Direct Line are not a buy to let lender.


We appreciate that your mortgage account has always been conducted in a satisfactory manner however the terms and conditions on your account state that Direct Line only lend on properties used solely for residential purposes.


Our agreement to let is based on individual circumstances and as you are unable to confirm a date of return we will therefore be unable to agree to any extensions on this date.


We will contact you again nearer the time of renewal regarding your intentions but must re-iterate that if you continue to let the property without our consent you will be in breach of your mortgage terms and conditions."


I agree with Pkea it might be easier to buy and sell, although as our 1 bedroom flat is at the lower end of the market we may find it difficult to buy something for £90K in the same area. My preferred outcome would be to get Direct Line to change their decision.


In terms of mortgage applications we applied to Lloyds, Barclays, HSBC and tried two different financial advisers on the south coast. We've put in a couple of online applications and checked the T & C's for most of the other companies in the mortgage market. To be honest we got a little fed up with applying because it appears that as soon as we say we live abroad our application gets rejected. That's why we went along the route of talking to mortgage / financial advisors. The last one we spoke to felt sure he would be able to find us a mortgage given the equity in the property. A week later he phoned back to say that nobody would lend to us as we lived overseas.

[Amethyst]

Re: Threatened with repossession - No arrears

Have a look at Empty Homes Agency - An Independent Campaigning Charity and some of their reports which state leaving a property unoccupied lessens its value and how it quickly falls into a state of disrepair, although,of course, you would do everything possible to protect your investment. The Empty Homes Agency is government funded. Direct Line would protect their investment by allowing you to continue to let the property until the mortgage is repaid.

Just another point you might make.

[scoobydoo]

Re: Threatened with repossession - No arrears

I agree with the point by Amethyst.

I think they are shootiing themselves in the foot as by their own admission in the letter they can give you permission to let the property - they are just choosing not to.

I would emphasise how the property will be at more risk by being left empty and it will also cost you more in terms of your insurance premiums.

I suggest a clear and consise letter using the info in the last post and asking for them to re-consider and add that by letting the property you intend to repay the mortgage as quicly as possible. Make it clear that when you ook out the mortgage it was intended as your main residence and that subsequent circumstance have resulted in your current position.

If you need help with the letter just shout as there are a few ex BS and bank employees here that can help.

[Paule]

Re: Threatened with repossession - No arrears

Was the original mortgage a 'buy to let' mortgage?

If they originally gave you permission, I would suggest you them a SAR to see what information they hold regarding your mortgage, and see whether they disclose a copy of the letter in which they gave you permission

SAR Information

[enaid]

Re: Threatened with repossession - No arrears

Was the original mortgage a 'buy to let' mortgage?

If they originally gave you permission, I would suggest you them a SAR to see what information they hold regarding your mortgage, and see whether they disclose a copy of the letter in which they gave you permission

SAR Information

Have mentioned that PK in my post as he was given permission, but has not got the letter.

[Emerald]

Re: Threatened with repossession - No arrears

Mainstream lenders usually give permission to let for a set period.

Have you specifically tried for a BTL mortgage? Birmingham Midshires have an offer of 4.99% 3 yr fixed which is a pretty good deal at the moment - you will need a broker, the fees are a little on the high side, but I have always found them to be very good and quick ot deal with. Most good BTL's are based on rental income not your personal circumstances. is your credit record clear?

http://www.bmsolutions.co.uk/product...asp?m_type=btl