You’re a homeowner in the UK, and an opportunity arises that requires you to temporarily move out of your home. You think, “Why not rent out my property during this period?”
But you have a residential mortgage. Are you allowed to do this?
This is where “consent to let” comes into play. It’s a term that might sound complex, but it’s important to be aware of it you are considering renting out your property while still under a residential mortgage.
In this article, we’ll unravel the concept of “consent to let”, and explain when it might be needed.
What is consent to let?
Consent to let is a written agreement between a homeowner and their mortgage lender. This agreement permits the homeowner to rent out their property while maintaining their existing residential mortgage.
You might wonder why such consent is necessary.
The reason lies in the nature of residential mortgages. These mortgages are designed for people who intend to live in the property they’re purchasing. As part of the mortgage agreement, you commit to living in the property. If you decide to rent out your home without obtaining consent to let, you would be breaching your mortgage contract.
Why is consent to let needed?
Where you want to rent out your main residence you will first need to seek the approval of your mortgage company.
If you decide to rent out your home without obtaining consent to let, you’re essentially doing this without permission.
This is a breach of the mortgage agreement and could lead to serious consequences.
Here are a few scenarios where you might need consent to let:
- You’re going overseas for a brief period and want to rent out your home during your absence.
- You’re temporarily relocating within the UK for work and want to rent out your home.
- You’re moving in with a relative to help with their care and want to rent out your home.
- You’re moving in with a partner and want to rent out your home while you’re trying to sell it.
- You’re a member of the armed forces going on a tour of duty abroad and want to rent out your home.
How to obtain consent to let
If you find yourself in a situation where you need to rent out your property, the first step is to contact your mortgage lender. Each lender has a different process for granting consent to let, but generally, it’s a straightforward process.
Before you apply for consent to let, ensure that you meet the following conditions:
- Your mortgage account is up to date, with no arrears.
- You intend to rent out your property using an acceptable tenancy agreement, such as an assured shorthold tenancy (AST).
- You’re not planning to rent out your property on more than one tenancy agreement.
Remember, there might be fees associated with obtaining consent to let. These fees vary from lender to lender. Some might charge a flat fee, others might increase your interest rate, and some might not charge at all.
Here’s what Lloyds Bank has to say
If you don’t have a buy-to-let mortgage, you’ll need to ask for our agreement to rent out your home.
Things to know:
- You must have our agreement to rent out your home.
- You must follow all the laws and rules for renting out your home.
- We do not allow multiple tenancies. This is where each tenant signs a separate agreement or has separate facilities such as their own kitchen (or both). The maximum number of tenants on one tenancy is five, and all tenants must be together on one agreement.
- Renting out your home should be temporary – so it might be better to apply for a Buy to Let mortgage if you’re not planning to move back in.
The duration and limitations of consent to let
Consent to let is typically a short-term solution. Most lenders will grant consent to let for a period of six to 12 months. When this period ends, your lender will revert you back to the conditions that were in place prior to granting consent.
If you wish to continue renting out your property after the consent period ends, you should contact your lender. They might be willing to extend the period of consent or suggest switching to a buy-to-let mortgage.
However, bear in mind that there are limitations and restrictions associated with consent to let. For instance, while the agreement is in place, you might not beable to borrow more against the property. Also, you’ll need to inform your building and contents insurance provider about your new mortgage arrangement, as it will affect your cover.
It’s also worth noting that certain circumstances might make obtaining consent to let more challenging. These include:
- If you’ve held your mortgage for less than six months
- If you’ve missed mortgage payments
- If your finances are not in good shape
- If you don’t have enough equity in your home
- If the prospective rental income doesn’t cover the mortgage repayments
- If you’re part of a government scheme that prohibits property letting
In these cases, it’s best to have a detailed conversation with your lender to understand your options.
Types of Letting
There are broadly three ways that allow you to rent out your home. They all need to be pre-approved by your lender.
Long-term letting – This is where you rent the whole property on a six or twelve month agreement (AST). The person renting will use the property as their main home. For letting beyond the initial consent to let period, you will require a buy to let remortgage.
Short term holiday letting – Your home will be rented for short periods, each one less than 30 days, to guests who wish to use your property as a holiday location, like an Airbnb. This could be for a few days, or a few weeks. For letting beyond the initial consent to let period, you will require a holiday to let remortgage.
Serviced accommodation – This is quite similar to holiday letting, in that the rental periods are short. However, serviced accommodation can be used by business people working away from home, or contractors who are happy to sign up for many months. For letting beyond the initial consent to let period, you will require a serviced accommodation remortgage.
What if consent is refused?
In some cases the lender is not willing to grant a consent to let. So you can’t let out the property as planned.
If letting is still important, then the other option would be to apply for a remortgage and then move your mortgage to a new lender, who will allow the letting. This will take a little while to put in place.
There’s a few ways that this can be achieved, and your best course of action would be to speak with an independent mortgage broker, who has access to the whole mortgage market.
Tell your insurance company
The home insurance that you currently have will be for an owner-occupier. ie. You live in your own house.
When you let out a property you will need to change the insurance cover to something more appropriate. The exact nature of this will depend on how you are letting the property out (short term, long term etc).
It’s unwise not to declare the letting to your insurer. If something happens that requires you to claim, they are unlikely to payout.
Understanding consent to let and when it applies is important.
It’s not just about complying with the law; it’s also about protecting yourself from potential financial and legal complications. Remember, every lender has different policies and procedures regarding consent to let, so it’s essential to have a detailed conversation to understand your options.
If you’re unsure about any aspect of consent to let, it’s always a good idea to seek advice from a mortgage broker, such as ourselves. They can provide you with personalised advice and suggestions based on your specific circumstances.
At Drake Mortgages, we’re always here to help you with your mortgage needs. Whether you’re considering consent to let or exploring other mortgage options, our team of experts can provide you with the expert guidance you need.
Don’t hesitate to get in touch with us today.
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