You may need to rent your home out to tenants for any number of reasons, but your mortgage is not a buy to let loan. This is something I’ve done myself but you may be worried about the rules.
But can you rent out your house without a buy to let mortgage and do you need to tell the lender? You can rent out your house without a buy to let mortgage but you need to tell your lender and get a consent to let the property. Whilst it’s not illegal if you don’t get consent to let you will be in breach of your mortgage terms and the lender could withdraw the loan so you have to repay in full.
What happens if you let your property without a buy to let mortgage?
If you let your property without a buy to let mortgage and without a consent to let from the lender, you will be in breach of the terms and conditions of your mortgage. If this happens the lender could be entitled to seek an immediate repayment of the loan.
The reason this question is asked is either:
- You’re a homeowner who wants to keep a property they already own and need to let it out.
- Or you may be thinking about getting a residential mortgage to buy a property you intend to let out to tenants.
If you fall into category number one, you have two options if your current mortgage is residential or a normal mortgage. Please read on to see what these options are.
But if you fall into the second category, don’t do this as you will be in immediate breach of your mortgage lender’s terms and conditions.
In fact you’d be committing mortgage fraud if you deliberately apply for a residential mortgage with the intention of letting the property as a buy to let. You should only apply for a residential or a normal mortgage on a property you intend to live in. Otherwise apply for a buy to let mortgage instead.
Can you let a property with a normal mortgage?
You can let a property with a normal mortgage with permission from the lender on a consent to let, but you might be better to convert your mortgage into a buy to let mortgage instead. Especially if it’s your intention to let the property out for some time and never return to it.
But if you intend to return to the property you should not put a buy to let mortgage on the property, as you cannot live in your own property with a buy to let mortgage. Unless of course it’s your intention to not live in the property for several years, or to not return to it beyond the time period allowed by the consent to let.
You can get an interest only buy to let mortgage which will give you a better monthly cash flow.
There are only a few residential mortgage lenders who will not allow you to let your property. But most will and all it takes is an application for “Consent to Let“. This is also referred to as “Consent to Lease” by some lenders too.
What is a consent to let mortgage?
Consent to let gives you the permission to rent out your home from your mortgage lender without having to remortgage onto a buy to let loan. Some lenders restrict this permission for a limited time period. But this time limit may be enough time to arrange a buy to let mortgage or to sell the property. It may also be long enough for your move away from the property until you return.
For example, Barclays will grant a consent to let for up to two years. Barclays will allow a consent to let for this fixed term if you are moving away for a short time period.
However, If you plan to rent out your home with no intention of returning in the foreseeable future, then you’ll need to apply for a buy-to-let mortgage instead. For each of the mortgage lenders you will need to look at their specific terms.
Below is a list of a few mortgage lenders. Each one has a link to their consent to let page on their website.
A consent to let application normally attracts an administration fee. This charge many be a one-off of charged annually.
But you may also be subject to a higher interest rate too. The consent to let fee and higher interest rates will depend on the lender and the mortgage product you have.
Is consent to let the same as buy to let?
Consent to let is not the same as buy to let but it amounts to the same thing, as a consent to let is for permission to let to tenants and a buy to let mortgage is specific lending on properties for letting to tenants. The difference is that a consent to let is usually only for letting over the short term, whilst buy to let is for letting over the longer term.
But that’s not to say that some lenders don’t have a problem if you need to let your property on a consent to let for a longer term.
Let’s take a look at a few of the high street lenders and whether these allow consent to let.
Bank’s that allow consent to let
- Halifax consent to let – Click her to find out more.
- Natwest consent to let – Click her to find out more.
- Nationwide consent to let – Click her to find out more.
- Lloyds Bank consent to let – Click her to find out more.
- Virgin Money consent to let – Click her to find out more.
- Santander consent to let – Click her to find out more.
- HSBC consent to let – Click her to find out more.
- Barclays consent to let – Click her to find out more.
- Yorkshire Building Society consent to let- Click her to find out more.
- First Direct consent to let – Click her to find out more.
- Leeds Building Society consent to let – Click her to find out more.
- Metro Bank consent to let – Click her to find out more.
- Woolwich consent to let (which is a part of Barclays) – Click her to find out more.
- Accord consent to let – Click her to find out more.
- Yorkshire bank do not do consent to let!
Reasons why homeowners may need to rent their house on a normal mortgage
There are a number of reasons why homeowners may want to let their house to tenants, but without changing the mortgage to a buy to let mortgage. These include the following:
- A temporary measure whilst you apply for a buy to let mortgage.
- You want to sell your property, but you are in a fixed rate mortgage with a penalty clause.
- You have to live further afield for work and you want to rent your house out to cover the costs of your mortgage and of renting a new property.
- You’re in the armed forces and have been redeployed overseas or further afield.
- Working abroad for a fixed time period.
- Working further afield or abroad on a permanent basis, but you can’t sell you property right away.
- You have moved in with a partner and you need time to sell.
- You have moved in with a friend or relative to help care for them.
- Your property is in negative equity which is stopping you from selling it.
What are the implications of not telling your mortgage lender about letting your property on a residential mortgage?
There are a number of implications of not informing your lender of your intension to let your property.
- You will be in breach of the lender’s terms and conditions.
- The lender could ask you to repay 100% of the mortgage immediately.
- You could be accused of committing mortgage fraud.
- Your credit report will be affected due to the violation of your mortgage terms. This could make it much more difficult to obtain credit or insurance in the future.
What are the tax implications of letting your home out to tenants?
The implication for tax if you let your house out to tenants is the income tax you will pay on the rental income less any costs relating to the tenancy. Your mortgage interest is not an allowable deduction, but you will get a basic rate tax credit against your net tax liability instead.
There are also possible Capital Gains Tax implications if you let your home out to tenants.
Do you need a buy-to-let mortgage to rent out a room?
You don’t need a buy-to-let mortgage to rent out a room in your house, but check your mortgage terms beforehand to avoid breaching the terms and conditions.
You need to check your insurance policy too and there may be tax implications, but the rent a room scheme gives a tax free allowance for this type of income.
Can you get consent to let for Airbnb or holiday let?
You can also sometimes get consent to let your home to Airbnb or as a holiday let, but it’s just as important to get your lenders permission to avoid breaching their terms and conditions. If you intend to let your house to Airbnb or as a holiday let you also need to check your insurance policy too.
But if you live in a flat be careful to also check your lease, as some flat leases prevent you from holiday letting or to use Airbnb.
Please don’t forget to read this before you leave…
Please don’t forget to also read this article to discover how you could save £71,475 on your next mortgage if you sell your house and rent before buying again. As I said earlier, even I was amazed when I did the calculations!
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