Guidance on subletting your shared equity mortgage property
The following guidance has been produced for the benefit of shared equity mortgage (SEM) holders that are administrated directly with Hampton Mortgage Servicing Limited and owned by our clients.
Are you able to let your property when you have an existing SEM in place?
No, your SEM contract prohibits the letting of your property. This is because the shared equity product was designed to assist borrowers to initially get on the housing ladder and was not, or is not, intended to support buy to let or investment properties. If you let the property without permission from the clients, this means you are in breach of your contract and are required to pay back the SEM with immediate effect. In the event of the contract being breached in this manner, our clients would be within their rights to take legal action against you to recover the sums outstanding. They would also be within their rights to begin charging the default interest as outlined in your loan agreement from the date of the breach.
Under certain exceptional circumstances permission to let may be considered on a case by case basis, however this is at the total discretion of the client.
How do I know if I have exceptional circumstances?
Each request for consent to let is considered on a case by case basis and it is expected that these circumstances are rare. To assist though we have provided some examples that are considered exceptional and where consent to let may be given:
➢ If one member of your household is a serving member of the British Armed Forces or a crown servant serving overseas or at a base further than 50 miles or 90 minutes travelling time away from their property and you as a family are required to move away for a fixed period;
➢ If you are required to move because a close family member requires you to be their primary carer;
➢ If you had written pre-approval from your home builder when you purchased the property and that approval has not expired.
If you feel your circumstances are exceptional, please send details of your circumstances including, where relevant the following information to firstname.lastname@example.org :
o Evidence from your first charge mortgage holder that they have given consent to let.
o Evidence of your posting (if in armed forces or a crown servant).
o Evidence from a doctor, hospital or health organisation that confirms you are required as a primary carer and the location of this.
o Evidence of pre-approval to let the property from the home builder.
Please note that any consent to let will only be given for a specific period and does not remove any obligations or responsibilities that you hold as the owner of the property. In addition, please be aware that any consent to let does not change, amend or alter the obligation and responsibility to repay the shared equity mortgage on the repayment date or in the event of prior sale or re-mortgage.
Are there any fees associated with granting consent to let?
All fees that can be charged by Hampton Mortgage Servicing Limited are laid out in the tariff of fees, which are provided as part of the annual statement and can also be found on our website. There is a charge associated with granting the formal approval to let and this is currently £90, which is payable when permission is given. A representative of Hampton Mortgage Servicing Ltd will inform you when this fee is due.
Do I have any other options if consent to let is not granted?
The consent to let only needs to be gained via Hampton Mortgage Servicing Limited if your property has a SEM and resulting charge over it*. If the SEM is prepaid in full, consent from the second charge lender is no longer required and it may be possible to repay the SEM at any time, not just on the repayment date. This could be via a number of methods such as selling the property, remortgaging it or via other means.
You should seek independent financial advice on which option is best for you and whether repaying early is in your best interests. Hampton Mortgage Servicing Limited is not regulated to provide advice but if you would like to discuss whether redemption is possible with your particular SEM or the steps that need to be taken to redeem your mortgage, please contact us on 0203 675 9959.
* Please note you may still need to gain permission or meet other requirements from your first charge holder who you may have a mortgage with (e.g. bank or building society etc), and you will need to consider these separately.