As a homeowner, there are certain situations in which you may have to move out of your home but can’t sell it right away. In such a case, renting the home out through a consent to let can be a great solution. So what exactly is a consent to let? Let’s find out.
What is a consent to let and how does it work?
It’s an arrangement between you and your mortgage lender that allows you to rent out the property to tenants while retaining your current mortgage.
A consent to let is meant to be a short-term solution. Therefore, it’s usually granted for a limited time period (12 to 24 months). At the end of the period, you have the option of applying for an extension of your consent to let or switching to a buy-to-let mortgage.
When might you need a consent to let?
There are many reasons you may want to rent out your home. It could be that you’re getting married and wish to move in with a partner. Or perhaps you are relocating for career-related reasons. Letting out your home could help you cover its mortgage repayments while you buy or move into another property.
So, why not just sell the house and use the proceeds to pay off the mortgage?
Well, it could be that you want to avoid an early repayment charge. Plus it’s not always easy to find an immediate buyer. So, rather than the house staying empty but still having to cover the mortgage repayments, you can rent it out.
According to the Homeowner’s Alliance, a consent to let can also be a good solution if you believe the local property market will have improved in a year’s time and you intend to put the house up for sale then.
How is it different from a buy-to-let?
A buy-to-let mortgage is a longer-term arrangement than a consent to let. It is typically aimed at landlords who are buying a property specifically to rent it out rather than to live in it.
With a consent to let, you can only rent out your property for a short period of time. You will eventually have to remortgage your current deal to a buy-to-let with rates that are significantly higher than for residential mortgages.
How much does it cost?
While a consent to let is generally cheaper than a buy-to-let, it’s not completely cost-free. Lenders will usually charge you an extra percentage rate on top of your current mortgage rate, or a one-off fee. The actual cost varies from lender to lender.
The best thing to do is to contact your lender and inform them of your need to rent out your home. They’ll tell you whether they’ll allow it, the terms and conditions (including any restrictions), the costs and how to apply.
What are the pros and cons of a consent to let?
Pros
- It’s quick and straightforward to arrange and can help to reduce stress during a time of change.
- The lender is likely to make sure than the rental income can cover the mortgage repayments, so you can relax knowing that the costs are covered.
- With a consent to let, you can rent out your house without fully committing to selling it or remortgaging to the more expensive buy-to-let.
Cons
- If you can’t find a tenant, you’ll have to continue making mortgage repayments out of your own pocket on top of meeting the rent or mortgage costs of your new property.
- In addition to higher fees and a higher interest rate, you also have to meet all of the other costs of being a landlord, including repairs and maintenance as well as landlord insurance.
Can you let out without informing your lender?
Letting out your property without consent from your lender could be a violation of the terms of your current residential mortgage agreement. It could be viewed as mortgage fraud. The lender might demand that you pay off the mortgage immediately or they’ll repossess your home.
The stakes are indeed that high. So to avoid problems, always seek consent from your lender before you let out your home.
