Getting Consent To Let: Can I Let My House Out?

So, you have been living in your home for a few years but your circumstances have now changed. Perhaps you have a job move out of the area, you’re moving in with a new partner or you are going traveling or moving abroad for a couple of years. You decide you don’t want to sell your property and so it makes sense to rent out your home while you are not living in it.

If you need to move out of your property, one of the first questions you will ask yourself is ‘Will my mortgage lender let me rent out my property on my current residential mortgage agreement?’

Can I Rent Out My House Without Telling My Mortgage Lender UK?

No, you will not need to inform your lender before renting out your residential mortgaged property. In the UK, renting without informing your mortgage lender could breach their agreement as most mortgages are set up to allow owner-occupied homes only. Before renting, get your mortgage lender’s permission by obtaining “consent to let” from them as failure to do so may lead to severe consequences such as immediate repayment and legal action being taken against you or even switching over to a buy-to-let mortgage which specifically caters for landlords – always check your terms carefully and consult your lender first so as not to run into issues or risks!

What Is Consent To Let?

Simply put, Consent To Let is approval from your mortgage lender that allows you to let out a property for rental. If the mortgage doesn’t qualify as buy-to-let mortgage, consent must first be sought from both the mortgage and tenants before renting it out. Furthermore, landlords may need additional consents such as from:

• Any housing association or organisation regulating property e.g. shared ownership.
• Any adult living with their landlord as husband, wife, or partner and who may have occupancy rights.
• Insurance provider for the landlord who must confirm coverage will remain intact when renting out property

How To Let Your Property with a Residential Mortgage

Before you consider letting your residential mortgaged property out you will need to get a consent to let. Below is a summary of how you should go about this and what actions you need to take if you are considering letting your property as well as a few possible options open to you that you may not be aware of.

1) Look at your mortgage offer

Start off by looking at your mortgage arrangement. When you took out your mortgage you would have received a mortgage offer from your bank or building society. In the mortgage offer, also known as a mortgage contract, the terms are laid out regarding the lender’s rules and requirements for letting out the property, including whether they will allow this. It is always recommended to work with a mortgage expert like a broker to explore your options and make sure you do everything above board.

2) Contact Your Mortgage Lender

If you are unable to find your mortgage offer, you could call your mortgage lender directly or speak to a broker and ask them what you would need to do if you wanted to let out your property. Be careful at this stage as it might make your lender nervous if they feel you intend to do this. If the terms in your mortgage offer do not allow you to rent out your property and you choose to do so anyway, you would technically be breaking the terms of the mortgage. Your lender could view this as fraud and insist that you repay your mortgage immediately.

3) Getting Consent to Let

Some banks and building societies will permit you to let your property and will let you keep your mortgage on the same terms and issue consent to let. This is your best option if it is open to you, as it will have less paperwork and costs involved.

Some mortgage lenders will give you consent to let the property but at a higher interest rate. It is worth considering this option depending on how much the increase in interest rate is and how much extra per month this will cost you.

A consent to let will be reviewed by your mortgage provider every year. It is seldom a long-term answer if you intend to let the property for several years however they can be very useful to either get to the end of an early redemption period or if you are only wanting to let the property for a short term.

4) Consider Speaking to a Mortgage Advisor

Getting advice from a mortgage advisor could save you a lot of trouble and money. Not only will a mortgage adviser be able to understand your original mortgage offer and let you know what your lender’s rules are if you cannot find your mortgage offer they will also have an understanding of the different banks and building society’s policy on letting a property while on a residential mortgage and will advise you on this.

When do I need to get consent to let?

As soon as you decide to rent out your property, contact your mortgage lender immediately to arrange permission to let. There may be certain instances in which consent for let may be beneficial:

• Fixed-Term Mortgage Adaptations: If you’re locked into a fixed-term mortgage deal but need to move, obtaining consent to let allows you to rent out your property without incurring early repayment fees. This consent typically lasts for the remainder of your mortgage term, after which you might transition to a buy-to-let mortgage or sell.
• Living Abroad Temporarily: For homeowners moving overseas temporarily with plans to return, consent to let offers a way to generate income from your property during your absence, helping cover living costs abroad.

