The term boomerangers has been coined to describe those struggling homeowners who are being forced to return home to live with their parents following the credit crunch.
For those who are returning home however, some have been shocked by the high level of the mortgage charges to do so.
The charges are for what mortgage lenders call a ‘consent to lease’. This is when a mortgage lender will permit a change to the terms and conditions of a mortgage allowing a borrower to let out their home under their current mortgage rather than moving to a buy-to-let mortgage deal, which normally requires a higher level of equity in the home and also a higher interest rate.
This ‘consent to lease’ is generally only granted if the borrower is experiencing financial difficulties or can prove they need to move for work reasons. In other words, they are not simply doing it for financial gain.
The consent to lease is a lifeline for many borrowers and often the only alternative to eventual repossession by this point but many have been surprised at the level of charges that come with it.
Mortgage lenders charge anything from £75 to £1,500 as a fee for this permit. Some mortgage lenders state it is an administration fee, others say the fee reflects the increased level of risk the lender is then exposed to and is a better, cheaper option than remortgaging to a buy to let deal. The charge and conditions faced by the borrower vary widely from lender to lender. Some limit the time you can do it for, some charge a fee and some will increase the interest rate slightly. All will require evidence of the income you can achieve through rent and in all cases, if this is something you may need to do, get advice from a rental agent.
Although the charges may seem unfair, mortgage advisors will often say that if it means you can ride out the market and avoid repossession then the fee is worth paying.
For those doing CeMAP training courses or studying for the CeMAP exam at the moment, there is nothing in the syllabus that really covers this but it is important to remember that the buy to let mortgages market is not currently regulated by the FSA and so there is nothing governing ‘unfair charges’.
