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Should I sell my buy-to-let flat or keep it?

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Q In 2006 I bought a flat on the south coast. Looking back I had no clue what I was doing and got caught up in an unrealistic bubble that burst soon after. I live in rented housing in the south and couldn’t really afford to buy anything. But I thought I would get a buy-to-let mortgage and that holiday letting would pay the mortgage and that at some point I would own it as I would otherwise never be able to buy in the area I live as my work has always been unstable freelance.

I was refused a buy-to-let mortgage (they said there was no guarantee it would let for enough weeks but I knew it would because of the seaside location) so I asked for a domestic mortgage, planning to live there within a couple of years and thinking it was no big deal. But my circumstances changed and I have not moved.

Now 15 years later it has been a successful let, covering the interest-only payments and the costs of managing it. But it has hardly reduced the bulk of the mortgage which I likely paid well over the odds for.

My question is should I keep it in the hope that there will be more money in it in 10 years so I have more for retirement? My other main worry is that the flat has been registered as a business and I pay tax on it but the mortgage company think I live there. I worry if I do anything I will rock the boat and flag up the issue, I’ve read that the mortgage company can demand the whole payment (I owe £190,000). If I sell does my mortgage company know anything other than I am selling? If I keep it and try to get a new mortgage with another lender, will it be flagged I live elsewhere?

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If I sell I won’t be buying anything else I will subside my low income and have a better life for a few years. It won’t be enough into older age but at least I can enjoy a few years that I may or may not live beyond. I would appreciate any reality check you can give me.
AN

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A I’m not surprised that you were refused a buy-to-let mortgage at the outset as they are for properties that are let to permanent tenants rather than holidaymakers. I am flabbergasted that you were granted a residential mortgage given that they already knew that you weren’t planning on living there.

I’m also not surprised that the bulk of the mortgage hasn’t gone down as you clearly have an interest-only mortgage where – unlike with a repayment mortgage – no part of the monthly mortgage payment is used to pay off the original mortgage loan. And you are right to worry that if you let slip to your mortgage lender that you do not live in the property, it may require you to repay the mortgage in full because you have breached the terms of the loan.

If you say nothing to your current lender and sell the flat, the lender won’t necessarily know anything other than that you are selling and will clear the mortgage. If you try to get a new mortgage with a new lender of course it will be flagged that you live elsewhere because you are supposed to tell the truth on any mortgage application.

In the (much) longer version of your question, you ask if you could try for a buy-to-let mortgage but for the reasons already given, the answer is no. It might be worth approaching a lender which specialises in loans for holiday lets but you may find it’s too expensive compared with your current mortgage.

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The reality is that, even if it’s by accident, you are currently committing mortgage fraud which is a criminal offence. I suggest that you find a solicitor specialising in mortgage fraud for advice on putting things right.

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