Can you rent out your house with a normal residential mortgage?
There are lots of reasons why you might be thinking about renting out your home.
You might have landed a job in another city.
The time might have finally come to move in with your partner.
Or money might be tight and you want to rent out your home and rent somewhere smaller in a cheaper area.
The implications for your mortgage
Most residential mortgages don't allow homeowners to rent out their property. So you'll need to check the terms of your mortgage first, or speak with your lender if you're not sure.
It might be tempting to assume your lender won’t find out if you rent out your home. But it’s not worth taking the risk. If you rent out your home without asking your lender, they could view it as fraud and insist that you repay your mortgage immediately.
They could even threaten repossession.
Consent to let
Your lender might give you ‘consent to let’, which means they’ll let you rent out your home and keep the same mortgage.
This should be noted in your mortgage contract and you’ll need to ask for consent.
You’ll only have permission to rent out your home for a limited time and your lender may increase their rate or charge you a fee. They could even do both.
Switching to a buy-to-let mortgage
If you plan to rent out your home on a more long-term basis, you’ll need to switch to a buy-to-let mortgage.
You may be able to do this with your current lender. If you’re in the middle of a fixed-term mortgage, they might charge you an early repayment charge (ERC).
A buy-to-let mortgage is usually more expensive
You normally need a bigger deposit if you take out a buy-to-let mortgage.
The standard is 20-25% of the property’s value compared to 5-10% for a residential mortgage.
So if you’re switching from a residential mortgage to a buy-to-let mortgage because you’re planning to rent out your home, you’ll typically need to have 20-25% equity in your home.
Buy-to-let mortgages also often have a higher interest rate than residential mortgages.
When deciding whether you could afford a buy-to-let mortgage, lenders usually take into account how much money you’ll receive from tenants rather than just your income.
Preparing to become a landlord
There are a number of things you’ll need to arrange before renting out your home.
You’ll have to comply with certain safety and legal requirements, which include:
working smoke alarms
fire safety labels on upholstered furniture
a Gas Safety Certificate
Speak to your home insurance provider about your plans and whether you need to switch to landlord insurance.
If you rent your home to at least three tenants who aren’t from the same family it’ll be classed as a House in Multiple Occupation and you’ll need a licence. (1)
Switching your mortgage
“If you’ve got a residential mortgage, you may be able to rent out your home subject to approval from your current lender or switching to a new buy-to-let mortgage,” said Prakash Patel, a Mortgage Adviser at Trussle.
“Before doing so, however, it’s important to be transparent with your lender and decide whether it's for the short or long term.
“If you have to take out a buy-to-let mortgage make sure you do your homework and find the best deal for your circumstances. If you can’t decide, get some free advice from a broker.”