How Much Does Consent to Let Cost?

Though many lenders can be accommodating, consent to rent may still be denied under certain circumstances, such as having insufficient income, equity issues, or participating in Help to Buy/shared ownership schemes. A history of missed mortgage interest payments could also diminish eligibility.

Can Consent To Let Be Refused?

Yes, it’s entirely possible for consent to let to be refused by your mortgage provider. Every lender will have specific criteria used to make decisions about consent requests. Typical reasons why a lender might refuse consent include:

Income and equity

You may require a minimum income to get permission to let. You may also need to have a certain amount of equity in your property and earn a rental income that will cover the mortgage.

Mortgage length

Some lenders won’t give consent to let until you’ve been with them for a certain amount of time. If you have held your mortgage for less than six months, you may struggle to get consent to let, but you should talk directly with your lender to find out.

Mortgage payments

Gaining consent to let can be challenging if your mortgage repayments have fallen behind since lenders deem consistent payments a sign of financial reliability. By paying any arrears promptly and maintaining timely payments, addressing arrears and maintaining timely payments, your chances of gaining consent increase greatly and lenders gain peace of mind that their investment is secure and safe.

Help to Buy or Shared Ownership

Shared ownership and Help to Buy mortgages usually have restrictions on letting the property. Any shared equity or government loan would have to be paid before converting to another type of mortgage.

What are the consequences of renting without permission?

Renting out your home without first getting permission from your lender can violate your mortgage agreement and have serious repercussions. Doing so is mortgage fraud and there will be consequences including possible foreclosure proceedings or financial penalties such as:

• Additional interest may be charged on top of the rate you’re paying
• A regular additional payment may be charged
• You may be charged backdated payments for any extra interest or additional payments made whilst letting the property out

Consider Switching To A Buy To Let Mortgage

The good news is you may well have another option open to you, especially if you are thinking of letting your property for several years or more. There is a mortgage that is just for this scenario. The mortgage is called a buy-to-let mortgage. Buy-to-let mortgages are designed for individuals who wish to invest in property with the intent of renting it out later. This could be a good option if your current lender is refusing consent to let for your residential mortgage property. Here are some additional factors you should keep in mind:

• Eligibility: Lenders will typically look at the potential rental income from the property to assess your eligibility for a buy-to-let mortgage, rather than just your salary.
• Deposit: The deposit required for a buy-to-let mortgage is usually higher than that for a residential mortgage, often around 25% of the property’s value or more.
• Interest Rates: These mortgages can come with variable or fixed rates, but interest rates tend to be higher compared to residential mortgages.
• Tax Considerations: The income you earn from renting out the property will be subject to income tax, though you can often deduct mortgage interest and other allowable expenses before calculating your tax liability.

What to Do Next

If you’re considering switching to a buy-to-let mortgage, here’s a list of steps to guide you:

1. Research Lenders: Start by researching various lenders and the buy-to-let mortgages they offer. Compare interest rates, fees, and terms.
2. Consult a Mortgage Advisor: A mortgage advisor can help you understand your options, navigate the application process, and find the best mortgage for your situation.
3. Calculate Costs and Potential Income: Assess the potential rental income against the mortgage payments, maintenance costs, and any other expenses to ensure it’s a viable investment.
4. Prepare Your Property: Ensure your property meets all the legal requirements for renting out, including safety standards and energy efficiency.
5. Apply for a Buy-to-Let Mortgage: Once you’ve chosen a lender and mortgage product, submit your application. Be prepared with financial documents and details about the property.
6. Consider Property Management: Decide if you’ll manage the property yourself or hire a property management company to handle tenant relations and the tenancy agreement, maintenance, and legal compliance on your behalf.
7. Stay Informed about Legal Obligations: Keep up to date with landlord laws and regulations, including tenancy agreements, deposit protection schemes, and property standards.

Frequently Asked Questions