The Public Liability Insurance Blog

Do I need to tell my mortgage lender I am letting out my property?

This is a guest post from Urban Sales and Lettings.

house in silhouetteWith the UK fast becoming a nation of “accidental landlords”, not to mention property being many people’s first choice when choosing an investment for the future, it is well worth taking a minute to consider how friendly your mortgage lender will be if you decide to let rather than sell your own house.

Most, if not all residential mortgages, will include a clause which either prohibits you from letting your property or requires that you seek permission from your lender before doing so. This type of clause is especially common in more recent mortgages. Don’t just assume you can go ahead and treat your property as a buy to let because you want to.

Lenders may consider you are more of a risk if you let your property out rather than live in it as the owner and will often withhold permission for you to rent the property out. If you do seek permission, prepare to be asked many questions such as why you are moving, where you are moving to and why you wish to let the property rather than simply sell it. If your mortgage provider should get even the slightest whiff of financial trouble or difficulty to afford, they will almost certainly withhold permission for you to let the property.

You wouldn’t be alone if you are thinking right now “but how will they ever know?” Your mortgage is a contract and the lender very much holds the cards as you would expect as they have drafted the contract. Breaching a contact is a very risky business and whilst there is the possibility you may get away with going ahead and renting out your property without seeking permission, keep in mind that mortgage lenders have been known to perform electoral role checks to prevent owners renting without permission.

Being found out could leave you in a highly undesirable situation with your lender asking for their money back or insisting you pay a higher mortgage rate. It is always a safer option to play by the rules, read through the small print and if your mortgage includes a clause that you must ask permission if you wish to let out the property, ensure you do so. This will avoid future problems such as having a mark against your name stating you were refused the right to have your mortgage continue due to fraud. Should this happen you will find it very difficult to obtain another mortgage in the future.

Generally, no matter who your mortgage provider is, if they do grant permission for you to let the property there will be various costs and fees involved. Nationwide for example require their customers to pay more if they let the property for longer than a six month period. When the six month period has ended, the mortgage rate will be increased by 1.5%. They also insist that customers complete a form and charge a £50 administration fee to process it. These type of costs are standard so be certain you are aware exactly what costs will be incurred to guarantee letting the property is a financially viable option for you.

Written by Sarah Male, Urban Sales and Lettings Online Estate Agents