Sammie Ellard-King
I’m Sammie, a money expert and business owner passionate about helping you take control of your wallet. My mission with Up the Gains is to create a safe space to help improve your finances, cut your costs and make you feel good while doing it.
Quickfire Roundup:
It is possible to rent out your house with a normal mortgage, but this is only the case if you’re looking to do this on a temporary basis.
In this scenario, you’d need to apply to your lender and get consent to let from them. If you’re looking to rent out your home long-term, you’ll need to apply for a buy to let mortgage.
Technically it is illegal and you may be committing mortgage fraud but there are ways to make it happen which we’ll explain below!
If your circumstances have changed, you may be left wondering, whether renting out your house with a normal mortgage is possible?
There are plenty of reasons to consider renting out your home, such as moving in with a new partner, inheriting a property elsewhere or just not wanting to miss out on your new dream home while yours is still on the market.
Back in 2018, I had the experience of renting out what was my home. I’m going to share just how the process worked, what it meant to my mortgage payments, the process to get consent to let as well as what becoming a landlord really entails.
Table of Contents
How can I rent my house out on a normal mortgage?
If you’re looking to rent out your home temporarily, and you have a residential mortgage, the good news is that there are steps you can take that keep you within the rules.Â
Most lenders will grant consent to let for a set period of time while your current mortgage deal still has time to run.
That’s the good news. The bad news is that if your lender refuses to give you consent to let, you can’t go ahead on your current residential mortgage.
Likewise, if you’re looking at long term renting, consent to let isn’t going to cut it. In both cases, you’ll need to apply for a buy to let mortgage.
I was looking at renting out my home for the long term, so sought out a mortgage broker to help me find the best deal.Â
They found me the best mortgage lender for my circumstances and this meant that I was able to make money from the property each month generating rental income.
What if I just rent out my home and don't tell the mortgage lender?
I’ll keep this one brief: don’t do it! Take the risk and you’ll be committing mortgage fraud.Â
You’ll be breaching your mortgage conditions and, if the lender finds out, you could be forced to repay your entire loan in one go.Â
You don’t want to be in a position where you need to find a lump sum of money, and you don’t want a black mark against your name for mortgage fraud: this would make it so much harder to get another mortgage in the future.
To avoid the possibility of immediate repayment, and breaking your mortgage terms, do the right thing and seek consent. If it’s refused, seek independent financial advice and apply for a buy-to-let mortgage.
What does consent to let mean for me and my mortgage?
Consent to let keeps you on the right side of your mortgage lender. It means that you’ve sought permission and your lender has said yes, you can rent out your home.Â
Usually, this will just be for the short term. Consent will typically last a few months to a year, or until your current mortgage deal comes to an end.
When it comes to how consent to let affects your mortgage payments, this will depend on your lender. Some mortgage lenders will charge you a fixed fee for the privilege. Other lenders will make you pay higher interest rates. Then there are lenders that will do both.
What will my lender consider when it comes to consent to let?
If you’re looking at consent to let, and becoming a short-term landlord, here’s what your lender will consider:
- Equity – if you sell your home and pay off your mortgage, how much would you have left? That amount is the equity. Many lenders will expect at least 25% equity before they’ll give consent to let.
- Income level – the rental income will need to easily cover the monthly repayments. You may also need to be earning a certain amount yourself each year.
- Time with a lender – some lenders will expect you to have been with them for at least 12 months. Others will want you to have been on your current mortgage deal for a while.
Help to buy – if you’ve used this government loan, or have shared ownership, you’ll need permission from these schemes too.
How about buy to let mortgages?
Buy to let mortgages are a must if you either can’t get consent to let, or you want to rent out your home for more than a year.
A buy to let mortgage is a mortgage product that is there for those who want to be a landlord and use their property to make money
Unlike residential mortgages, a buy to let mortgage means that you can rent your property out for the long term.
This means that you can get to a stage where you can enjoy the rental income and create a monthly passive flow.
The key thing with buy to let mortgages is that they’re usually interest only. This means that monthly repayments cover the interest and, at the end of the term, you’ll need to repay the capital amount.
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Is it hard to be accepted for a buy to let mortgage?
When you try and switch to a buy to let mortgage, you’ll find that the process is a little tougher than the application process for a residential mortgage.
You’ll need a good credit score and you’ll need to demonstrate that the rent your tenant will pay covers the mortgage payments, with plenty of wriggle room.
Typically, the rental income will need to be around 125% of the monthly mortgage repayments.
Are you ready to become a landlord?
Owning a buy to let property is a great way of generating extra income. It also gives you an asset that will, hopefully, increase in value over time. However, while you can earn a decent amount in rental income, there are numerous responsibilities that a landlord has to consider. These include:
- Complying with fire safety regulations
- Supplying an annual gas safety certificate
- Complying with rules around carbon monoxide and fire detectors
- Following strict rules around deposit
- Understanding the rights of your tenant with an assured shorthold tenancy
- Ensuring the tenant can afford the rental payments
While a letting agent can assist, ultimately the landlord is the one that’s legally responsible.
One other thing to note is that when you’re remortaging to a buy-let-mortgage you must make sure you have a good advisor working on it to get a good deal.
FAQs
Do you have to tell your mortgage provider if you rent out?
Yes, it’s essential to notify your mortgage provider if you plan on renting out your property. Most standard mortgages include a condition that the property should not be rented out without the lender’s consent.
Failing to inform your lender could be seen as a breach of your mortgage terms and may have serious consequences, such as your mortgage being called in or charges for a higher interest rate.
If you plan to rent out your property, you may need to switch to a buy-to-let mortgage, or your lender may grant a “consent to let” for a specific period if the renting is temporary.
It’s also important to note that renting out your property might have tax implications and could affect your home insurance, so you should seek advice on these matters as well.
Is it illegal not to have a buy-to-let mortgage?
Yes, it is illegal as you are committing mortgage fraud.Â
Equally, you are breaking financial contracts by renting out a property without informing your lender and getting their consent could breach the terms of your residential mortgage agreement.
Many standard mortgages explicitly prohibit the borrower from renting out their property without the lender’s permission.
If you breach the terms of your mortgage by not informing your lender that you’re renting out the property, they could technically demand immediate repayment of the entire loan amount or increase your interest rate.
Final thoughts on can I rent my house out on a normal mortgage
Consent to let is a great option for accidental landlords who have found themselves, unexpectedly, with a property to rent for the short term. If you’re wanting to be a full time landlord, a buy to let mortgage is a must.
Either way, be sure that you inform your lender of what’s happening. Breach the terms of your residential mortgage and you could find that there are long term consequences.
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Disclaimer: Content on this page is for informational purposes and does not constitute financial advice. Always do your own research before making a financially related decision.
