Can I Let My House Without Telling My Lender?
The short answer to this question is no. Failure to inform your lender should you rent out your property will infringe upon the legal conditions of the initial mortgage contract.
There’s been a clampdown on ‘accidental landlords’ since 2013, with banks and lenders actively searching for properties which have been listed on the rental market without their consent.
If you do wish to let to a third party, a ‘consent for lease’ is required which can only be obtained by applying to the mortgage lender. Because of this, inform your supplier immediately if you wish to rent out your property.
Terms and Conditions
The terms and conditions of your primary mortgage agreement will lay out the regulations around letting to another party, although they may be tucked away in the small print somewhere.
Trying to get away with a sub-let without informing the lender isn’t recommended. If they find out, the whole mortgage value could be called in, meaning you’ll be evicted and owe the full sum.
Likewise, letting a property requires you to have landlords building insurance. If something were to go wrong, i.e. with fire damage or mould, the insurer may simply refuse to pay out.
In terms of the main high street banks, ‘consent to let’ details can usually be found on their website. Although some conditions may differ from lender to lender, a few recurring stipulations appear. They include:
- The change in circumstance must be genuine. If the intention was to always let out the property in the first place, this will hinder your application.
- To get around this, lenders usually insist the property owner pay the mortgage for at least six months.
- Interest rates will typically rise by around 1% to 2%, plus an administration fee.
- An application form needs to be completed including detailed information about the reason for letting, expected tenants, earning potential, etc.
The 2013 clampdown came as lenders became suspicious some homeowners were keeping their rental arrangement quiet. Although many were simply not aware they had to disclose this information, others were purposely doing so to avoid additional charges.
Likewise, as opposed to a standard mortgage, a buy-to-let application requires more strenuous eligibility criteria to be fulfilled. Naturally, lenders won’t take too kindly to a rental arrangement without a buy-to-let mortgage in place.
By obtaining a ‘consent to let’, this doesn’t necessarily mean you’ll lose the existing mortgage agreement or be out of pocket. In some cases, the lender may look favourable on the new occupants, thus granting the ‘consent to let’ without additional interest rates being added.
In this respect, your choice of tenants is important to consider. If they’re low earners with a bad credit rating, a ‘consent to let’ is harder to come by or you may be penalised more as the primary mortgage owner.
A mortgage deal will be issued in relation to your personal circumstances. Of course, if you choose to let to another individual, these circumstances will have changed. In such an event, the lender may wish to alter the mortgage arrangement terms.
Remember than any purposeful non-disclosure could have financial penalties or even more severe legal implications should the terms be willingly broken.
To avoid any confusion over this issue, speak to your mortgage lender or seek professional legal advice beforehand.
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