If you have a residential mortgage but are considering renting out your home temporarily, it’s important to know the rules…
Consequences of Taking on Tenants Without Making Your Lender Aware
If you wish to rent out your residential property, you will need to inform your mortgage lender first, as this might change the terms of your original agreement with them. If you fail to do so before taking on a tenant, and you do not have a buy-to-let mortgage, this could lead to serious consequences.
Without your lender’s permission, you may be in breach of your mortgage contract, which could be considered mortgage fraud. This could lead to your landlord calling in your entire mortgage immediately, and they may even repossess your home.
Consent to Let
Consent to let is a formal agreement with your lender allowing you to rent out your home temporarily without changing your residential mortgage. If you’re looking to let out your home on a short-term basis, your lender may give you consent to let. Some lenders allow this if:
- You need to relocate temporarily for work
- You are going travelling
- You are waiting for your home to sell
- You need to relocate to take care of a friend or family member
- You are a member of the armed forces who has a tour of duty in another country
Your lender will usually charge you an administration fee or might increase your mortgage rate during the letting period.
However, it’s important to note that not all lenders will offer consent to let, so you will need to contact them to find out.
Criteria for Consent to Let
The criteria you must meet to be eligible for a consent to let will depend on your lender. However, most lenders tend to require some or all of the below:
- Being with your lender for a minimum amount of time, e.g, 6-12 months
- Not having any late mortgage payments or arrears
- Agreeing to comply with a maximum occupancy
- Obtaining approval from your insurance provider
- Agreeing to rent out your home on an assured shorthold tenancy
- Not applying to borrow more on the property while it is being rented out
- Agreeing to a maximum amount of time to take on a tenant, e.g, 6-24 months
- Some lenders may require that you have a minimum income level, and/or a minimum level of equity in your home
Difference between Consent to Let and Buy to Let
Consent to let is just for those who wish to rent out their property temporarily, whereas buy-to-let is for the long-term. If you intend to rent out your property indefinitely or for an extended period, you may need to consider switching your residential mortgage to a buy-to-let mortgage, which is specifically designed for rental purposes.
Help to Buy and Lifetime ISAs
If you have a Lifetime ISA or a Help to Buy ISA, the money used from the account towards a property must be towards your first home that you intend to live in as a primary residence.
The government website does state that there are some circumstances in which you might be able to sublet your home bought with savings from one of these accounts, but that you would not be able to change your mortgage to a buy to let mortgage until you have repaid your loan in full.