If you’re moving away for work, travel, or to live with a partner, renting out your house can help you generate extra income to repay your mortgage while you’re gone.
But is it possible to rent out your house on a normal mortgage, or will you need to change it? Read on to find out.
Renting Out Your House On A Normal Mortgage
Whether or not you can rent out your house on a regular mortgage will depend on your lender and how long you wish to rent it out.
You must inform your lender that you want to let and get permission or consent to let on your current residential mortgage.
If your lender doesn’t allow it or has strict occupancy requirements, you may not be able to rent your house out on a residential mortgage.
The lender can only permit you to rent out temporarily or for a limited period.
If you want to rent out permanently or the lender doesn’t consent, you’ll need to switch to a buy-to-let mortgage.
How Does Consent To Let Work?
Consent to let simply refers to permission from a mortgage lender to let out a property.
If the lender gives consent, it means they’re okay if you rent your house out while on your residential mortgage.
However, consent to let only lasts for a limited period, usually 6 to 12 months.
Consent to let is only suitable if you want to rent out your house for a short term.
For example, you want to move in with your partner but need to determine if you can live with them before selling your house.
With consent to let, you can rent your house while deciding whether you’ll move back in or go ahead and sell.
It can also be suitable if you want to travel for a few months and get extra income from the house to help pay the mortgage when you’re gone.
Having consent to let will be easier than switching to a buy-to-let mortgage and then reverting to the residential mortgage when you return.
Considerations When Seeking Consent To Let
Some of the factors lenders consider when deciding to grant your consent to let request include:
Income
A minimum income may be necessary to get permission to let. Some lenders will not consent to let if you’re not earning above a certain amount.
They may also require that the rental income from the property can easily cover the cost of mortgage repayments.
Equity
The lender may require that you have a certain amount of equity in your property.
Equity is how much of the property you own outright or simply how much cash you would be left with if you sold your house and paid off the mortgage.
A lender may require that you build up a decent amount of equity, like 25% of the house value, before granting consent to let.
Mortgage Length
Some lenders won’t grant consent to let unless you’ve been with them for a while.
It may be challenging to get consent to let if you’ve held your current mortgage for less than six months, with some lenders setting a minimum mortgage length of 12 months.
Shared Ownership or Help to Buy
Getting consent to let can be harder if you’re on a shared ownership or Help to Buy mortgage.
The schemes usually have strict criteria for letting the property and may even require that the government loan or shared ownership is paid off before converting to other mortgage types.
Cost of Renting Out Your House On A Normal Mortgage
Although some lenders can grant you consent to let with no additional charge and keep the terms of your original deal the same, most will set a charge for the permission.
It can be an admin or a fixed fee, or you may have to pay higher interest rates.
You must also consider other landlord costs, including energy performance and gas safety certificates and ensure your property meets fire safety regulations.
It’s wise to ensure that your rental income can cover all the costs plus your mortgage repayments.
Must I Tell My Lender I’m Renting Out My House?
Yes. If you let out your house without the proper consent from your mortgage lender, you’ll be breaching the terms of your mortgage contract.
Living in the property is usually part of the mortgage conditions if you purchase a house on a residential mortgage.
Occupying it personally presents less risk than using it as an investment property or renting it out.
As a result, most owner-occupied mortgages require a lower down payment, offer lower interest rates and are easier to qualify for.
You may be accused of occupancy or mortgage fraud if you don’t tell the lender you’re renting out the property, which can have serious consequences.
The lender can demand immediate repayment of the entire loan or repossess the property. Although it doesn’t often happen, the lender would be within their rights to do so.
Most lenders settle on a change in terms with financial penalties like additional interest on top of the current one, regular additional payments or backdated payments on extra interest demanded for the period you were letting.
The consequences are not worth the risk, so it’s better to inform the lender and seek consent, and even if they refuse, you can simply switch to a buy-to-let mortgage.
Switch To A Buy To Let Mortgage To Rent Out Your House
If you don’t get permission or want to be a permanent landlord, you can switch to a buy-to-let deal with your current provider or remortgage onto a new deal with a different lender.
It will allow you to rent out your house for as long as you want, but it usually requires extra checks and assessments to ensure you can afford the buy-to-let mortgage.
In addition to assessing your affordability, lenders will require that the future rental income is at least 125% of the mortgage payments before agreeing to switch.
Can I Rent My House Out On A Normal Mortgage? Final Thoughts
You’ll need to inform your mortgage provider and get consent to let if you want to rent your house out on a normal mortgage.
You can be liable for mortgage fraud if you don’t get permission.
Call us today on 01925 906 210 or contact us. One of our advisors can talk through all of your options with you.
