Consent to let…
Contrary to some social media claims, buying a residential property using a traditional mortgage and then seeking “Consent to Let” shortly after ownership is not the proper approach to begin a Buy-to-Let (BTL) portfolio. In fact, this practice constitutes mortgage fraud, and lenders are closely scrutinising such transactions and requests. It’s essential to explore legitimate avenues for building a BTL portfolio to avoid legal and financial repercussions.
“Consent to Let” refers to a formal, written agreement between you and your mortgage lender. It grants you permission to temporarily rent out your home. This arrangement is essential because it’s the only legal way to rent out your house while holding a residential mortgage.
Before considering letting out your home, it’s crucial to obtain your mortgage lender’s approval. Without their consent, you risk violating your mortgage contract, potentially leading to mortgage fraud. In such cases, your lender may demand immediate repayment of the entire mortgage or even repossess your home.
Keep in mind that “consent to let” isn’t a permanent alteration to your mortgage agreement. If you plan to rent out your property long-term, you’ll need to switch to a buy-to-let mortgage.
What valid reasons are there for consent to let?
Temporary Relocation: If you’re posted abroad for work, such as service personnel in the Armed Forces, or if you have care responsibilities for a relative living elsewhere, you may need to temporarily rent out your home.
Waiting for Home Sale: When you’re living with a partner and both of you own homes, one of you may decide to sell to reduce costs. Consent to let allows you to rent out your home temporarily while waiting for it to sell. This way, you can potentially cover your old mortgage with rental income while you await the sale, allowing you to move into your dream home.
Buy-to-Let Mortgage Transition: If you’ve decided to become a landlord and are switching your mortgage to a buy-to-let arrangement, consent to let can help you get tenants into your property sooner. It allows you to legally let out the property while awaiting completion of the new mortgage.
Remember to check with your lender about their specific policies regarding consent to let. Not all lenders offer this option, and certain home ownership mortgages (like Help to Buy) may not allow it.
When might consent to let be refused?
When seeking consent to let, it’s important to recognise that approval is not guaranteed. Lenders typically impose specific conditions that you must meet. Here are some common requirements:
Up-to-Date Mortgage Payments: Your mortgage payments should be current and made on time, without any arrears.
Assured Shorthold Tenancy (AST): You’ll likely need to agree to rent out your property under an assured shorthold tenancy, which is a common type of rental agreement in the UK.
Single Tenancy Agreement: You can only rent out your property using a single tenancy agreement. Multiple tenancies are generally not allowed.
No Additional Borrowing: While your property is being rented out, you usually cannot apply for additional borrowing against it.
Six Month Rule: Some lenders require a minimum mortgage tenure (e.g., at least six months) before granting consent to let.
Informing Home Insurance Provider: It’s essential to inform your home insurance provider about the new mortgage arrangement, as it may impact your insurance coverage.
Equity: A certain level of equity (e.g., at least 25%) might be necessary.
Remember to consult your specific lender to understand their precise criteria for granting consent to let.
Is it illegal to rent a house without a BTL mortgage?
If you have a residential mortgage and rent out your home without your lender’s permission, you’re in breach of your mortgage contract. This constitutes mortgage fraud, which is essentially breaking the law.
If your lender discovers this, consequences can be severe. At a minimum, they might impose penalties and raise your mortgage rates. In more serious cases, they could demand immediate repayment of your mortgage loan. If you’re unable to comply, they might even repossess your home.
In summary, the risks associated with renting out your home without consent are not worth taking.
What are the associated costs?
Lender Charges: Most lenders will impose additional costs when you rent out your property. These can include an extra percentage rate on top of your regular mortgage rate or a one-off fee. Some lenders may even charge both.
Landlord Insurance: As a landlord, you’ll need specialized insurance to cover your property. This insurance typically protects against risks like damage, liability, and loss of rental income.
Tax on Rental Income: If your rental income exceeds £1,000 per year, you’ll need to pay tax on it. Make sure to report your rental income to HM Revenue & Customs (HMRC).
Letting Agency Fees: If you use a letting agency to manage your property, they’ll charge fees for their services.
Maintenance and Repairs: Landlords are responsible for maintaining the property. Regular upkeep, repairs, and occasional renovations are part of the cost.
Legal Fees: Drawing up tenancy contracts and legal documents may involve legal fees.
What are Landlord responsibilities?
Smoke Alarms: You must fit smoke alarms in the property to ensure tenant safety.
Gas Safety Certificate: Obtain a gas safety certificate for the boiler. This ensures that gas appliances are safe for use.
Energy Performance Certificate (EPC): Provide tenants with an EPC, which rates the energy efficiency of the property.
Fire Safety Regulations: Ensure that any furnishings comply with fire safety regulations.
Remember, being a landlord involves financial commitments and legal obligations. It’s crucial to weigh these factors carefully before proceeding with consent to let.
