If you are planning to travel or move somewhere else temporarily, you may want to rent out your home instead of selling it completely. However, renting out your house on a normal mortgage can be complicated. You will need to either get your mortgage provider’s consent, which can be tricky, or move to a buy-to-let mortgage.
Quick Overview
You might be able to get consent to let your home from your mortgage provider. This is usually for a short period of time and depends on how strict the terms of your mortgage conditions are. Your lender may want to consider other factors before making a decision, like your income and how much equity you have in your home. If you aren’t eligible for consent to let, you could consider switching to a buy-to-let mortgage – but this comes with its own difficulties.
Can I Rent My House On a Normal Mortgage?
In short, maybe. It depends on how long you plan to rent your property. If you want to rent it on a short-term basis you may be able to gain consent from your mortgage provider. Short-term would generally be 6 – 12 months, but this depends on your lender’s criteria and how they assess your individual case.
However, renting your house long-term on a normal mortgage isn’t usually practical. By long-term we mean longer than a year, but some mortgage providers may only allow you to rent your home for up to 6 months. Unfortunately, renting your house out permanently on a normal mortgage isn’t – you would need to switch to a buy-to-let mortgage for this.
What is a Normal Mortgage?
A normal mortgage is your average residential mortgage. If you have one, you will have taken out a loan from a mortgage provider to help you pay for a property that you then live in.
The key to a normal mortgage is the ‘live-in’ aspect because if you want to purchase a residential property to let, you will have to get a buy-to-let mortgage instead. This type of mortgage is specifically for renting residential properties and if you get one, you will not be allowed to live in the property.
Most people get normal mortgages because they are planning on buying a home to live in full-time. However, life circumstances can cause plans to change. Perhaps you want to travel for 6 months to a year . Maybe you are moving in with a new partner and want to try living with them before selling your house.
In cases like these, it may be beneficial to rent your home temporarily. You will also gain some extra income to support you with whatever changes are happening in your life.
Do I Have to Tell My Mortgage Provider If I Am Renting My House?
Yes, you will need to inform your mortgage provider if you wish to rent your home. If you don’t tell them, you’ll be in breach of your mortgage conditions and be at risk of committing mortgage fraud.
If your lender finds out that you are renting your home without their permission, they might leave a black mark on your credit history and force you to repay your entire mortgage loan in one go.
You may even have to sell your home to afford the repayment. A black mark on your credit history will damage your credit score and make it harder for you to access credit, including mortgages, in the future.
Remember: Don’t assume that your mortgage provider won’t find out if you let your home. You would be breaking the terms of your contract with them and it just isn’t worth the risk.
How Consent to Let Works
Permission from your mortgage lender to let out your home is called consent to let. If you get approved for consent to let, it simply means that they are happy for you to let out your property while still keeping your residential mortgage.
Consent to let is great for short-term letting because it is much easier than switching to a buy-to-let mortgage. Your mortgage provider will probably put a cap on how long you can let your property before you have to move back in (usually 6 – 12 months), but this can vary depending on your lender’s conditions.
It is worth noting that consent to let isn’t free. While it’s true that residential mortgages are normally cheaper than buy-to-let mortgages, you will probably have to pay a fee to get consent to let.
This might be a fixed fee or take the form of higher interest rates. How much you’ll end up paying can differ massively between mortgage providers and will also depend on your individual circumstances. Your lender should be able to give you more information. You will also also have to pay the costs associated with being a landlord, such as:
- Make sure your building meets fire and safety regulations
- Getting gas safety and energy performance certificates
- Building maintenance
- Tenant advertisement costs
- Agency fees, if you are using an agency to manage your tenants
Can I Get Consent to Let?
Whether you can get consent to let will depend on your lender and your individual circumstances. Your lender will want to run some checks on you to see whether they can offer you consent to let. Here are some of the main factors they will consider:
Income
You may need to hit a certain income floor in order to get consent to let. This is to ensure that you can afford your mortgage during the life changes that may happen and if you don’t manage to get tenants. Your lender will consider your income alongside how much they think you can earn from renting. A requirement might be that your rental income easily covers the cost of your mortgage repayments.
Length of Deal
One condition your lender sets out might be that you have to have been under your current mortgage deal for a certain length of time. Again, this can vary. But most stipulate either 6 or 12 months as the minimum time. It’s worth remembering that even if you’ve held a mortgage on your property for a number of years, lenders will typically look at how long you have held your current deal with them, rather than how long you’ve held a mortgage as a whole. However, they may consider you as less of a risk if you have been paying back a mortgage without any missed payments for a number of years.
Equity
You may be required to have a certain amount of equity in your property. Equity refers to how much of the property you own outright. You can work this out by looking at how much of your mortgage you have left to pay.
The percentage you have paid off typically equates to the amount of equity you have in your property. Some lenders want you to have built up a specific amount of equity, potentially around 25%, before giving you consent to let.
Shared Ownership
Shared ownership is where you own a percentage of a property and somebody else, usually, a housing association, council or the government, owns the rest.
Getting consent to let can be very tricky if you have shared ownership because you will only be a mortgage holder for part of the property, even if you live there full time. You should speak to whoever owns the rest of the property for more information.
Help to Buy
Getting consent to let can be tough if you bought your house under the government help-to-buy scheme. There are usually strict criteria for letting property under government schemes. You may have to pay off the entire loan and then convert to a different type of mortgage.
Switching to a Buy-to-Let Mortgage
A buy-to-let mortgage is essentially a mortgage that allows you to let your property full-time. You may want to consider switching to a buy-to-let mortgage if you:
- Don’t get permission to let on your residential mortgage
- Want to become a permanent landlord
- Wish to let your property long-term
A buy-to-let mortgage is much more flexible because you are allowed to let your property for as long as you want and use it as an income stream.
However, you will not be allowed to live in the property yourself. This means that you can’t go away and travel for a year, for example, then move back in. If you wanted to live in the property again you would need to go back to a normal mortgage.
Switching to a buy-to-let mortgage would involve remortgaging to a new deal, either with your current lender or a different one. You would be subject to extra checks because the lender will want to be sure that you can still meet your repayment plan if the property happens to be vacant, especially if you are paying another mortgage or rent on the property you are actually living in. Most lenders require that you can make at least 125% of the mortgage payments on your income rental. Whether that fits within the scope of the current rental market is something that you will need to think about.
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Final Thoughts
Renting your house out on a normal mortgage is possible however you will need to check with your mortgage provider and pass their assessment before doing so. Not everybody will be eligible for consent to let, so it is worth weighing up your other options.
For instance, you may want to switch to a buy-to-let mortgage if you plan on renting your property long-term. Whichever option you decide to go with, it is important that you are open and honest with your mortgage provider. Not informing them of a tenant in your property is mortgage fraud and may have serious consequences.
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