Yes, you do need permission from your mortgage lender to rent out your home. This is known as “consent to let,” and it’s essential to contact your lender before making any moves towards becoming a landlord. Renting out your property without this consent could result in a breach of your mortgage terms, potentially leading to serious financial and legal repercussions.
Our article will explain why you need your lender’s permission, what the process involves, and what other options are available to ensure that you are fully informed before deciding to rent out your home.
What is Consent to Let?
“Consent to let” is formal permission from your mortgage lender that allows you to rent out your property, despite having a residential mortgage. Most standard residential mortgages are specifically intended for owner-occupied properties, meaning that you live in the property yourself. If you decide to let it out, even for a short period, you will need consent to let from your lender to make sure you’re not breaching the terms of your mortgage agreement.
Why Do You Need Consent from Your Mortgage Lender?
Mortgage lenders impose certain conditions based on the perceived risk associated with the property. When you take out a residential mortgage, lenders consider your living arrangements and assess the risk accordingly. When you decide to rent out the property, you introduce new risks, for example tenants may not care for the property as an owner would, and there are potential issues with missed rental payments, which can impact the risk profile of the mortgage.
Failure to obtain consent to let can lead to significant issues. Your lender may consider you to be in breach of contract, and they could demand immediate repayment of the loan or even take legal action against you. This is why it’s important to get in touch with your lender before deciding to rent out your home.
How to Get Consent to Let
Here is a step-by-step guide on how to get consent to let:
1. Contact Your Mortgage Lender
The first step is to reach out to your mortgage lender and ask if they offer consent to let. Not all lenders are open to this arrangement, but most will consider it, especially if you have a good track record with your mortgage payments.
2. Provide Information About Your Plans
Your lender will need to know why you want to rent out the property. Common reasons include relocating for work, moving in with a partner, or temporarily moving abroad. Most lenders prefer a clear reason, as consent to let is often granted for temporary circumstances.
3. Review and Sign New Terms
If the lender agrees, they will set out new terms for your mortgage while the property is rented. This may include higher interest rates or an administration fee. You will need to sign an agreement accepting these terms before you can let the property out.
4. Pay Any Associated Fees
Lenders may charge a fee for granting consent to let. This fee could be a flat administrative charge or a percentage increase on your interest rate.
What Happens if Consent to Let is Denied?
If your lender denies your request for consent to let, there are still some options available:
Remortgage to a Buy-to-Let Mortgage
You could consider switching your mortgage to a buy-to-let mortgage. Buy-to-let mortgages are designed for landlords, often featuring higher interest rates but providing the flexibility you need. Michael Anthony Estate Agents can assist in guiding you through this process.
Switch to Another Lender
If your current lender refuses to grant consent to let, it may be worth considering remortgaging with another provider who does offer flexibility. This can be more complicated but might be worth exploring if your long-term plan is to let out the property.
How Long Does Consent to Let Last?
The duration of consent to let can vary depending on the lender and the situation. Typically, lenders grant consent for a fixed period, such as six months to two years, after which you may need to reapply or consider remortgaging to a buy-to-let mortgage if you wish to continue letting out the property. Always check your lender’s terms to ensure you remain compliant.
Can You Rent Out Your Property Without Consent to Let?
Technically, it is possible, but renting out your home without obtaining consent is highly inadvisable. Lenders can call in the mortgage immediately if they find out, leaving you in a vulnerable financial position. Additionally, your property insurance may be invalidated without the proper permissions, leaving you unprotected in case of damages or accidents.
The Impact of Letting Out Your Home on Insurance
It’s not just your mortgage lender that needs to be informed; your home insurance policy will also need to be updated to reflect your property’s status as a rental. Standard home insurance may not cover damages or liabilities involving tenants, so landlord insurance is required to ensure adequate protection. Failing to do this could leave you exposed to unexpected expenses.
Buy-to-Let Mortgages vs. Consent to Let
You might be wondering about the difference between buy-to-let mortgages and consent to let:
Buy-to-Let Mortgage
A buy-to-let mortgage is intended for properties being purchased with the purpose of renting them out. The interest rates on buy-to-let mortgages are generally higher than residential mortgages, and lenders may require a larger deposit.
Consent to Let
This allows homeowners with an existing residential mortgage to temporarily let out their property without converting to a buy-to-let mortgage. It’s usually a good option if you plan to rent out your property for a limited time or are not ready to commit to a buy-to-let mortgage.
How Michael Anthony Estate Agents Can Help
Renting out your home is a big decision, and navigating the mortgage, insurance, and legal requirements can be overwhelming. At Michael Anthony Estate Agents, we provide a full range of landlord services, designed to make letting your property simple and stress-free. We can assist with tenant finding, property management, and provide expert advice to ensure all legal and financial aspects are covered.
FAQs
What is the difference between a residential mortgage and a buy-to-let mortgage?
A residential mortgage is for properties you intend to live in, while a buy-to-let mortgage is specifically for properties being let to tenants. Buy-to-let mortgages often have higher interest rates and stricter lending criteria.
Can I switch to a buy-to-let mortgage after getting consent to let?
Yes, if you decide that you want to rent out your property on a longer-term basis, switching to a buy-to-let mortgage is usually recommended for compliance and financial reasons.
Does consent to let affect my credit score?
Obtaining consent to let typically does not affect your credit score, but failure to get consent when required can lead to financial issues that may impact your score.
Can I get consent to let if I am in negative equity?
It can be more challenging to obtain consent to let if you are in negative equity, but it’s not impossible. Your lender will assess the situation based on risk and other factors.
How much extra will I pay with consent to let?
The costs can vary by lender, but typically, you might face a one-off fee and a slight increase in your interest rate. Each lender has different terms, so it’s best to check directly with them.
Michael Anthony Estate Agents
At Michael Anthony Estate Agents, we’ve been providing expert estate agent services to our local communities for over 30 years. Our team is experienced in helping homeowners transition from living in their properties to letting them out, ensuring the process is smooth and compliant. We offer a range of services, including:
Tenant Find Services: We help source reliable tenants to ensure your property is well looked after and remains an attractive investment.
Full Property Management: We handle everything from rent collection to maintenance, giving you peace of mind that your property is in good hands.
Market Appraisals and Valuations: Accurate valuations ensure you know the rental potential of your property and how to maximise your returns.
If you’re considering renting out your home, we’re here to help! From arranging valuations and sourcing tenants to full property management. Contact us today via our online contact form and let us help make your landlord journey a success.